The Center for Offshore Safety (COS) finished its third annual forum this past week. As always it was a valuable event to gauge where the industry is on implementing the Safety and Environmental Management Systems (SEMS) rule. One of the most prominent issues during the sessions was whether Contractors should have SEMS plans, which are currently only required for Operators.
The clear message was that operators would like their service companies to have SEMS plans that match up with their own plans and that they are ready to push for that to happen. It is less clear how soon and under what conditions.
How is pushing for it? The COS, which generally represents the largest Operators and Contractors, has two different committees working on the framework for a Contractor SEMS plan. The first is looking at the audit protocols that would be used to measure a Contractor SEMS. The second is looking at how it would be implemented. For example, would all Contractors be required to have a SEMS and would they all have to go through a COS-sanctioned audit? Additionally, a separate industry group is rewriting the API RP 75 requirements that are the basis for the SEMS rule. That group is leaning towards applying the RP 75 rule to Operators, Contractors and Subcontractors. That makes it likely that Contractors (and possibly their subs) would need SEMS plans.
On a separate track, the Coast Guard is studying whether vessels should have SEMS plans. BSEE has made it clear it thinks Contractors should have SEMS plans, but appears to be holding back on a requirement to see if industry does it voluntarily.
What would a Contractor SEMS look like? At this point, two Contractors have voluntarily gone through a SEMS audit under the COS guidelines for Operators. Schlumberger and Pacific Drilling followed the regulatory requirements for an Operator SEMS closely and simply adapted the parts that didn’t directly apply.
What are the sticking points? One issue is what the plans would look like, but that appears to be a minor point. Most of the elements of SEMS apply easily to Contractors, such as JSAs and Safe Work Practices. Some parts would not apply, such as mechanical integrity for a Contractor that doesn’t take equipment offshore, and those could simply be left out of the plan.
The larger issue is how Operators would view a Contractor audit. Some Contractors say the process simply shifts the audit costs from the Operator to them. They say it only has value if the Operators agree to accept one universal audit. Currently, they may have to undergo repeated audits from multiple Operators.
Cost is an issue. For a large Contractor, the cost of a full COS-approved audit may be reasonable, but smaller Contractors or ones that work in several industries may find the audit to be cost-prohibitive. COS members are still wrestling with this and it may take a while to resolve.
What about other Operators? COS represents about a dozen offshore oil and gas Operators, although they are some of the largest in the Gulf. That leaves more than 60 other operators that are not in COS. Most, but not all, of those would probably welcome a shared audit, partially because it takes much of the responsibility for audits off their shoulders and partially because it would represent an industry consensus on how compliance should be monitored. However, how much faith they would put in a shared audit is still to be resolved.
What should Contractors do right now? On the one hand, there is no immediate mandate for a Contractor to adopt a SEMS plan. On the other hand, there are very good reasons why they should. The first is that the requirement is clearly coming and experience has shown that it takes a year or two for a SEMS plan to fully take hold. Starting now would help ensure that the company is ready. The second reason is that the customer is starting to expect it. None of these discussions are happening in a vacuum. If there is a decision to require Contractor SEMS audits in a year or two, customers are going to start pushing for the framework soon. It also makes good commercial sense at a time when Operators are paring down their Contractor lists.
If you need help developing a SEMS plan or performing the gap analysis to know how much work it would take to develop a SEMs plan, contact us at Lifeline Strategies. We are here to help!