Whether oil companies appreciate the value of safety sufficiently and how they quantify its benefit are pertinent questions for the PSA. It is now looking more closely at the way players utilise financial analyses when taking decisions on safety.
Safety for people and the environment takes precedence over financial considerations, says safety economist Nina Simone Kierulff at the PSA.
“That’s a fundamental principle in Norway. At the same time, good financial impact assessments are needed – not least when introducing new regulatory requirements.”
Together with fellow safety economist Bjørn Andreas Hanson, she heads a PSA project on how the industry applies financial analyses to decisions which involve safety and the working environment.
The goal is to increase the agency’s own knowledge about how to use such assessments when considering safety investments, where the cost/benefit of such spending is important.
The Norwegian authorities have long experience in assessing the value of safety in the petroleum industry. Since the PSA was separated from the Norwegian Petroleum Directorate in 2004, it has continued to develop this expertise – in part through a commitment to safety economics.
“Unless you carry out a broader analysis, describing the cost/benefit of the solutions currently being chosen by the oil companies becomes a challenge,” says Hanson.
“Issues we’ll be exploring in the project include the way the industry puts a value on safety, and how today’s value concepts either drive or retard safety work. We’ll also be looking at the possible impact of viewing safety as an unquantified value.”
“It’s often difficult to predict the possible cost/benefit effects of a measure or an action,” Kierulff observes. “After all, benefit is usually something we only observe indirectly, as the absence of possible incidents.
“However, experience shows that great uncertainty can also exist over costs. Cost/benefit is often complex, but must be understood and expressed as clearly and precisely as possible.
“And it must be possible to identify associated costs in order for necessary investments to be made. It’s important for all sides to establish the value of safety measures adequately.”
Hanson explains that the PSA wants to secure the greatest possible insight into the research literature in the field and the way the industry relates to financial analyses when taking decisions which involve safety and the working environment.
“We’ll be applying the findings to the further development of our own analysis tools,” he explains.
And Kierulff adds: “Going more deeply into the economic aspects of decisions will allow us to study complex issues in more detail.”