Transformational Compliance in Asset-Intensive Companies: Q&A with ERM’s David Robbins
David, what makes asset-intensive companies different from the rest in terms of compliance concern?
Asset-intensive companies have complex portfolios. Assuring day-to-day compliance in a cost-effective manner is an especially daunting task for the oil and gas industry, as with other asset-intensive industries. Given the distributed nature of the assets and changes that occur in the field on a day-to-day basis, it is difficult to maintain an accurate representation of the equipment and an accurate risk and compliance profile.
Like all companies, oil and gas companies are seeking ways to assure compliance and achieve operational excellence within a competing environment of increasing regulation, organizational change and shrinking budgets. As opposed to a ‘cut and cope’ approach, which translates into ‘doing more with less’, leading companies are using the downturn in the market to take a fresh look at people, processes, and technology to uncover opportunities to reduce effort and improve performance. This often includes applying risk-based strategies to prioritize activities and eliminate low-value work streams.
What specific opportunities do you see for asset-intensive companies?
What they’re finding is that there are opportunities for efficiencies and performance improvements across several areas:
- Alignment of People and Processes. Taking a fresh look at current people and processes helps identify opportunities for enhanced efficiency by working across functional groups and eliminating redundancies. As an example, take asset management. Many companies we work with are siloed today, meaning they are managing assets using different processes and tools across the company. Aligning processes across the functions of EHS and field operations while consolidating systems to manage change is bringing about both operational efficiencies and more accurate reporting.
- Simplify EHS Systems. Many companies are using outdated point source solutions that were implemented many years ago. These systems are good at collecting and reporting data, and looking at past performance, but they lack the analytics needed to evaluate leading indicators to be proactive and predictive. Taking advantage of the lessons learned from the marketplace, the newer technologies such as Enablon have incorporated these capabilities as a core feature of their software, allowing companies to eliminate multiple solutions with a single platform.
- Focus on the Highest Priority Areas First. Rather than trying to ‘boil the ocean’, focus on early wins to achieve incremental return on investment (ROI). By focusing on the areas of highest impact, cost savings and performance improvements can be realized quickly.
What tools are these companies using to leverage these opportunities?
Asset-intensive is, by nature, distributed in upstream. Changes occur on a day-to-day basis. Managing risk and achieving compliance are difficult if you’re sitting in Houston and you’ve got 3,000 wells located across multiple counties and/or states, for instance. Yet regulators expect data to be up-to-date. In the old model, Operations had their enterprise management systems while the EHS group had their separate set of assets in their EHS management system. If you really think about it, there is duplication there. By contrast, unifying efforts across functional business areas (EHS and Enterprise Asset Management (EAM)) cuts waste and risk by eliminating redundancy – closing the gap through integration.
EHS software platforms are effective in managing the equipment, profiling risk, and managing and tracking compliance obligations, including the ability to interface with regulatory service providers such as RegScan, BNA and ENHESA. However, a critical factor that often gets overlooked or underrepresented is management of change (MoC). The assets that are relevant to EHS compliance are, in most cases, the same assets that Operations manages in the field. However, a low percentage of the companies that we work with have interfaced the EAM system to the EHS system.
Can you give us some insights into the process behind a successful implementation?
Leading companies in this area begin the alignment of field-level assets and the EHS system during initial capital project planning and execution, and then carry this through Operations. Assets that are relevant to EHS compliance are equally relevant for engineering management, so we’ve interfaced operational management systems with enterprise asset systems. This gets reflected immediately in the EHS system, without a time delay. EHS systems bring together Operations elements and EHS, and fuse them together in a way they’ve had a difficult time accomplishing in the past.
What is the next frontier?
We need to move from reactive lagging indicators to predictive leading indicators to prevent the next incident from happening. Tie together risk with compliance assurance. If you have an incident it’s easy to draw a correlation. Use the data to improve business performance. Create a learning organization.
There’s the near future and the far-away future. If you think about the current-state process, companies approach compliance for similar industries and sectors in individual company ways – different systems, different approaches, within their own organization’s cultural context. The next immediate frontier is the recognition that collaboration with industry peers and partners, and development of standard industry processes afford an incremental step forward toward higher value and lower costs. That sets up the opportunity to achieve day-to-day compliance, as well as creating the opportunity to benchmark with others within the industry by being able to trend and report data against industry KPIs.
If they are largely focused on EHS, the immediate next step from there is developing a closer integration between EHS and other functions like EAM, field asset management, finance, and accounting.
Beyond that, the final frontier is the incorporation of the Industrial Internet of Things (IIoT) into a way that allows companies to take advantage of what is in the field; embedding smart devices and connecting to field equipment, to allow embedded technology to support transactional data and MoC that largely affect asset-intensive organizations. The first step is to take EHS out of its niche and get it infused into Operations and then, as Operations matures, EHS is able to translate mundane and inaccurate work into a more streamlined process.
This is not years away. We are at the door. Having the framework and the vision in place to combine EHS and field operations – as well as the ability to retrieve this information through enterprise systems – allows you to drastically reduce the amount of data collection and manipulation to be done in terms of compliance, and enables real-time trending of information so that you can be more predictive.
In your experience, how do events such as SPF further thinking about adoption and integration of EHS systems?
People in their day-to-day work are focused internally on many important details that affect their own business. The SPF event provides a forum where they can take a break, engage with their peers, and gain important insights as to how other companies are addressing and approaching common problems.
Many times we compare the differences, but if you really think about it, upstream oil and gas companies operating in similar areas actually share a lot of commonality in terms of regulatory requirements. Collaborative conversation allows for the ability to leverage the combined learning to achieve higher quality results at a lower cost. All have tanks, compressors, etc., to create best-practice processes and technology solutions. From these, companies can extract a tremendous amount of cost-savings and infuse value into the overall process.
SPF Americas 2016 will take place on October 4-5 in Chicago, and will bring together more than 500 EHS, Sustainability, Risk and IT professionals from the world’s largest corporations. Register today and don’t miss out on 50+ sessions and countless opportunities to network with your peers.