Royal Dutch Shell Group .com Shell, BP Cost Cuts Spur U.K. Oilrig Safety Concerns (Update1)


April 5 (Bloomberg) -- An increase in injuries on the U.K.'s offshore oil and gas platforms is raising concern among workers and government officials that cost cuts by companies such as Royal Dutch/Shell Group and BP Plc have undermined safety.


The number of major injuries, including fractures and finger amputations, at the U.K.'s offshore oilrigs rose 36 percent in the 12 months through March 2003, preliminary government figures show. More than 290 people have died as a result of offshore accidents in the North Sea during the past 20 years.


``The oil companies say they won't compromise safety, but it's becoming self-evident that we're close to reaching a safety- critical point,'' said Taf Powell, 53, head of the offshore division of the U.K.'s Health and Safety Executive.


The agency is investigating a September accident on Shell's Brent Bravo platform that killed two workers who were repairing a leaking gas pipe. The safety executive has the power to close rigs that fail to correct maintenance lapses or staffing shortages that endanger workers. Powell said he wasn't aware of any outstanding safety violations.


Union officials said they are addressing their concerns through the safety executive and have no plans for further action unless the situation gets worse.


The total number of offshore oil workers in the U.K. dropped about 35 percent to 22,265 in the past 10 years, the HSE report shows.


Reduced Workforce


Shell, based in London and The Hague, has cut its North Sea workforce by 38 percent since 1994 and London-based BP by 29 percent as improved technology increases efficiency and output declines. U.K. oil production dropped 23 percent in the same period, according to the Department of Trade and Industry.


Workers are also protesting Shell's decision to reduce the number of rescue ships to two from four. London-based BP is proposing to replace its safety vessels with helicopters.


Shell and BP say the changes haven't increased risks and statistics show a long-term decline in injuries.


``Safety is the priority,'' BP Chief Executive Lord Browne said last week on a conference call with investors.


The number of injuries that cost more than three days of work fell to 530 for every 100,000 workers in 2002-03 from 1,205 in 1993-94, according to the safety executive's most recent statistics. The rate for fatalities and major injuries combined rose to 287.5 per 100,000 workers last year after dropping to 215.5 in 2001-02 following four years of declines.


`Stark Reminder'


``We are always looking at better ways to carry out maintenance, and although I feel we have improved our programs, we have had recent events which act as a stark reminder that we still have things to learn,'' said Tom Botts, chief executive of exploration and production for Shell in Europe.


BP shares rose 6 pence, or 1.3 percent, to 469.25 pence as of 8:52 a.m. London time. Shell's London-traded shares fell 1.5 pence, or 0.4 percent, to 360 pence.


The safety executive last year ordered changes at Canadian Natural Resources Ltd.'s Ninian South platform because of concerns inspections and maintenance weren't adequate to ensure equipment could contain high-pressure oil and gas, according to a copy of the notice. The problems were corrected and the rig kept running.


Maintenance Concerns


Unions blame maintenance backlogs for the Brent Bravo accident and say the reduction in employees forces them to take shortcuts to complete necessary work.


``They were patching up a pipe that had already been temporarily repaired,'' said Jake Molloy, head of the Offshore Industrial Liaison Committee, the U.K. offshore workers union. ``There are just too many repairs and too few staff for the pipe to have been repaired properly in the first place.''


Shell officials declined to discuss the Bravo accident because the HSE is still investigating.


Some employees work as many as six hours more than their scheduled 12-hour shifts, and weekly testing of fire alarms is carried out on a monthly basis, Molloy said.


``Oil companies need to have a serious think about how they're running their rigs,'' he said. ``Working in the North Sea is like working with a ticking time bomb.''


Shell has 22 safety representatives in the North Sea, equivalent to one for every 227 workers. Botts couldn't provide a figure for the number 10 years ago, though he said it was ``significantly more.''


BP declined to provide figures on the number of safety workers.


``It's true that we need to get more safety representatives, Botts said. ``Ten years ago we had about twice as many but then the workforce was bigger.''


Safety Agency


Safety executive inspectors visit each offshore installation twice a year for two to three days at a time, Powell said.


``If that is true and we find that simple maintenance tasks are being overlooked and downsizing is reducing numbers of people available to supervise those who are carrying out maintenance, then we will take action,'' he said.


Powell, a former BP employee, joined the safety executive in 1991, overseeing a team of drilling engineers implementing regulations mandated after the 1988 Piper Alpha accident in which 167 people died in an explosion at a North Sea platform. He has been head of the Offshore Division since 1996.


Each of Shell's four platforms used to have one standby boat. Now two upgraded vessels with anti-collision radar and remote controlled scoops to retrieve people from the water serve all of the sites.


``The two boats we have in place now are of better quality and can do the same if not a better job than the other four,'' Botts said.


BP's proposal to use helicopters in place of rescue vessels has also caused concern because the aircraft can't prevent ships from hitting platforms and they are useless in bad weather, said Allan Graveson, national secretary of the National Union of Marine, Aviation and Shipping Transport Officers.


``Continuing to improve safety performance is a priority and key challenge for BP,'' said David Nicholas, a company spokesman in London. ``Our overall safety performance in the North Sea has shown consistent improvement but we are not complacent.''

Click here to return to Royal Dutch Shell Group .com