Change Management Tools to Mitigate Operational Risk FINAL

1 2013 Optimized Systems and Solutions Inc. All rights Management Tools to Mitigate Operational RiskOffshore Power and Rotating Equipment Conference 18 April 20132 2013 Optimized Systems and Solutions Inc. All rights It is not the strongestof the species that survive, nor the most intelligent, but the ones most responsive to Change . Charles Darwin23 2013 Optimized Systems and Solutions Inc. All rights Disclaimer Presenter Who Is this cat? About OSyS Definitions Risk, Risk Management & Change Management (MOC) Introduction Risk Management & MOC Drivers API-691 SEMS rule Risk Management Automation/Software Tools The Payback4 2013 Optimized Systems and Solutions Inc. All rights All opinions expressed herein are those of the speaker and not necessarily of OSyS, Rolls-Royce plc or any living 2013 Optimized Systems and Solutions Inc. All rights is this cat? Mike Bearrow is a professional engineer, & Accidental Safety Professional, with a BS in Mechanical Engineering from Texas A&M University (class of 1982).

2 Whoop!!! I am a Sr. Project Manager and Risk Management SME. I have 30 years of experience providing Process Safety Management automation and consulting services. Safety and design experience with Boeing Aerospace, McDonnell Douglas, Halliburton, Boeing Helicopters, SAIC, DS&S and OSyS. 56 2013 Optimized Systems and Solutions Inc. All rights We Are & What We Do Optimized Systems & Solutions (OSyS) is A Rolls-Royce company Strong financials & no debt. 2012 Revenue = $150M, Employees = 400 Rolls-Royce Annual Revenue = $13 Billion, Employees = 38,000 Offices in UK, Middle East, Europe, Asia & Texas. OSyS Solutions PEHM Leading provider of predictive equipment health Management (PEHM) solutions to the oil and gas, power generation, aviation, marine and defense markets. We can model high value assets, predict problems and shape the future with that insight. KMS Knowledge Management System is a mature suite of continuous improvement software Tools designed to help companies automate HSE and Process Safety 2013 Optimized Systems and Solutions Inc.

3 All rights LocationsUnder consideration8 2013 Optimized Systems and Solutions Inc. All rights Moment89 2013 Optimized Systems and Solutions Inc. All rights Riskis Frequency X Probability Risk Management is the identification , analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks . Risk is usually defined in terms of financial loss as well as safety, health, environment, reputation, opportunity losses. A risk ranking matrix is often used identify risk qualitatively. Quantitative methods also exist such as Fault Tree Analysis. These are used heavily in the design of Nuclear and Military 2013 Optimized Systems and Solutions Inc. All rights Management is Necessary Mistakes & mishaps can be expensive Loss can be crippling The environment can be harmed People can get hurt; or worse Companies can be ruined. 11 2013 Optimized Systems and Solutions Inc.

4 All rights Management Regulation Precursors 1988: Piper Alpha North Sea oil production platform operated by Occidental Petroleum (Caledonia) Ltd. The platform began production in 1976. An explosion and the resulting oil and gas fires destroyed it on 6 July 1988, killing 167 men, with only 61 survivors. Total insured loss was about $ billion. At the time of the disaster, the platform accounted for approximately ten percent of North Sea oiland gas production, and was the worst offshore oil disaster in terms of lives lost and industry impact.[5] 2010: Deepwater Horizon Deepwater Horizonwas an ultra-deepwater, oil drilling rig owned by Transocean. On 20 April 2010, while drilling at the Macondo Prospect, an explosion on the rig caused by a blowout killed 11 crewmen and ignited a fireball visible from 35 miles away. The resulting fire could not be extinguished and, on 22 April 2010, DeepwaterHorizonsank, leaving the well gushing at the seabed and causing the largest offshore oil spill in history.

5 The resultant oil spill continued until 15 July when it was temporarily closed by a cap. BP have agreed to pay $ billion but faces additional penalties that could range from $5 billion to $20 billion. 12 2013 Optimized Systems and Solutions Inc. All rights Alpha (1988) Start of modern formal Risk Management Systems Two approaches Safety Cases SEMP / SEMS But there is considerable overlap and increasing convergence13 2013 Optimized Systems and Solutions Inc. All rights to Piper Alpha14 2013 Optimized Systems and Solutions Inc. All rights Alpha: UK Impact 1990: The Cullen Report Major improvements to UK Safety Cases for Risk Management Other areas such as Norway, Australia, SE Asia Not always called Safety Cases 15 2013 Optimized Systems and Solutions Inc. All rights States (Federal OCS) Equally vigorous response to Piper Alpha Many more platforms (>6000) Many are small Standard design API Recommended Practice 75 - Safety and Environmental Management Program (SEMP) was the result16 2013 Optimized Systems and Solutions Inc.

6 All rights then came Deepwater Horizon24 hour coverage by Wolf Blitzer and Anderson !17 2013 Optimized Systems and Solutions Inc. All rights of Deepwater Horizon 11 fatalities Worst spill in history Very bad public perception Loss of confidence within the industry Regulations reinforced (including SEMS) Moratorium on drilling Where were you when you heard of this event?18 2013 Optimized Systems and Solutions Inc. All rights Management is a Law or Highly Suggested For refineries and chemical plants OSHA Process Safety Management and EPA RMP DOT Integrity Management Programs Offshore SEMS; more on that in a minute Everywhere in the US and many parts of the world API is the de facto, REGAGEP. Not the Law, but it might as well be API is constantly improving on and creating new guidance and recommended practices. API 691 Risk Based Machinery Management will be out at the end of this year and require MOC as part of the Operate and Maintain lifecycle process.

7 19 2013 Optimized Systems and Solutions Inc. All rights Management Process20 2013 Optimized Systems and Solutions Inc. All rights Risk and Change Most risk Management systems including SEMS, PSM & RMP assume that systems are designed, operated and maintained by competent Risk is introduced when intended or unintended Change occurs. Whether that risk manifests itself into an accident, mishap or poor result is dependent on the quality of Change Management or MOC. MOC exists as a risk Management process to ensure that we do not deviate from the design intentof the system/process that is under going Change and If we do deviate from the design intent, we do it with fore thought, deliberation and might even say with skepticism or the jaundiced 2013 Optimized Systems and Solutions Inc. All rights later this Risk Based Management of Machinery (RBMM) RBMM is a risk based RP that will cover the life cycle of the API machinery A mixing of reliability and Risk Management Tools are recommended to manage the life cycle of machineries Management of Change , Corrective Action Tracking plays a key role on assuring the efficient and reliable operation of machineries The RBMM lifecycle process will aligning to the generic project lifecycle process stating the Minimum industry requirements to deliver Risk Based Machinery Management API machinery to ensure safe, efficient operationsfor Brown & Greenfields through their 2013 Optimized Systems and Solutions Inc.

8 All rights Based Machinery Management Lifecycle Process Focus on the following phases of the asset s life cycle:1. Define; identification of high risk items2. Execute; Operation and maintenance readiness3. Operate; Operate, Monitor and Improve 23 2013 Optimized Systems and Solutions Inc. All rights Process - Details24 2013 Optimized Systems and Solutions Inc. All rights Failure Mode & Effect Analysis By Vendor during FEED By Owner in Detailed DesignRAM Reliability, Availability & Maintainability Reliability Block Diagram Monte Carlo Simulation Sys (FEED) & Eq. (D. Eng)TRL Technology Readiness Level By Vendor Validated by Owner Technology Qualification Risk FactorRCA Root Cause Analysis Find causes at the System level (Latent) Used as a proactive tool to improve process and designMOC Management of Change Component of process safety Ensure that any Change is documented, evaluated and analyzed against hazardsLOPA Layer of Protection Analysis Technical Safety Based on IEC60511 Used to define barriers to Failure Modes (Theads)METRICS Key Performance Indicators Drive process improvement Used to identify design changesAPI-691 RBMM Competencies and ToolsCondition Based Monitoring Normality Models used to detect and diagnose incipient failure Validated by Owner during commissioning25 2013 Optimized Systems and Solutions Inc.

9 All rights to SEMS for OCS Bhopal is to OSHA s Process Safety Management standard, what DeepwaterHorizon is to DOI s SEMS precursor or forcing function. Most companies could not withstand a Bhopal or Deepwater Horizon event. SEMS is focused on reducing the likelihood of the big bang, not slips trips & falls. SEMS is comprised of 13 Risk Management elements & is enforced by Bureau of Safety and Environmental Enforcement (BSEE).26 2013 Optimized Systems and Solutions Inc. All rights Thirteen Elements of SEMS1. General Management Program Principles2. Safety and Environmental Information 3. Hazards Analysis4. Management of Change5. Operating Procedures6. Safe Work Practices7. Training8. Quality Assurance/Mechanical Integrity9. Pre-Startup Review10. Emergency Response and Control11. Incident Investigation12. SEMS Element Audit13. Documentation and Recordkeeping27 2013 Optimized Systems and Solutions Inc.

10 All rights the Risk Management Requirement Many majorupstream companies believethey are in virtual compliance with API RP 75; and therefore SEMS. That is the same conclusion many refiners and chemical manufacturers came to after the PSM standard was promulgated in 1992. Nearly 20 years later, we know that was not true. All companies are looking for a cost effective way to comply with this rule. The challengeis to use these 13 elements to increase Operational efficiency, effectiveness and comply with SEMS requirements at the same time. These are not mutually exclusive goals, but being successful requires SEMS automation or information 2013 Optimized Systems and Solutions Inc. All rights do Automation Tools help? Data Collection at the source of the the platform This is where the risk is and where continuous improvement gets done. This is where they need Decision Support, FROI, PSSR, MOC idea Collecting, Analyzing (RCA) & Sharing Lessons Nearly impossible without software Automatic alerts when Incidents & Near Misses occur Spreading the word quickly to those who can understand and create a plan of action.