addressing drilling risks: what could go wrong?
TRANSCRIPT
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Addressing drilling risks:
What Could Go Wrong?
Anna Grebennikova
Risk Management for LUKOIL Drilling Operations
2nd Annual Contract Risk Management Forum for Oil & Gas 2014,
Amsterdam, May 22-23
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About the Speaker
Anna GREBENNIKOVA
is a Risk Manager for the Well Construction Department, LUKOILcompany. She specializes in risk management for drilling operations.
Prior to her assignment with LUKOIL, Anna Grebennikova worked asan Expert of the E&P Competence center, IBS company. She wasspecialized in risk management practices, drilling operations riskmanagement and participated in consulting projects for some majorRussian O&G companies.
Before this she was a reservoir engineer in the Russian Oil and GasResearch and Development Institute (VNIIneft) which is theacknowledged leader in the field of oil recovery enhancementinnovative technologies and stimulation of oil production.
Anna Grebennikova earned a Master of geology degree at theGubkin Russian State University of Oil and Gas (2011), and aDegree in Mathematics and Mechanics at the Saratov StateUniversity (2006).
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Agenda
1. Drilling risks allocation
2. Risky risk management
3. LUKOIL's steps on the way
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The Main Goal Is..
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.. To show that the source of risk
could be:
Value chain business process;
Risk management itself
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Definition of risk
“If you wish to converse with me, define your terms”.
Voltaire
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Long :
The probability and magnitude of a loss, disaster, or other undesirable event
Shorter (equivalent):
Something bad could happen
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Drilling project KPI’s
Drilling project
Budget Schedule Quality
HSE
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Drilling project KPI’s
Drilling project
Budget
Overruns
Schedule
Delays
Quality
Issues
HSE
Hazards
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Risk classification (proposed by CAS)
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• Liquidity
• Credit (default, downgrade)
• Price (foreign exchange, interest rate )
• Business operations (HR, product development, supply chain)
• Empowerment (leadership, change readiness)
• IT (relevance, availability)
• Fire and other property damage
• Natural perils
• Business interruption
• Crime, personal injury
• Reputation damage
• Competition
• Technological innovation
• Capital availability
• Regulatory & Political trends
Strategic Hazards
FinancialOperational
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Drilling risks vs Shareholder value
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Shareholder value
Revenue growth
Operating margins
(after taxes)
Asset efficiency Expectations
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ERM maturity: Russian O&G companies
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2011 20112012
2012 2012
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Risk management: what could go wrong?
Survey 1: Financial Times & Oliver Wyman 650 executives
energy, financial, manufacturing, life science, technology, and transportation
The biggest challenge is aligning risk data to strategies and operations
There is poor communication of risk information across organizations due
to "siloing" and poor risk information systems
Huge disconnect between strategy, operational planning, capital allocation, and
risk management practices
Companies are not using a "fit-for-purpose" risk management approach and have
been unable to cull the important from the trivial
Risk information integrity is suspect due to the quality of the data inputs
There is heavy reliance on internal subject matter experts for risk
information
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Risk management: what could go wrong?
Survey 2: Boots & Coots
All operators had hazard and/or risk management as one of the elements in their management system
BUT: There are few, if any, truly risk-based management systems in place
Operations risk professionals at oil and gas companies studied do not rely on integrated electronic risk information systems
Companies generally use risk management tools and techniques to demonstrate that their existing management systems are effective rather than use them as the basis for effective design of their management systems
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Illusion of success (by D. Hubbard)
Success by self-assessments
“Change in culture”
“Building the consensus”
“Our theory is mathematically proven”
“Structured” methods (like Astrology)
Vendors’ claims : “Others bought it!”
“But at least we are doing something!”
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10 reasons risk management won’t work
No. 1 – Leadership & Culture
No. 2 – Excel Spreadsheets
No. 3 – Compliance Focus
No. 4 – Common Risk Language
No. 5 – Diamonds in the Sand
No. 6 – Over Quantification
No. 7 – The Chasm Between Risk Practitioners & GRC Software Vendors
No. 8 – Vision, Planning & Silos
No. 9 – Linking Strategic Objectives
No. 10 – Risk Articulation & Granularity
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Risk management success/failure spectrum
Best. The firm builds quantitative models to run simulations; all inputs are validated with proven statistical methods, additional empirical measurements are used where optimal, portfolio risk analysis of risk and return is used. Always skeptical of any model, the modelers check against reality, and continue to improve the risk models with objective measures of risks. Efforts are made to systematically identify all risks in the firm.
Better. Quantitative models are built using at least some proven components; the scope of risk management expands to include more of the risks.
Baseline. Intuition of management drives the assessment and mitigation strategies.
No formal risk management is attempted.
Worse (the “merely useless”). Detailed “soft” or “scoring” methods are used, or perhaps misapplied quantitative methods are used, but at least they are not counted on by management. This may be no worse than baseline, except that they did waste time and money on it.
Worst (the “worse than useless”). Ineffective methods are used with great confidence even though they add error to the evaluation. Effort is spent on seemingly sophisticated methods, but there is still no objective, measurable evidence they improve on intuition. These “sophisticated” methods are far worse than doing nothing or simply wasting money on ineffectual methods.
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LUKOIL’s WCD steps on the way
• Currency risks
• Priority projects to daywork
• Project RM procedure design
• Supervisory pool
• Reorganization of WC BU’s
• RLG Performance Consulting
• Well heads to International Standards
• Wild Well Control Capping Stack
• K & M
• Emergency plans (Intra Point)
• Standards & Regulations
• Long-term contracts
• Standard contracts
• Master vendor list
• N New Rigs/Year
• Young Specialists Program
• 10 Year TargetsStrategic Hazards
FinancialOperational
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Conclusions
Do any of our risk management methods work?
Would anyone in the organization even know if they didn’t work?
If they didn’t work, what would be the consequences?
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