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Upstreamonline: Shell in the safety firing line (“new crisis… potentially far more serious than the reserves issue”)

Former company auditor makes claims of serious breaches in safety standards and falsified maintenance records on North Sea fields

By Upstream staff

SHELL is facing a major new top management scandal following startling disclosures of how it persistently ignored critical safety warnings on its UK flagship Brent field in the North Sea by running its four platforms “flat out” while allegedly violating operating procedures, falsifying maintenance records and corruptly failing to maintain safety critical equipment.

In an exclusive interview with Upstream, Bill Campbell, a former Shell International group auditor in The Hague, reveals how in the late 1990s the top directors of Shell Expro in Aberdeen, the UK arm of the Anglo-Dutch group, allegedly sanctioned a policy widely known as Touch Fuck All (TFA), whereby offshore installation managers were told to stop any work with the potential to cause unplanned shutdowns.

The allegations levelled by Campbell against Malcolm Brinded, Shell’s group chief executive for global E&P, who was in charge of the UK business at the time, and his oil director Chris Finlayson, who is now country president of Shell Russia, claim the two men ran an operation where production took priority over safety concerns.

Upstream has also seen copies of a Shell internal audit from November 2003, two months after the deaths of two men in the utility leg on the Brent Bravo platform, which shows safety standards across a large number of Shell’s main European assets had deteriorated still further since the 1999 Platform Safety Management Review (PSMR). (See separate stories pages 28&29).

Campbell, who worked for Shell in many senior capacities for 24 years, was called upon by group management in The Hague to carry out a PSMR in 1999 of Shell Expro’s Northern Business Unit installations, including the four Brent plaforms, after growing internal concerns over major incidents on the company’s Cormorant Alpha and North Cormorant installations. Campbell says he discovered that the TFA policy meant a significant proportion of essential maintenance on safety critical equipment was being deferred because of the risk that executing this maintenance might accidentally result in having to shut down production. His five-strong audit team found that, although the work had been deferred, it was still reported in-house as maintenance that had been completed.

Campbell alleges that his audit found that by manipulating technical integrity performance indicators, Brent asset manager David Bayliss had constantly fed false figures into the corporate database, indicating levels of compliance much higher than those actually achieved. For instance, the audit team discovered that while in August 1999 he was reporting 100% compliance with safety critical preventative maintenance on Brent Alpha, the actual figure was only about 14%.

The PSMR audit and many other Shell internal documents seen by Upstream have uncovered totally inappropriate attitudes, skills and behaviours that were evident in the operation of the four Brent installations.

“During this time, the organisation lost control and opportunities were taken by people to run the business as they saw fit,” alleges Campbell.

“It was organisational change for change sake. Morale was generally at rock bottom after large reductions in offshore staffing, and there were huge management failures in drawing up standards and a tendency for senior managers to grow their own rules,” he claims.

The PSMR audit found that the TFA acronym was in fact in widespread use in Shell Expro and appeared at every level in the Northern Business Unit, both onshore and offshore, on official notes and memoranda.

Campbell discovered the TFA policy had by late 1999 resulted in 75% or more of safety critical elements (SCE), such as fire and gas detection systems on Brent, not being maintained within their specified period. Verification of SCE is a requirement placed on all operators by the UK Health&Safey Executive (HSE) under the provisions of the Prevention of Fire, Explosion&Emergency Response (PFEER) regulations. Campbell says that when he and his audit team visited Brent they discovered about 30% to 40% of the equipment failed under test, even though under the regulations such equipment had to be available immediately if so required. Deluge and oil mist detector systems on all four platforms failed under test with huge risk implications for the platforms’ safety, he claims.

The findings of the Campbell-led review team, when taken together with a long-string of subsequent events, including the deaths of two men on Brent Bravo in 2003, now threaten to plunge Shell into its biggest internal crisis since Jeroen Van der Veer took over as chairman from Phil Watts, who was ousted by the board in early 2004 for having overstated the group’s oil reserves.

Upstream revealed earlier this month that Shell is still suffering major safety problems on its Brent Bravo platform, which has just suffered two gas leaks in three weeks, fuelling fears that little has improved since the 1999 PSMR on either the safety or regulatory

Last week, Bravo experienced further problems when a water pipeline passing through the utility leg sprung a leak, forcing work in the leg to be suspended. Campbell believes the root-cause of Shell Expro’s current problems started with a re-organisation carried out by Brinded during the 1990s. As a consequence of Brinded’s enhanced Expro plan, the Brent business was merged with the Northern Business Unit, all of which was overseen by oil director Finlayson.

“Under Brinded’s regime, all the previously strong checks and balances whereby a director would have approached another were then played out by someone who was subordinate to the oil director, who at the same time was the person who was also driving the production,” claims Campbell.

Concurrently, the HSE function was downgraded so the manager responsible had to go through a long chain of command rather than, as previously, having a direct line to the top. Under Brinded’s changes, Campbell claims, the day-to-day power and authority for Brent operations was put under the control of asset manager Bayliss, who reported to Northern Business Unit general manager Jorn Berget, who in turn was accountable to Finlayson and ultimately Brinded.

Campbell was highly critical of Berget’s hands-off management style, which he argued let Bayliss run the Brent field assets with minimum oversight, effectively unchecked.

The PSMR audit, involving interviews with about 250 people, soon started to uncover the darkest truths about the way the Brent installations were being “sweated” for long periods in order to meet the heavy demands placed on the field by a highly lucrative gas nomination contract negotiated under Brinded.

Shell and its 50:50 Brent partner ExxonMobil had spent about£1 billion in the 1990s converting the four large platforms to producing quite large volumes of low- pressure gas and relatively small quantities of oil. The ageing first-generation field, which started production in November 1976, was given a new lease of life in the 1990s and was then still supplying about one-third of the UK’s total gas demand.

Campbell argues that Shell failed to properly implement the recommendations of the 1999 audit team and that contributed in large measure to the situation when two men died on Brent Bravo on 11 September 2003. He claims the risk levels on the platform were so high that a major accident was inevitable as the time the platform was exposed to these risks increased.

He alleges that the loss of safety consciousness among top managers in Shell Expro was so bad that the company was extremely lucky not to have suffered a more serious accident, perhaps even involving the loss of one of its platforms.

Shell tells Upstream it has taken the Campbell allegations very seriously. As a result of these concerns, it confirms that last year it launched a thorough and detailed independent internal investigation.

“This recent investigation showed there had been a significant management response to the findings raised in the PSMR, including a detailed improvement plan with action being taken, and progress reviewed by senior management,” says Shell.

The group says it responded vigorously and properly to the PSMR findings. “The allegation regarding operating with high-risk levels is untrue and we absolutely refute this. Safety is and will remain our first priority offshore. If the HSE considers this to be the case, they have the powers to require an immediate shutdown,” says Shell.

Shell claimed the internal investigation team found that the allegations made by Campbell in December 2004 contained significant inferences and extrapolations of the PSMR findings which were not verified in the historical records of the PSMR, nor during interviews conducted by the investigation team last year.

Campbell, meanwhile, also exposes high-level incompetence and a chronic weakness in the application of the current Safety Case regime, including a failure of the verification process by the UK’s safety watchdog, the Offshore Division of the HSE, headed by Taf Powell.

The offshore audit found that dangerous practices persisted as oil workers had been conditioned by management not to raise problems. Furthermore, external verifiers have a commercial relationship with the major oil companies, thus raising questions over their supposed independence. At that time, they also seemed to have no relationship with the HSE.

In the wake of the reserves debacle, Shell has sought to considerably strengthen its internal controls and Van der Veer has made attempts to start rebuilding the group’s reputational loss suffered as a result of the circumstances surrounding Watts’ exit. There is now a danger the group could be plunged into a new crisis by safety revelations that are potentially far more serious than the reserves issue.

Related articles (will be posted later today)

Upstreamonline: From the start of his working life to retirement from Shell, Bill Campbell was a safe pair of hands

Upstreamonline: Directors brought into the loop over claims in audit (”Finlayson… made false statements to the workforce and press)

Upstreamonline: Questions over ‘corrupt and deeply flawed independent verification process’

Upstreamonline: HSE under the spotlight as failings taint regulation system (Shell was, in his view, “criminally negligent”)

Upstreamonline: Brinded shoots the messenger

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