STANDARDIZATION OF INDUSTRY EXPECTATIONS FOR …

1 STANDARDIZATION OF INDUSTRY . EXPECTATIONS FOR OIL AND GAS. Stacey W. Hagen Bo Creek ExxonMobil Development Company Orion Drilling Company Drilling Services & Systems Team Lead Quality Assurance / Quality Control Manager API Sub-Committee 18 Chairman - Quality API SPEC Q2 FOR AUDITING. AGENDA. Objective Provide History and INDUSTRY EXPECTATIONS on API Q2. Outline Brief History of API. Business Drivers for New INDUSTRY Standard API Q2. API Q2 Overview Benefits API SPEC Q2 FOR AUDITING. BRIEF HISTORY. API SPEC Q1. API SPEC Q2 FOR AUDITING. History of API and Spec Q1. July 28, 1914 November 11, 1918. National Petroleum War Services Committee Pooling Program 1919 American Petroleum Institute Program was transitioned into a third party audit program in the mid 1980's under the Specification of Quality Programs, API Spec Q1 that is now in its 9th Edition Just as there were drivers for the Monogram Program, one now exists for the certification of services API SPEC Q2 FOR AUDITING.

2 BUSINESS DRIVERS. FOR API SPEC Q2. API SPEC Q2 FOR AUDITING. BUSINESS DRIVERS. Absence of a Corporate Management System Inconsistency in Risk Mitigation Lack of Implementation Lack of Oversight API SPEC Q2 FOR AUDITING. BUSINESS DRIVERS. Increasing complexity of wells Need for improved service technology and equipment / tool reliability Increasing spread rates on rigs Need for systems to ensure uninterrupted operations API SPEC Q2 FOR AUDITING. BUSINESS DRIVERS. Service centers have more than one customer Additional requirements typically specified by one or two customers A customer may only be 10% of total business Implementation / compliance of requirements only 10% of the time is next to impossible API SPEC Q2 FOR AUDITING.

3 BUSINESS. The DRIVERS. incident killed 11 workers- and Perception spewed more than 200 million gallons of crude in what is touted as the country's worst oil spill ever. Subsequently, a moratorium was imposed on offshore drilling. API SPEC Q2 FOR AUDITING. ROOT CAUSES OF NPT. LACK OF: Service execution planning Lack of using history logs Personnel Competency Contingency planning Lack of or not Following Quality Checks, procedures Inspection and Test Preventive Maintenance, Inspection, Test Programs (PMITP). API SPEC Q2 FOR AUDITING. INDUSTRY . RESPONSE. API SPEC Q2 FOR AUDITING. INDUSTRY RESPONSE. Realization that ISO 9001 , ISO TS29001 and API. Spec Q1 apply to manufacturing API Task Group (TG) 5 developed under API.

4 SC18. Specification for QMS Requirements for Service Supply Organizations Identify the EXPECTATIONS for execution of upstream services including well construction, intervention, production and abandonment Published December 15, 2011. API SPEC Q2 FOR AUDITING. API SUBCOMMITTEE 18. CSOEM. SC18. TG1 TG2 TG3 TG4 TG5 TG6 TG7. Auditor API Monogram Min. Mfg. API Welding Life Cycle Effectiveness Spec Q1 Program Requirements Spec Q2 Management API SPEC Q2 FOR AUDITING. API TG5 MEMBERS. API SPEC Q2 FOR AUDITING. API SPEC Q2. HOW IS IT DIFFERENT? API SPEC Q2 FOR AUDITING. PROCESS-BASED QMS (ISO 9001, 29001 & API Q1). API SPEC Q2 FOR AUDITING. PROCESS- AND RISK-BASED QMS (API Q2). CUSTOMER.

5 CUSTOMER. REQUIREMENTS CONTINUAL SATISFACTION. IMPROVEMENT. INPUT OUTPUT. API SPEC Q2 FOR AUDITING. OVERLAP - API SPEC Q1 VS. API SPEC Q2. General Requirements Control of Monitoring and Measurement Equipment Quality Manual Measurement, Analysis Control of Documents & and Improvement Records Training Quality Policy Corrective and Preventive Quality Objectives Action Planning Management Review API SPEC Q2 FOR AUDITING. SERVICE-SPECIFIC Additions - API SPEC Q2. No Claims to Exclusions Preventive Maintenance, Inspection and Test Competency of Personnel Service Performance Validation Risk Management Management of Change Detection Equipment Corrective and Preventive Action Service Design resulting in a change of controls Contingency Planning Customer Notification Control over Critical Suppliers Traceability of Critical Services and SRP.

6 Service Quality Plan API SPEC Q2 FOR AUDITING. Elements Requiring Procedures Personnel Competency / Training Customer Property Document Control Preservation of Service Related Product Control of Records PMIT. Risk Assessment TMMDE. Service Design Service Performance Validation Contingency Planning Nonconformities Purchasing Management of Change Verification of Purchased Services &Service Monitoring, Measuring & Improvement Related Product Internal Audit Execution of Service Analysis of Data Identification & Traceability Improvement Service Related Product Status Corrective Action Preventative Action API SPEC Q2 FOR AUDITING. EXCLUSIONS. When an organization performs activities addressed by this document, including the provision of service-related product, all requirements shall be performed and no claims to exclusion of those requirements shall be permitted.

7 Service-related products (SRP): Materials, equipment, and software used in the execution of a service. API SPEC Q2 FOR AUDITING. PERSONNEL COMPETENCE. Competency = NEW. Education Risk Based Training Problem Solving Skills (OJT). Experience COMPETENT. API SPEC Q2 FOR AUDITING. PERSONNEL COMPETENCE. THE FOUR LEVELS OF LEARNING. Novice Competent Experienced Expert Not Expected to Beyond Creates expected perform to understanding knowledge to be able basic of what must and teaches to perform standards be done others API SPEC Q2 FOR AUDITING. RISKS Management Immediately 1 years 5 years 10 years API SPEC Q2 FOR AUDITING. RISK MANAGEMENT. Maintain Procedures to controls Risk throughout Service Execution Identify service related risk Implement controls Notify customer of remaining risk API SPEC Q2 FOR AUDITING.

8 Design & Development Every Service includes Design and Development API Q1 Planning Inputs Outputs Review Verification Validation Changes Products API Q2 Planning Inputs Outputs Verification Final Changes Review Services Failing to understand what is and is not critical will impact the service design which will result in increased risks, lack of controls and potential for loss. API SPEC Q2 FOR AUDITING. CONTINGENCY PLAN. Contingency planning shall be integrated into services and supporting processes between the organization, its suppliers and the customer . API SPEC Q2 FOR AUDITING. CONTINGENCY PLAN. Actions required History Risk for significant risk Assignment of Disruption Mitigation Outputs responsibility &.

9 Contingency Prevention Planning Measures authority Internal and Integration external Spares Reliability communications API SPEC Q2 FOR AUDITING. PURCHASING & CONTROL OF SUPPLIERS. Determine criticality of the services and SRP. Evaluation & Onsite audits for critical suppliers. Critical That deemed by the organization or customer as indispensable or essential, needed for a stated purpose or task, and requiring specific action API SPEC Q2 FOR AUDITING. SERVICE QUALITY PLAN. Customer Specific for the Service being performed Risk Assessment Takes into account Environmental & Personnel Operational Conditions Competence Design and Contingency Development Planning Contract Requirements Identification of Equipment API SPEC Q2 FOR AUDITING.

10 IDENTIFICATION AND TRACEABILITY. Identification controls must be put into place to clearly identify all stages of delivery, installation, repair (maintenance), and redress Service-related product shall be identified. Critical service-related product shall be identified and traceable. API SPEC Q2 FOR AUDITING. PMITP. Is applicable to Service Related Product (SRP). Equipment Maintenance is handled under Work Environment. Corrective Preventive Expensive Predictive Minimizes Corrective Results in NPT Maintenance SRP Integrity and Reliability Focus of API Spec Q2. API SPEC Q2 FOR AUDITING. PMITP. Reports that document history use, repairs, modifications, remanufacturing, inspection and test activities that all direct verification for reuse of product.