Oil and Gas IQ recently released a list of their oil and gas industry prognostications for the year. Their seven topic list spanned everything from continued oil price declines (to as low as $40) through the first half of the year; to a Venezuelan debt default; to the militarization of the Mediterranean gas reserve dispute between Turkey, Greece, Lebanon, and Israel.
And closing the list as their #7 forecast: an increase in industry fatalities, caused by the drop in prices and the pressure to retain profitability. The rationale was that, 'If past experience informs future trends, then this will mean that training budgets for core competencies in 2015 are reduced, resulting in a greater loss of life across the global industry.'
Clearly, the traditional tension—and perceived inevitable trade off-- between safety and productivity is the basis for this forecast. And what a chilling forecast it is. After working with clients for decades on this problem, we know that safety and profitability are not mutually exclusive. This is one forecast that doesn't have to come true. For example, one of our clients in a highly hazardous industry just closed 2014 with their best safety record in history, while dealing with significant production and service delivery issues. This company 'stayed the course' with their embedded safety culture even though the pressure to cut corners was significant. And dating back to the 80's, the Paul O'Neill/Alcoa story has been well documented on how a business in financial dire straits chose safety excellence as the path to improvement.
Safety should not be a priority to be shifted or demoted when times get tough. While many enlightened oil and gas companies and their leaders clearly understand this, and truly live a 'safety first' mindset, our work around the world has exposed us to the ugly truth that not all do. Most of the time, this is manifested more through unintended consequences of actions, rather than deliberate disregard of the value of human life. The caricature of a cigar-chomping, callous business leader is largely a myth. But still, leaders make decisions that impact safety every day. What can oil and gas leaders do to assure their path to zero culture is maintained or enhanced during this down cycle in the industry?
Here are few ideas that our clients have used successfully:
- Get even closer to your contractors: The O&G industry is built on contractors working collaboratively. If you're an owner/operator/E&P company of any size, chances are you and/or your contractors have felt the impact of the soft prices and haveRIF'd workers and/or redeployed crews. Chances are this means you have new contractor employees on site that are unfamiliar with your safety processes; or your subs are trying to do more with less. Get closer to your contractor principals at a corporate level, and ensure your site PIC is alert and focused on safety.
- Ensure safety is engineered in: The media reports on industry cap ex reductions in 2015 means there will be fewer projects, and projects reduced in budget and scale. With those that remain, ensure you consider safety in your planning. Ensure safety has a seat at the table with engineering and the hierarchy of controls is considered. When done upstream like this, our clients tell us capital cost impact is minimal.
- Continue to have leaders model safety leadership: When stock prices are declining, the media buzzards are circling, and profits are dropping, it's very easy to get distracted. Personal worries about job security, earnings and workload are real for leadership teams, and this can creep into their leadership behaviors that their workers sense and see. But now is the time for senior leaders to model what's truly important. Tough times define character. Make sure your leaders continue to be safety leaders, and retain what we call their 'moral license to lead'. Don't call off safety conferences; don't stop doing audits and field visits; and don't stop embedding safety into your business messaging. If training is essential to safety, find the money.
'This too shall pass' is an adage cited over centuries, from medieval Persian poets, to biblical figures, to Abraham Lincoln. While none were talking about the price of crude or natural gas, it applies here. Prices will recover. The industry will survive. Make sure your workforce does as well.