Risk Management - Literature review Example

Management Dissertation in Risk Management Table of Contents Introduction 3 Aims and Objectives 4 Background 4 The nature of oil spillage risk in oil exploration program 4 Oil spillage and their occurrence in oil exploration programs 5 Importance of Topic 6 Methodology and Structure 6 Literature Review 7 Overview of Risk Management in Oil Exploration Programs 8 Definition and Purposes of Risk Management 8 Application of Risk Management in Oil Exploration Programs 10 Management of Oil Spillage Risks 11 Identification of Oil Spillage Risks 12 Risk Assessment of Oil Spillage Risk 14 Introduction Risk management is done in order to avoid risks from arising and also to minimize their consequences. First of all, it is needed to correctly recognize all known risks because the risks cannot be mitigated unless it is identified. So, it is done thoroughly and accurately so that all the possible risks can be assessed within time. Secondly, it is required to determine the consequences and probability of each recognized risk. After taking all the necessary steps, different policies or models or framework should be identified so that risks can be mitigated completely. Over the last two decades, public alertness and anxiety about oil spills has been high. Periodically, public suffering increases with media coverage of incidents like M/V Cosco Busan spill in San Francisco Bay in the United States or with incidents like Prestige spill off the coast of France. Prospective arrangements for opening offshore and Arctic regions for oil explorations have once more caused great alarm (Etkin, 2009, p.3). This paper concerns with the management of oil spills and oil spillage risk in oil exploration programs. The happening of oil spills is basically a matter of probability. There is no assurance concerning the oil amount that would be produced or the possibility of a spill that would take place during the expected life of a given lease. A probabilistic incident like oil spill event or oil spill contact to an environmentally responsive area cannot be forecasted; only an approximation of its likelihood can be quantified (Scarlett, Linkov and Kousky, 2011, p.20). Before applying the risk management practices; risk assessment should be done in order to know that what can go wrong at a definite time period and what the outcome will be if it does. Therefore, it is necessary to find out the probable occurrences that could lead to an oil spill, together with the feasible resulting impacts. Risk assessment, in itself, does not eliminate the risk, but offers a systematic approach which permits for the recognition, management and lessening of the risk (Organization, 2010, p.3). This paper will focus on the methodology and structure, purposes of risk management, application of risk management in oil exploration programs, identification of spillage risks, risk assessment of oil spillage risks, risk response planning for oil spillage risks and risk monitoring and control for oil spillage risks. Aims and Objectives Aims: The aim of this paper is to develop a framework that will help the companies in order to control their oil spillage risks in oil exploration programs. Objectives: The objectives will be to investigate the nature of oil spillage risks; identify and summarize the existing understanding about oil spillage risk management; discover good practices in managing oil spillage risks and to provide a new framework that summarizes the findings and can be used further for managing oil spillage risks. Background The nature of oil spillage risk in oil exploration program The oil industry is concerned with a long history of spills on the North Slope and the probability of future spills is high. Indeed, there has been an oil spillage once a day, on average, from the time when gas and oil development began on the North Slope. Many of the tragedy involved pipelines, and improvement in the Chukchi and Beaufort would result in setting a connection of pipelines from wells to shore, till 75 miles away. In order to make the subject worse, ocean currents move the chemicals and oil hundreds of miles. Further, in the Arctic Ocean, cleaning up oil spills would lead to enormous challenges. Suppression and recovery at sea hardly ever leads to the removal of more than a comparatively small fraction of a large oil spill, i.e. only 10-15% and often significantly less. Till date, no technology subsists in order to clean up oil in the sea ice circumstances and late-season spills would stay behind until the following year. Furthermore, cold water splits down oil much more slowly than the warm water. Another impediment is the lack of infrastructure for quick reaction to a spillage. Climate change has considerably weakened the basis on which Arctic ecosystems function. Most important industrialization would add to the challenges faced by phytoplankton, at the bottom of the food chain and would generate a series of other problems. Species mainly at risk include polar bear, walruses, ringed seals, beluga and bowhead whales and coastal birds. So, it is found that the environmental risk is associated with the oil exploration programs (Goodyear and Beach, 2012, p.1). Oil spillage and their occurrence in oil exploration programs Oil spillage refers to an unintentional release of oil in a water body due to human activity and is regarded as form of pollution. Oil spillage occurs due to release of crude oil from underwater wells and pipeline, or offshore drilling rig, or a tanker, frequently presenting a danger to marine life and environment. Oil spillage became a main environmental problem mainly because of the use of supertankers competent of transporting more than 500,000 tons of oil. On ocean surface, oil is dangerous to several forms of aquatic life because it averts adequate amounts of sunlight from penetrating and also decreases the dissolved oxygen levels. Crude oil makes gills and feathers ineffective, and because of this reason fish and birds die from direct contact with the oil itself. The overall environmental problem is caused by negligent or unintentional release of used gasoline solvents and crankcase oils by individuals and industries and the natural seepage from the ocean floor greatly heighten the overall environmental problems. Royal Dutch Shell Oil made an arrangement to commence investigative drilling in the Arctic Ocean off Alaska’s northern coast. Shell’s offshore oil exploration programs threaten susceptible wildlife (Goodyear and Beach, 2012, p.1). While, offshore drilling rely more on pipelines in order to move oil to the coast, it is necessary to examine the history of pipeline incidents because many of the onshore leaks were related with pipelines. Three major spills were found from the North Slope segment of the Alaska Pipeline (Goodyear and Beach, 2012, p.3). Importance of Topic The topic is to set a framework in order to manage the oil spillage risks in oil exploration programs and it is important because many species are at risk due to oil spillage in the waters. Crude oil makes gills and feathers ineffective, and because of this reason fish and birds die from direct contact with the oil itself. Environmental risk is related with the oil exploration programs, so it is necessary to find out the probable occurrences that could lead to an oil spill, together with the feasible resulting impacts. Therefore, it is essential to set a framework in order to identify, manage and control the oil spillage risks in order to save the life of the birds, fish and other species such as polar bear, walruses, ringed seals, beluga and bowhead whales and coastal birds; which lives in oceans and other water channels. Methodology and Structure A number of advanced methods are available in order to control oil spills and to reduce their impacts on the wildlife and environment. Most of the spill response materials and equipments are significantly affected by such aspects as conditions at sea, wind and water currents. Mechanical containment and recovery tools such as booms, skimmers and sorbents are the initial line of defense against oil spills. They are used to confine and accumulate the spilled oil until it can be disposed of correctly (Nomack, 2010, p.1). Bio-remediation approach can also be used which involves the use of micro organisms in order to biodegrade the oils. Chemical and biological techniques such as gelling, dispersing and biological agents can be used in combination with mechanical means for cleaning up oil spills. Gelling agents and dispersing agents are most useful in order to keep away the oil from reaching sensitive habitats and shorelines. Biological agents have the possibility to help recovery in sensitive regions such as marshes, shorelines, and wetlands. A positive research in these technologies will recover the oil spill problems (Nomack, 2010, p.1). Other response methods are the physical methods and the scare tactics are used to clean up shorelines and provide sufficient environmental recovery. These tactics are used to protect the sea animals, fishes and birds by keeping them away from oil spill spots (Epa, 2011, p.1). Apart from these, Biological Exposure Model is also used to calculate the volume, area or portion of a population exaggerated by concentration of oil elements in the water, surface oil, and sediment contamination. For wildlife, the fraction or number of population suffering oil-induced consequences is proportional to the water surface region swept by oil of ample quantity in order to give a sub lethal or lethal dose to an exposed animal. The probability of exposure is associated to behavior of habitats on the water surface (Davidson, Cogswell and Kenneth, 2008, p.301). Literature Review The Literature review will focus on the overview of how risk is identified and managed in the oil exploration programs including purposes of risk management; and application of risk management in the oil exploration programs. It will also take into consideration how to manage oil spillage risk which includes identification of oil spillage risks; risk assessment of oil spillage risks; risk response planning for oil spillage risks; and risk monitoring and control for oil spillage risks. Further, the literature review will focus on the overall summary of framework for how to manage oil spillage risks. Risk management is necessary in order to avoid risk and minimize their effects on the oil exploration programs. It is also essential in order to evade the pollution caused in water and to save the life of the birds, fish and other species. Overview of Risk Management in Oil Exploration Programs When it comes to controlling the risk of large oil spillage, one of the challenges is that the events are doubtful, even though the probable impact is high. In order to control the risk of oil spill properly, it is necessary to understand all the phases of the risk, by means of different controlling measures. The oil industry is looking out for a method in order to develop oil spill risk management and techniques for examining the oil spillage risk and also the effect of risk reduction. Definition and Purposes of Risk Management It is a process of identifying, measuring, and then developing various approaches in order to manage the risks. The strategies involve neglecting the risk and minimizing the negative effect of the risk and also accepting some effects of a particular risk. In the subject matter of oil spillage, it is defined as a process that assesses the results from the risk assessment and then puts in place actions in order to ensure that recognized risks are whether acceptable or they require mitigation (Organization, 2010, p.16). Purpose of risk management: The main purpose of the risk management is to recognize probable difficulties before they occur, so that the activities of risk-handling may be designed and summoned as needed across the project or product life in order to lessen unfavorable impacts on achieving objectives. Efficient risk management involves early and aggressive identification of risk. The process of risk management is divided into three parts: defining the strategy of risk management; identifying and evaluating risk; and managing identified risk including the execution of risk mitigation plans (Bitkom, n.d, p.395). Defining the risk management strategy: An effective risk management strategy addresses the following: possibility of risk management effort; tools and methods which are to be used for identification of risk, analysis of risk, mitigation of risk, and monitoring of risk; project related sources of risk; how these risks are to be organized, differentiated and compared; parameters such as possibility, outcome, and thresholds, for taking action on recognized risks; risk mitigation methods to be used; definition of risk assessment in order to monitor the status of the risks; and time gaps for risk assessment. It should be guided by a general vision of success (Bitkom, n.d, pp.400-401). Identifying and evaluating risk: The identification of possible issues, threats, and hazards that could adversely affect plans is the foundation for thriving risk management. Risk must be recognized and described in a logical way before they can be managed properly. The methods for risk identification are as follows: observe every element in order to uncover risks; carry out a risk assessment; evaluate risk management efforts from comparable products; inspect databases or lessons-learned documents; and observe agreement requirements and design specifications (Bitkom, n.d, p.402). Managing and mitigating risks: Risks are managed and mitigated, where suitable, to minimize unfavorable impacts on achieving purposes. The steps in managing risks include developing risk managing options, examining risks and performing risk managing activities. The plans of risk mitigation are developed and executed for chosen risks to proactively minimize the possible impact of risk incidence. Options for managing risks naturally include following alternatives: Risk avoidance: Lowering or changing requirements though still meeting the user’s needs. Risk control: taking dynamic steps in order to reduce risks. Risk transfer: Modifying design requirements in order to lower the risks. Risk monitoring: Observing and periodically reassessing the risk for modification to the allocated risk parameters. Risk acceptance: Recognition of risks but then also not taking any actions (Bitkom, n.d, p.407). Risk acceptance is generally done when the risk is low for formal mitigation or when it is notices that there is no proper method to minimize the risk. Risks are monitored when there is clear and recognized threshold of performance or risk coverage that will generate risk improvement planning or summon a plan if it is required (Bitkom, n.d, p.407). So, there is a need of risk management process in order to identify, evaluate and mitigate risks. Application of Risk Management in Oil Exploration Programs The nature of oil exploration programs are discussed below: SPCC i.e. Spill Prevention, Control and Countermeasures regulations are designed in order to protect waters from oil pollution which is often caused by oil spillage. The regulations are concerned to the non transportation associated facilities with a definite underground oil storage capacity that is likely to discharge oil in the waters (Agency, 2002, p.28). The Bureau of Land Management involves managing the exploration and production of oil and gas (Agency, 2002, p.32). The Fish and Wildlife Service is the major federal agency which is committed to protecting wildlife and also their habitat from the dangerous effects of the oil pollution in water. It will focus on identifying toxic chemicals; analyzing their effects; avoiding harm to fish and other species of water; and taking out the toxic chemicals and re-establishing habitat in case the prevention is not possible. These professionals are the experts on water quality, oil and chemical spills, hazardous material and other aspects of pollution biology (Agency, 2002, p.33). The American Petroleum Institute is regarded as the national trade association which is involved in oil and gas exploration, transportation, production, marketing, and refining. The Institute represents its professionals in addressing regulatory issues. It also collects statistics, sponsors research, conducts workshops and suggested practices for the industry equipment (Agency, 2002, p.34). The oil exploration industry has been very active in assessing and introducing new operational and engineering methods in order to prevent the oil pollution caused in the water (Unep, 1997, p.53). Management of Oil Spillage Risks The Oil spillage risk evaluation draws on the practice and lessons learned by the industry and governments, during the past thirty years, in association with marine oil spill contingency planning and reaction (Organization, 2010, p.vii). It includes the identification of oil spillage risk, assessment of oil spillage, risk response of oil spillage and monitoring of oil spillage risk. It is acknowledged that each spill signify its own particular challenges for industry and governments, depending on type of oil, weather condition, location and environmental resources of risk. Though, the assessment of risk and preparedness level is to be instituted at a specific location or nationally, and should use reliable approaches that are based on past experiences (Organization, 2010, p.vii). The main element in order to react to a marine oil spill is the continuation of a tested and exercised contingency plan that relates the risk of a spill with the capability to respond, though taking into concern the threat to the environment. The plan should include circumstances which are matched to a suitable response approach and ability, and establish measures in order to generate external assistance through response approach. Efficient oil spillage response needs suitable system and trained personnel for effective implementation. Therefore, a systematic approach is needed which, integrate attentiveness and prevention activities as part of the risk reduction process (Organization, 2010, p.1). Identification of Oil Spillage Risks The overall environmental problem is caused by negligent or unintentional release of used gasoline solvents and crankcase oils by individuals and industries and the natural seepage from the ocean floor greatly heighten the overall environmental problems. On ocean surface, oil is dangerous to several forms of aquatic life because it averts adequate amounts of sunlight from penetrating and also decreases the dissolved oxygen levels. Crude oil makes gills and feathers ineffective, and because of this reason fish and birds die from direct contact with the oil itself. So, the main risk associated with oil spillage is the environmental risk. Prior to describing the risk assessment process, identification of the variety of terms is essential which is used in describing the oil spillage risk assessment process: Source: The operations or facilities such as pipeline, oil tanker, storage tank, offshore installation and non-tank vessel; from which an unintentional release of oil takes place (Organization, 2010, p.3). Hazard: A potential danger such as uncharted rocks, maintained equipment and congested waters; which causes the release of the oil, often leads to oil spillage risk (Organization, 2010, p.3). Event: Event is mainly referred to the accidental release of oil such as a hazard interaction with a resource in order to create an event (Organization, 2010, p.3). Frequency: The statistical number of times an incident will take place within a definite sample size over a definite period (Organization, 2010, p.4). Probability: Probability is referred to a particular incident and is conveyed as a number between zero and one; which means between zero chance and certain (Organization, 2010, p.4). Likelihood: It is a general term which covers either probability or frequency, depending on the analyses used (Organization, 2010, p.4). Consequence: The consequence may be environmental or socio-economic costs or damage which may take place from an incident (Organization, 2010, p.4). When a ship descends, it carries oil along with it into the abyss. Corrosion, storms and other events can lead to the leakage of that oil and pollute the sea, which kills the marine life, birds, and also poses a health risk to people. Out of 20,000 shipwrecks in United State waters, the NOAA i.e. the National Oceanic and Atmospheric Administration, in recent times recognized 6 drawn vessels that most terrorize to pour out their oily innards. NOAA proposed further consideration and oil clean up of 17 of those shipwrecks. Risk Assessment of Oil Spillage Risk Risk assessment should be done in order to know that what can go wrong at a definite time period and what the outcome will be if it does (Organization, 2010, p.3). In risk assessment process is to recognize the source and danger, followed by contemplation of hoe these may interact in order to generate possible events and scenarios. Both the sources and dangers may be recognized through various methods. First method is, through historical data: This process makes use of historical data which is suitable to the area or operation that is being assessed. At a nationalized level, global spill statistics may be valuable in some cases, while individual actions may be better suited to more precise data sets in others. The data may give a clue of the causes of the spillage, volumes and oil types; which are essential elements in scenario development (Organization, 2010, p.4). Second method is the expert review: It means the use of experts in order to observe and discuss an action in a structured framework. Based on their experience and knowledge, the result would be list of possible circumstances that might lead to an oil spillage (Organization, 2010, p.4). Tiered response: The scenarios should be classified in a manner that will support and feed into the eventuality planning process. The conventional and widespread approach in planning is to employ the tiered response approach. There are generally three types of tiers: Tier 1: It includes those operational type spills that may take place as upsets to usual actions at, or within a port, or near an operator’s own facilities, as a result of routine activities. Read More