Sustainability, Safety and Reputation during economic challenging times

The decline in oil prices has resulted in some companies decreasing investments, and some even cutting back expenditures. Safety, the environment, and the industry reputation are of concern as companies cut costs during declines.  Accidents continue occurring, indicating that the safety and environmental risks – and challenges of the oil and gas life cycle will continue regardless of oil prices. 

The industry has already gone through significant oil and gas price swings and critical global events several times, and we should learn from past lessons. HSE risks and challenges increase with low oil prices. In fact, the situation now is significantly augmented due to the job losses and wider economic impacts of the COVID-19 induced economic volatility. 

Lower prices and economic volatility often translate into job and maintenance cuts; some workers get distracted with the prospect of potentially losing their jobs, and others may start taking more risks to preserve their positions. The situation may be increased by conflicting communications coming from the top to maintain production while cutting costs.

The industry has already gone through significant oil and gas price swings and critical scenarios several times, and we should learn from past lessons. 

Looking forward, global energy demand will continue to grow but at a slower pace due to greater efficiency, slower population and economic growth, and new and improved technologies. And although more energy will be needed in a lower carbon way, the oil and gas industry will continue to play an important role in the energy portfolio and hydrocarbons will still account for just about half of the total energy mix in 2050. 

The current slowdown in investment will translate into falling production, requiring the drilling of more wells to keep up with upcoming future demand.

The industry's most important and valuable resource is its people. The message from management to the workers on the ground must be one of paying much more attention than ever to safety, environmental protection, and responsible operations while running more efficient operations and maintaining focus on operational integrity. The same message must be passed on to drilling and service companies, especially when contracts and prices are renegotiated. 

Bottom line, it is imperative to maintain focus on safety, the environment, and responsible operations regardless of the present price of oil. The message and actions coming from the top leadership at all times must be loud and clear: moving forward with HSE as the number one priority continuing operations in a very efficient and responsible way.

Mexico Oil & Gas "Apertura" - Round 2 – 1st Call for Bids: 15 Shallow Water Blocks

Mexico launched on July 20th the first call for Round 2 of its Oil & Gas "Apertura", which covers 15 shallow water offshore blocks. 

The blocks are located along the coasts of Tampico, Misantla, Veracruz and southeastern Gulf of Mexico area.  The bidding process will take 8 months with awards of the offshore blocks are scheduled for March 2017. 

Shallow Waters and Above-Ground Risks

Successful bidders (e.g. IOCs) for the blocks located in shallow water of the Gulf of Mexico will sign a production sharing contract for 30 years with two possible extensions of five years.

These shallow water blocks present above-ground non-technical risks, that if inadequately managed often translate into project delays and cost overruns, and operational interruptions during the project life cycle.

The area encompassed by the Round 2 shallow water blocks is geographically extensive and environmentally diverse, and it includes sensitive areas with high biodiversity as well as communities that rely on natural resources.

Initial engagement with stakeholders has identified environmental and social concerns, and communities’ needs among those living closest to the oil and gas areas, including for example:

·       Impacts to ecosystems due to spills and leaks and wastewater discharges,

·       Increase in vehicular and vessel traffic, 

·       Impact on existing local infrastructure and services, 

·       Community health and safety, 

·       Local content requirements, 

·       Income generating opportunities,

·       Skills training,

·       Education, and

·       Basic services.

These challenges and expectations require a contextualized and integrated approach, and innovative solutions to manage the sustainability non-technical risks to ensure the success of the Apertura and oil and gas business ventures in Mexico.

How HSE International, LLC can help

The successful IOCs need to develop and adopt, from the onset, strategies based on a framework that integrates social, economic, environmental, and institutional factors, to have a clear vision for how to operate in the area. 

HSE International’s experience working in the oil and gas industry, in environmentally sensitive and complex social settings, and our international delivery capabilities working with local strategic partners in Mexico, can help IOCs develop and implement strategies based on a sustainability framework.

HSE International’s Sustainable Development Analysis (SDA) combines social, economic, environmental, political and institutional analysis to improve the understanding of the linkages between development dynamics and the political and social structures that shape development outcomes.

We have the knowledge and experience to assist IOCs develop and implement sustainable development frameworks to address these issues early in the project cycle, helping Companies’ manage the above-ground risks and impacts, and contribute to earning and maintaining the regulatory and social licenses to operate. 

HSE International has worked in the Mexico’s oil and gas sector since 2008, including supporting IOCs, NOCs and Regulators, along the oil and gas value chain. We have developed a process to address social, environmental, security and safety risks each step of the way, and are eager to contribute to a more sustainable development of the oil and gas sector in Mexico. 

For more information on how to manage above-ground non-technical risks, read HSE International’s post http://www.hseinternational.com/news-insights/2015/5/mexicos-oil-gas-apertura-shallow-waters-and-above-ground-risks,  and email us at: solutions@hseinternational.com

What's next for Mexico’s Oil and Gas E&P “Apertura”

The next bidding round in the opening of Mexico's oil and gas sector, named 2.1, will be called by the end of July and consist of 15 shallow-water blocks for exploration and extraction work in the Gulf of Mexico.

The following round, or 2.2, would be called by the end of the summer and consist of of 14 onshore blocks for E&P work in the gas-rich Burgos Basin in the north of the country, as well as in southeast Mexico, according to government officials.

Rounds 2.1 and 2.2 may result in a higher proportion of contracts being awarded. However, companies will remain cautious, seeking to secure more attractive conditions for unconventional contracts, due to low oil prices ($44 per barrel as of July 19th), and social and security risks of operating in Mexico.

The situation is not unlike many other experiences in newly opened regions of Latin America and other continents, in which community relations and security risks continue to emerge as critical issues for the energy sector.

Experience says that those projects that have suffered delays and cost overruns during the initial phases are likely to be overwhelmed with problems during subsequent project phases.

Successful bidders (specially the international oil companies - IOC, to be operating in Mexico’s oil and gas sector) will face challenges that have the potential to escalate very rapidly.

This is mainly due to the lack of appropriate and timely engagement and information that is available to communities and local stakeholders who may also feel their grievances in the past have not been adequately considered.

To avoid these situations, there is a need for the Government to conduct strategic assessments and engagement, and promote the implementation of good international industry practices.

The IOCs need to develop and adopt “entry strategies” and early engagement with communities and other stakeholders. The strategy should be based on a sustainable development framework that integrates the result of social, environmental, political, and institutional analysis, to improve the understanding of the linkages between development dynamics and social structures that shape development outcome. 

These challenges and stakeholder expectations require a contextualized and integrated approach, and innovative solutions to manage the sustainability non-technical risks to ensure the success of the oil and gas business ventures in Mexico.

How HSE International, LLC can help

HSE International uses its sector-focused approach, deep knowledge and experience of the oil and gas industry operating in complex social settings, and international delivery capabilities, including local strategic partners to help our clients.

HSE International has worked in the Mexico’s oil and gas sector since 2008, including supporting IOCs, NOCs and Regulators, along the oil and gas value chain. We have developed a process to address social, environmental, security and safety risks each step of the way, and are eager to contribute to a more sustainable development of the oil and gas sector in Mexico. 

For more information email us at: solutions@hseinternational.com