Applying and maintaining a coherent set of HSE rules and guidelines within a sector containing inherent safety risks and complex contracting chains – such as the oil and gas industry – can present challenges for governments, operating and services companies, and local businesses alike. The networks of contractors and subcontractors that companies rely on to carry out day-to-day operations can be diffuse, making oversight harder, reducing accountability, and presenting a number of obstacles to maintaining HSE performance throughout the contracting chain.
At Egypt Oil & Gas’s recent Field Best Practices workshop, Mark Konecki, Region Operations Director at Apache Egypt, spoke of the need to put in place a set of guidelines and training programs for all contractors working within the sector. “For many contractors that work in our day-to-day operations, their safety performance is not as good as that of the other more experienced contractors that work in the industry… It is the contractor safety performance that we struggle with the most,” he said, speaking from his experience working with Apache, Qarun Petroleum Company (QPC) and Khalda Petroleum Company (KPC).
Given this ongoing problem faced by Egyptian companies, questions should now be raised about what can be done to solve the problem.
Mapping the Contractor Landscape
Over the past decades the role played by contractors in the global oil and gas industry has increased significantly. Although there are no specific work-hour statistics available for the Egyptian oil and gas sector, existing global data evidences the large involvement of contractors in the industry. Figures published by the International Association of Oil & Gas Producers (IOGP) suggest that the number of hours worked by contractors is almost four times greater than those worked by the client company.
In Egypt, local contractors are hired by operating companies for different activities. National contractors such as Enppi, Petrojet and the Egyptian Drilling Company (EDC) employ specialists and can deliver technical services more akin to the large multi-national contractors. Smaller, local contractors – which sometimes include local Bedouin families – will typically deliver services which do not always require a high level of skill or technical ability. These services include site maintenance, such as electrical and plumbing work; construction, such as operating heavy machinery, material hauling and labor work; and catering for workers on the site. Each phase of implementation – exploration, construction, operations and decommissioning – to varying extents rely on contractors in order to ensure that operations are run in an efficient and cost-effective way.
Local Contractors and HSE
While experienced multi-nationals are familiar with international HSE standards and have the resources to ensure that company employees maintain them, the same cannot always be said for local contractors. This does not include Egypt’s national state-owned contracting firms – which have strong guidelines embedded into their operations – but the smaller, local businesses which may not have the knowledge, the means or the will to ensure these standards are followed by their employees.
“Generally speaking, local contractors’ adherence toward HSE needs improvement,” Abdelsalam Yasseen, HSE Manager at Baker Hughes GE (BHGE), tells Egypt Oil & Gas. Although safety standards among local contractors in the oil and gas sector is generally better than in other Egyptian sectors, Yasseen maintains that HSE performance is below international norms.
“I can give you a number of personal experience examples of people working for local contractors that actually lost their lives or suffered severe injuries due to the local contractor being reluctant to provide the correct equipment or adequate PPE [personal protective equipment] in order to save some cost,” he says.
Konecki, who has worked extensively in the Egyptian oil and gas sector, tells us that HSE guidelines are regularly breached by local contractors. “This happens more frequently than one could imagine,” he tells us. The failure to use seatbelts, for example, has resulted in deaths and injuries among workers employed by local contractors.
Poor HSE performance is felt first and foremost by the frontline workers who are tasked with operating in a hazardous work environment. What may be less obvious are the potential implications for the industry as a whole. According to a report by the International Institute for Environment and Development (IIED), the widespread use of contractors and subcontractors means that the resources required to manage risk affects other areas of the sector’s social and environmental performance.
The complexity of modern-day contracting requires a sector-wide system of HSE enforcement that removes the challenges that individual companies face when it comes to monitoring their contractors and subcontractors. As it stands, the IIED raises important questions about whether it is even possible to achieve the level of oversight necessary to ensure safe working conditions throughout the contracting chain.
Improving Safety among Local Contractors
Agreeing to a set of HSE policies and procedures will be the first step for some local contractors working in the Egyptian oil and gas sector, many of which do not yet have a coherent HSE framework in place. However, this is not enough to ensure that the company improves its HSE performance, Konecki tells us. “Just because it is written down on a piece of paper, it does not mean it is effectively implemented in a company,” he says. “It needs to become part of a company’s safety culture.”
One way of achieving this is to make HSE policies a high priority during the procurement process. By doing this, the tendering company can ensure that the contractor will perform to a certain HSE standard, and – if it does not meet all the criteria – measures can be taken to ensure that all workers receive adequate training.
This can tie-in with an idea floated by Yasseen that would see the creation of a pool of HSE-approved contractors. To enter this group, each contractor would have to be pre-screened, audited and assessed against an agreed-upon set of HSE key performance indicators. This way, oil and gas companies would be able to tender contracts safe in the knowledge a high HSE standards will be applied.
Creating a pool would also create an additional incentive for contractors to maintain a high HSE performance. The fear of losing business should in theory already provide sufficient incentive for contractors to ensure their operations are conducted in a safe and environmentally-conscious manner. However, while there can be repercussions for contractors which continuously fail to meet the requisite standards, contracts often continue to emphasize cost and time. Incentivizing contractors to deliver work as quickly as possible and on a tight budget is not likely to generate positive HSE results. Instead, by creating a pool, local firms would be forced both to implement changes in order to be eligible to compete for future contracts, and tendering companies would be obliged to contract HSE-approved contractors.
Yasseen describes to us the story of a local contractor, which had no prior experience of implementing HSE policies and procedures. “The [service] company worked with the contractor hand-by-hand, guiding the contractors on the HSE requirements, providing support, training and frequent audits… At the end, this contractor became one of the best players in the market of transportation in Egypt.” While it is unfeasible for service companies to engage with every local contractor through the HSE process in such a way, the journey taken by this contractor demonstrates that it is possible to effect change on a case-by-case basis. When combined with large-scale initiatives – the private sector acting in concert with the government to introduce sector-wide enforcement mechanisms – there remains real hope that safety and environmental standards can improve throughout the Egyptian contracting chain.