Statoil Incident Blamed On Complex Chain Of Command

OSLO (Dow Jones Newswires), Dec. 20, 2011

Employees and subcontractors of Norwegian oil company Statoil perceive the company's chain of command and drilling procedures as too complex, and feel management is allowing "local kings" to exert too much power, according to a report looking into a May 2010 incident at an oil platform.

The independent International Research Institute of Stavanger, or Iris, which researches energy and marine environment, released the report Monday, examining the causes behind the May 19, 2010, incident at the Gullfaks C oil platform.

Under slightly different circumstances that event could have become a disaster, according to the Norwegian Petroleum Safety Authority. It demanded further investigations on why Statoil failed to learn from previous incidents, pointing to a 2004 blowout at the Snorre A platform.

The Petroleum Safety Authority said it could have ended in a sub-surface blowout or an explosion not unlike the BP PLC (BP)-operated project in the U.S. Gulf of Mexico in April, 2010. Statoil has said the risk of explosion at Gullfaks C was very small.

In December 2010, an incident at Statoil's Gullfaks B platform in the North Sea leaked some 730 kilograms of gas when a pipeline was being replaced, Statoil has said.

Those incidents prompted Statoil to close 20 wells at the Gullfaks field due to safety concerns, and another 30 wells had to be closed to maintain the field's pressure balance. Statoil's 2010 production dropped below its 2009 level because of the disruptions.

This year, incidents at its Njord and Visund fields in the Norwegian North Sea have added to Statoil's problems.

Iris' report says workers tried to warn Statoil that something was wrong with the Gullfaks C well, but that management failed to heed the warnings. The authors interviewed 37 Statoil employees and 15 hired subcontractors for the report.

Oystein Michelsen, Statoil's executive vice president for development and production Norway, said in an interview that Statoil "recognizes" the report's main conclusions.

Statoil's 2007 acquisition of the energy assets of aluminum producer Hydro created leadership changes on the continental shelf that led to a perceived loss of experience and competence, the Iris report says. Employees received new positions and tasks, and the company merged two sets of rules and procedures, which made them more complicated to understand, the report says.

The report outlines three main issues: employees perceive the procedures and chain of command as too complex, they feel management is allowing "local kings" to exert too much power, and that the organization isn't heeding criticism.

"We will work with our leaders and strengthen their confidence," Michelsen said.

Those interviewed for the report said they were afraid to be critical, especially in writing, fearing "negative consequences."

"Divergent opinions on the drilling process were not sufficiently taken into account," the report says of the Gullfaks C incident.

Michelsen said he believes Statoil employees generally aren't afraid to speak their mind, even though some might feel that way.

"I get many clear messages on what people do not like when I travel to our rigs," Michelsen said.

Industri Energi, one of three offshore unions, criticized Statoil's new system of grades and rewards for performances.

"It's a big issue if you don't dare to talk about things you feel are wrong regarding security," said Per Steinar Stamnes, Industri Energi's union leader on the Continental Shelf. "We should be able to handle that both offshore and onshore."

Some of the employees said "local kings" stick together and "have gathered enough power to stop, slow down and initiate changes," the report said, adding that there has been a power struggle between unions and management on the company's platforms.

One man told Iris several people had warned him that if he had something controversial on his mind, putting it in writing would be "dangerous."

However, Michelsen said that isn't the way Statoil runs its business.

Statoil will start drilling production wells again at Gullfaks in the first quarter of 2012, and hopes to reach a production level comparable with the situation before the incident.

"We now see that we will not lose reserves because of this," even though some production will have been delayed, Michelsen said.

Copyright (c) 2011 Dow Jones & Company, Inc.


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