Minister of Local Government and Labour Gunnar Berge

Ministry of local government and labour

Safety and technology management in a cost competitive environment

Statement in Stavanger 29th August 1996

It is a privilege for me this morning to address this capacity audience, and convey the Norwegian Government's view with regard to safety and technology management in a cost competitive environment.

An important purpose of the Norwegian petroleum industrial activity is of being to the benefit of the whole society. This is not just a fine political phrase: Over the years we have continuously sought to administer the petroleum resources and adjust the framework of statutory rules and regulations in a manner, which should secure:

• the attraction of companies with established reputation, capable of conducting the activities in a prudent manner
• the fair contribution from the industry to the national revenues
• the sensible conservation of petroleum reserves
• the safe-guarding of personnel, the environment and property
• the protection of other industries, such as the fishing industry, from negative impact
• the promotion of national goods and services
• the promotion of Norway as a reliable oil and gas producer and business partner

These issues are all efficient contributors to the welfare of the nation. In this context, however, the volume of industrial activities is not indifferent: High industrial activities will contribute to the welfare accordingly, and the industry's cost competitiveness is, of course, an instrument in achieving this end.

Many would say, that the promotion of cost competitiveness is the concern of the industry itself, or maybe such ministries as the Ministry of Industry and Energy and the Ministry of Finance. Action to promote cost competitiveness, however, may involve or impact a host of national interests, which are the responsibilities of various administrative bodies.

Industrial disasters will cost the society dearly in terms of loss and human suffering. Personal injuries often impose considerable strain on the health and social security structure. Since the State participates in the industry at own risk, it shall have to cover for loss. It is therefore in the interest of the national to prevent such incidents to happen, and one of my duties is to ensure that proper standards pertain with - regard to the sound management of safety and working environment in the offshore petroleum activities.

The Norwegian petroleum legislation establishes that "safety" means protection of man, the environment and assets, such as installations and production. Furthermore, that the term "protection of man" means protection against physical and mental injuries and diseases, as well as health hazards, including undesirable long-term effects related to possible short-comings of the working environment. Not only must the industry and statutory authorities take due regard to such important matters, which English-speaking countries often refers to as "Health, Safety and Environment (HSE), but they should also make economic considerations.

This calls for a holistic approach to the management of safety, because an uncompromised promotion of safety standards may seriously impede the cost competitiveness of the industry, on which our nation's revenues depend so much. Furthermore, since the tax structure allows for a large portion of the companies' expenses to be exempted from taxation, it is also within my responsibility to ensure that not only shall the framework of rules be relevant, namely that the costs involved in implementing them is justified by gains in safety, but it shall also facilitate quality production in terms of reliability, quantity and regularity. As you will appreciate, the art of rule-making can be fairly complicated !

Consequently, the majority of Norway's administrative bodies play an important role in the pursuit of cost competitiveness, their tasks being of establishing favourable conditions for such developments. It is fair to say that the petroleum authorities have responded positively to this challenge. Their efforts have contributed to, among other things, the establishing of the following distinctive features of the current regulatory regime:

• Goal-setting requirements have substituted the former, detailed regulations. This allows for a certain degree of freedom for the companies to choose optimal solutions to safety and technical problems
• The current regime acknowledges and makes the most of the existence of industry standards, which allows for increased use of lesser expensive so-called shelf products.
• The current supervisory system is based on the fact that application of quality and safety management systems is widespread in the industry. Such use of administrative management systems are indispensable tools for achieving safe operations, and avoiding unnecessary complicated and expensive technical constructions, utilities and arrangements. Hence, the attention of the authorities' supervision typically concerns the organisational and managerial issues of the activity. Since the companies of the industry possess both economy and skill, the development of new and safe technology is an obvious task for them. The regulator has taken steps to facilitate such developments by stipulating functional legal requirements, which allows for the companies to design the technical solutions in order to comply, and by assisting the companies in their efforts to do so.
• Regulatory activities aim primarily at assessing if and how well these administrative management systems perform, for example, in identifying non-compliance or the correct properties of technical solutions to safety problems.
• The safety regulator gives priority to supervision in the early stage of development projects. By identifying and discussing problems at an early stage of development, we avoid costly modifications.
• Although various relevant governmental bodies are still involved in the regulatory set-up, a single authority is the contact point for the industry in safety and working environment matters. This has apparently contributed to improved co-ordination of regulatory activities, more consistent exercising of regulatory powers, and more intelligible lines of communication.
• Nevertheless, the greatest contribution to cost competitiveness from the statutory administration, is, the way I see it, perhaps the change of the nature of relations between the regulator and the industry from being somewhat adversary to emphatically collaborative. Today, the majority of regulatory activities features constructive, co-operate efforts, in which both the industry and regulator contribute to the result. It is interesting to observe, that this has not been achieved at the sacrifice of regulatory integrity.

In recent years, operating companies have, in search for potential cost reductions, also been re-assessing the need for personnel, both on existing offshore installations and within their onshore organisations. Certainly, manning reductions are by nature a delicate issue. Work-force participation in such processes is not only a legal right, but I am convinced it can also give benefits for the employer - if properly managed.

The companies' maintenance programmes have increasingly become targets for the introduction of retrenchment measures. Reassessments of such programmes may be beneficial to safety matters, since they tend to bring about a consciousness and better understanding of the need to do the right things at the right moment. However, it is also my view that proper maintenance is indispensable for ensuring safe offshore operations, and in this particular field it is more likely that cost reduction might be achieved at the detriment of the safety standard. I would therefore like to emphasise that the initial technical standard of offshore installations must be maintained throughout their working life.

I am also aware that the industry, in its pursuit of reducing operational costs, is contemplating alternative contract models for future development projects. The issue is whether companies other than the appointed licences, such as ship owners, etc. may take on greater responsibilities for petroleum operations in the offshore industry. Alternative contract models represent a challenge to the industry with respect to ensuring that duties and responsibilities are adhered to, and that the interfaces between the licensees, operators and contractors are properly managed.

Where do we go from here ?

Should my presentation have conveyed the impression that the government is perfectly satisfied with what it has done to contribute to cost competitiveness, this was not intentional. We will continue to pursue our policy of contributing to cost competitiveness:

• We will continue to collaborate with the industry in the process of substituting regulatory guidelines by industry standards, provided the industry maintain and further its framework of such standards in step with the technological and societal development.
• We will on a continuous basis assess the framework of acts and regulations to ensure that its structure and enforcement mechanisms are compatible with the characteristics of the rapidly changing industry, and that it makes clear what is required to comply.
• Since offshore developments typically are featured by progressively tighter time schedules, activities that earlier took place in sequence are now conducted in parallel. This contributes to cost competitiveness, but provides also great challenges for the industry's safety and technology management, as well as for the regulator. We will on a continuous basis assess and further the effectiveness of the supervisory machinery in ensuring that petroleum activities are conducted in a quality fashion.
  We will continue to follow up the development of European Union directives etc. which are relevant to the Norwegian offshore activity. This implies that we shall participate in international standardisation work, the objective being to harmonise requirements of acts and regulations.
• We will continue the co-operation between the North Sea regulatory authorities. The long term objective is to harmonise statutory requirements and enforcement mechanisms as far as practicable.
• Mobile units are subjected to many more assessments of compliance by owners, customers, certifying bodies and regulators, than are fixed installations. In fact, such assessments are carried out prior to each assignment. This is primarily due to specific procedures of the supervisory system, and has little to do with inherited, practical shortcomings related to this kind of installations. The Government is therefore presently contemplating to establish an arrangement, in which owners of mobile units may obtain some kind of statement of fitness from the regulator, regardless of whether it has an assignment on the Norwegian shelf or not.
• The NORSOK initiative for cost reduction in the petroleum activity has, among other things, produced a number of draft industry standards. Quite a few of these are relevant to safety performance. I have been satisfied to observe that it was a fundamental precondition for this work, that the standard of safety and working environment in the offshore industry, should be sustained. The authorities have taken an active interest in the process of developing these standards. Provided the application of the NORSOK standards maintain or further the quality of the industrial activities in terms of safety and working environment, we are prepared to make reference to these standard in rules and regulations.

I am, of course, inclined to view cost competitiveness in a macro-perspective context, but in conclusion I do not see any conflict in principle between cost competitive ability and sound safety and technology management. Reduced cost competitiveness does not attract neither established participant nor potential investors, which in turn means that the industry will not contribute as much as it could to the benefit of the society as a whole. The government will continue to contribute in this respect, and give its support to the industry's own initiatives, as long as gain in cost competitiveness is not achieved to the detriment of standards for safety and health.

Not that I think it will. I have observed that the industry itself has taken on to enhance its cost competitiveness subject to current standards being maintained and furthered. I am also pleased to see that safety and working environment are items on the agenda for this event. I feel confident that the exchange of viewpoints and sharing of experience, which we will have during this conference, will contribute to the achievement of common goals with regard to safety and working environment issues in our offshore petroleum industry.