A Research Proposal on the Risk Management Strategies of Selected Companies in the Oil and Gas Industry
A Research Proposal on the Risk Management Strategies of Selected Companies in the Oil and Gas Industry
“Experiences differ and common usage lack precision” (1988) with regard to risk. Risk involves both hazard and opportunity to people who undertake the risk. People evaluate results based on their evaluation of the situation based on the criteria of gains and losses. Furthermore, risk involves trade-offs. This means that there are some groups who experience losses while others gain from the risk. The trade-off influences the perception of people about the risk. Oftentimes, the risk issue revolves not on the scientific facts about the risks but the conflict of values and the acceptability of the risk of different groups with conflicting interests.
The safety of business environment has always been the concern of government, companies, employees and customers for years. Risk management is a function similar to the other management functions such as marketing, purchasing or finance. Thus if we look at economic development from a functional viewpoint risk management is something every countries does which leads to the achievement of its overall economic objectives. According to (2002), as competent reflective agents, we are aware of the many ways in which a generalized 'climate of risk' presses in on our daily activities; sensitive to the risks that affect our lives; and are specialists in managing risk. From health concerns to stock market gains and environmental and political issues, the contemporary risk climate is one of proliferation, multiplication, specialism, counterfactual guesswork, and anxiety ( 2002).
However, adequate consideration and calculation of risk-taking, risk-management and risk-detection can never be fully complete since there are always unforeseen and unintended aspects of risk environments. This is especially true at the level of global hazards, where the array of industrial, technological, chemical and nuclear dangers that confront us grows, and at an alarming rate. Indeed, (1996), an innovative and German sociologist defines the current situation as that of world risk society. According to (1996), the rise of risk society is the result of the new electronic global economy. He has developed powerful analyses of the ways in which the situation is transforming social reproduction, nature and ecology, intimate relationships, politics, economics and democracy. In this regard, this resea5rch study will look into the risk management strategies utilized and applied in the oil and gas industry.
Background of the Study
Managing the risk of health and safety in the organization lies within operational risk. Health and safety is an operational risk as it involves the human aspects of the business, or within the internal operations of the organization. But generally, institutions have difficulty quantifying operational risk because its definition is so broad and data on operational losses, which are important essential for statistical calculations, are often impossible to obtain; thus, in order to develop good measures here, the industry must design and implement systems that can capture the necessary data, and doing so is well worth the cost, as operational losses can be worth tens or even hundreds of millions of dollars (2001).
Ultimately, it is pertinent that risks are effectively managed for the company to prosper, because by managing business risks, an organization’s health, assets and opportunities will be secured and taken full advantage of ( 2000). But barriers do exists. There are several reasons for not implementing risk management, such as cost, benefits and expertise (2000). That is, the most common rationalizations are that the project is too small (or too large) to justify the time and expense of a review; that the benefits cannot be determined and, therefore, the costs are assumed to outweigh the benefits; and that the effort is unlikely to uncover anything that is not already well known to everyone involved in the project (2000).
The oil and gas industry is the object of a great deal of criticism when it comes to the health and safety of its employees ( 2005). This is due to the numerous activities within the industry, which include the use of chemicals for various processes such as drilling, cementing, completion, stimulation, and production (1990). The occupational hazards of exposure to these agents have not received sufficient attention nor have the types of health and safety strategies that firms should strictly implement. The oil and gas industry is one of the riskiest industries when it comes to the health and safety of employees. Interruptions in oil production caused by fires and accidents lead to significant economic losses, and potential hazards to humans and the environment. Employees are also threatened by infectious disease, food borne/waterborne illness, and wildlife and vector-induced disease (2003). Working in oil refineries exposes employees to benzene and Naturally Occurring Radioactive Material or NORM – substances that are dangerous to health (2003).
(2000) conducted a study about the benzene and total hydrocarbon exposures in the upstream petroleum oil and gas industry and found several safety concern issues. The study was based on the Canadian Oil and Gas Industry, and a total of 1547 air samples taken by 5 oil companies in various sectors (i.e., conventional oil/gas, conventional gas, heavy oil processing, drilling and pipelines) were evaluated and summarized. Although the study was not focused in the oil and gas industry in Saudi Arabia, it still provided results that can be generalized for the whole oil and gas industry around the world. For instance, it found the percentage of samples are over the occupational exposure limit (OEL) of 3.2 mg/m3 or one part per million for benzene, for personal long-term samples ranges from 0 to 0.7% in the different sectors, and area long-term samples range from 0 to 13%. On the other hand, for short-term personal samples, the exceedance for benzene is at 5% with respect to the OEL of 16 mg/m3 or five parts per million in the conventional gas sector and none in the remaining sectors. The findings help establish a precaution to the global oil and gas industry that certain operations such as glycol dehydrators be carefully monitored and that a task-based monitoring program be included along with the traditional long- and short-term personal exposure sampling.
Another study that reflects the safety procedures in the oil and gas industry in general is the study conducted by (2001), which reports a benchmark assessment of employee and contractor safety climates in an offshore oil company that operated contractor partnership agreements in the North Sea. Questionnaires were used in the study to assess safety climates in terms of employees’ and contractors’ perceptions of safety management, workplace conditions and safety concerns. The results showed that safety climates could be aligned in organizations that operate partnership agreements within a recognized health and safety management system. (2001) suggested that the approach presented is appropriate for benchmarking safety climates before and after partnership arrangements have been established in order to determine the level of cultural alignment that has been achieved.
Markussen (2003) enumerated several effects on employee health that a geological survey/seismic operation can produce. Employees are endangered of infectious disease; foodborne/waterborne illness; wildlife & vector; induced disease; and noise. On the other hand, oil and gas production causes chemical and physical agent exposure, specifically on drilling mud; petroleum products; treatment chemicals; radioactive sources; NORM*; solvents; metals; temperature (heat/cold); silica/asbestos; noise/vibration; and PCB’s. (2003) concluded that all risks must be identified and managed through wisely incorporated resources in order for quality operations to be long lasting.
Statement of the Problem
The oil and gas industry faces many criticisms when it comes to health and safety of its employees. This is due to the numerous activities within the industry that include chemical use for various processes (1990). These include: drilling, cementing, completion, stimulation, and production ( 1990). The occupational hazards of exposure to these agents have received little attention, as well as the types of health and safety strategies that firms implement. Thus, this study will look into the risk management strategies implemented in the oil and gas industry. As such, the following research questions will be the focus of inquiry in this particular scholastic activity:
1. What are the current risk management strategies and management policies that are implemented in the oil and gas industry?
2. What are the issues and problems considered by the companies in the oil and gas industry in formulating their risk management strategies?
3. How do companies in the oil and gas industry assess the effectiveness and efficiency of their respective risk management strategies?
Significance of the Study
The oil and gas industry is a high reliability industry despite technological innovations because of the existence of hazards even if the risk is not commonly realized. Previously, risk assessment measures in the oil and gas industry were focused on analyzing the statistics on risk actualization to determine the areas with the most significant hazards as basis for the development of more stringent health and safety standards. However, post-accident assessments are not proactive measures that fully support the health and safety in the workplace. This led to the shift from reliance on data of accident occurrences to the determination of possible areas of high risks and developing preventive measures (F2000) based on the recognition that human factors play a significant role in accidents relative to purely technical matters ( 1999).
The risk message being disseminated should come from reliable sources for the information being relayed to be accepted and believed. Trust is the basic factor for people to believe a risk communicated and to make this as basis for their risk decisions. To make the risk message achieve its full impact, the information should be presented in a manner that fits its significance. The content should be clear to achieve comprehension and influence decision-making. These factors are important because risk messages spread across communities and the content of the risk message should be clear and understandable to have a beneficial effect and not just create panic based on unfounded beliefs or misconceptions. The message is as important as the mode of communicating the message ( 2000).
The completion of this research project will be most beneficial to the selected companies that will participate in the study. the information and data elicited from the management will be examined and carefully analyzed in order to address recommendations that will primarily benefit them. In general, the whole oil and gas industry will benefit from the study since relevant and highly important findings and results will contribute to the risk management considerations and implementation in the business. The public, in this respect, will likewise indirectly benefit from the research activity since risk management concerns not just the economic considerations of the oil and gas industry but of the entire society.
Objectives of the Study
Risk management refers to "An organized, systematic decision-making process that efficiently identifies risks, assesses or analyzes risks, and effectively reduces or eliminates risks to achieving the program goals" ( 1998). It is a management process which deals with planning, leading, and controlling the use of the organization’s budget or resource in order to diminish its risk of loss effectively. It is the process of balancing the risk of loss from unexpected causes against the economic cost of protection. Risk management requires decision-makers to have a thorough understanding of the particular risks involved in a situation, the principles on risk management, and the development of an organized risk management process.
The following statements cover the objectives that this research endeavor aims to achieve upon the completion of the data and information needed through sound analysis and interpretation of the findings of the study:
1. To conduct a comprehensive literature review on the current risk management strategies and management policies that are implemented in the oil and gas industry.
2. To facilitate interviews among selected companies in the oil and gas industry regarding the issues and problems considered in formulating their risk management strategies.
3. To inquire into the assessment and evaluation process used by selected companies in the oil and gas industry to measure the effectiveness and efficiency of the risk management strategies and policies they implement.
Scope and Limitations of the Study
In every research there are bound to be hurdles that the researcher needs to overcome in order to finish the task. It is important the even before the research begins, the researcher takes note of the possible difficulty that the research will be facing. This will allow the researcher to prepare for the surfacing of the said difficulties. It can be deemed that this section of the proposal will aid the researcher in implementing a risk management program for the researcher. This is important so that the researcher will not waste any valuable time and resources.
It may be the case that the research be affected by inadequate time to gather all the necessary data. It must be understood that the longer the observation period or intervention, controlling of variables, from the researcher the more accurate the findings can be. The lack of cooperation from the authorities means that the study will have no chance of being completed. Therefore, the researcher has the responsibility of ensuring that all the necessary authorizations are in place before the actual start of the study. This will give way for any troubleshooting that needs to be done in case any of the predetermined plans goes wrong. Time might be the greatest limitation to this research, which hindered long-term outcome objectives. Environmental factors, such as socioeconomic status will not be controlled, and which may create many variables within the research. As this study will utilize a small sample of respondents in which the results may not effectively represent the general population.
The input-process-output model, the framework to be used, is compatible with the study because of its simple structure. The input will be the literatures that will be collected from different online databases. This also includes the secondary data that will be acquired from families of the chemical dependent offender and social institutions that implement the programs. The difficulty will logically be on the process of the model. The process is the analysis of the data collected and will prove to be difficult because of the different issues that the study might face. Information to be acquired should be arranged conveniently so that they can be analyzed more efficiently. The effective execution of the process will be the main importance of the research because it will determine the quality of the output.
Overview of the Methodology
This study operates primarily under the qualitative research approach. The research concepts were studied in order to provide information and understanding on the governing considerations that selected companies in the oil and gas industry implement in or to effectively and efficient manage the risks in their business operations Exploratory research normally involves open-ended study, unguided by theory and intended to provide a new body of empirical knowledge from which theories might be postulated (2003; 2002) which the study will adapt in order to answer the study questions as well as answer to the objectives presented by the research project.
The study will also employ qualitative research method because it will try to find and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitative elements that do not have standard measures such as behaviour, attitudes, opinions, and beliefs are analyzed. As such, the information that the informants of the study will share to the researcher will be accordingly examined, analyzed and interpreted to answer the research questions presented. The bulk of the study will be facilitated under the qualitative paradigm so as to elicit thick information which will be helpful in conceptualizing the arguments of the research endeavour. An in-depth analysis on the findings from the information collected through interviews will be made focusing on the comparison of the different cases that the study will reveal during the organization of the data. In this regard, an in-depth cross-case comparison analysis will be the main methodology.
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