This is the third post I have done on the drop in the price of oil and safety. The first one looked at whether the oil bust was hurting safety. The answer appear to be no – not yet. This post looks at the future and the evidence is that we may well see a rise in safety incidents, but not during the downturn. First a disclaimer – Predicting future incident rates is about as accurate as predicting future oil prices. They are really both just educated guesses.
First let’s look at where we are now. As I pointed out in my first post on this subject, we aren’t seeing evidence of a decline in safety, despite the downturn and cuts it has caused. Bob Gray, with the Mayer Brown law firm, put it very well in a recent Rigzone article, “The service companies say that now their personnel is down to the really good ones, they’re more efficient and they’re not spending as much time training people. On completion services for example, drilling, but if the price of oil – or when the price of oil comes back – the questions is whether we are going to have sufficient folks out there to meet the increased demand.”
If this is true, we may see our incidents rise when business picks up. This may be summed up in two formulas.
Downturn: Less work + more experience + less turnover = fewer incidents.
Upturn: More work + less experience+ more people = more incidents.
There seems to be a good deal of evidence that the problems come when we get back to work. That was the finding of a 2011 study done for the Centers for Disease Control. It looked at business cycles and industrial incidents and concluded that the construction, manufacturing, and mining industries tended to see incidents go up during the upswings.
What does the evidence say for oil and gas? The last big oil price bust lasted from 2008-2009 and the statistical evidence is hazy. Incidents in the Gulf of Mexico went down, but in 2010, when industry should have seen an upturn, it was nipped in the bud by Macondo, so we didn’t really see much improvement in business or decline in safety.
The International Oil and Gas Producers (IOGP) keeps worldwide statistics and, looking at their data, the most we can say is that incidents were declining steadily until 2008. Incidents rose slightly when prices went back up, but the real impact may have been that the downturn seems to have brought a four year halt to safety progress in oil and gas.
Now let’s go back to the biggest downturn before 2008, the one from 1997-2000. At least in the Gulf of Mexico, the data is pretty striking. That downturn started in January of 1997, bottomed out in January of 1999 and didn’t hit its highs again until March of 2000. Sure enough, the Minerals Management Service statistics on incidents in the Gulf show a sharp spike in incidents as Gulf activity was increasing:
Be careful about concluding too much from one business cycle, but companies should recognize that they will be at more risk when the business cycle turns up.
What should companies do to prepare? First, recognize that the workers you have now may not always be at their best. Distractions and stress degrade performance and safety. Keep a strong eye on behavioral-based safety. Second, plan for the future. That means keeping the cobwebs off your hiring, training and safety oversight programs. Hopefully it won’t be too long before you need them.