All businesses across all industries must have a plan to mitigate specific risks and potential hazards. A robust risk management system will help organizations thrive in the face of financial uncertainties, technology issues, and other such disruptions in their niches.
Risk management is especially important in the energy industry, a market worth more than $7 billion globally in 2023.
In this sector, risks can emanate from many diverse sources. Workers can be exposed to hazardous chemicals, and poor refinery design, changing regulations, and ecological disasters are constant threats.
This makes robust and safe oil and gas process engineering a priority.
But before we discuss the specific risks in the energy sector, we need to understand how enterprises manage risks in the first place.
The International Organization of Standardization (ISO) has developed a five-step risk management checklist that all organizations should abide by.
- Step 1: Identify all potential risks
- Step 2: Analyze the risks
- Step 3: Rank and prioritize urgent risks
- Step 4: Treat risks—this step may involve employing industrial engineering services
- Step 5: Monitor and review risks
When these steps are followed, organizations can expect to operate more efficiently and with a certain level of stability for long-term growth and success.
Let’s take a closer look at the top risks that threaten the energy industry in North America in 2023.
What Are the Most Common Risks in the Energy Industry?
Environmental Risks
Oil and gas production methods pose several ecological risks. These processes lead to extensive greenhouse gas emissions, a high chance of oil spills, and the production of several tons of extremely hazardous waste.
As governments compound the pressure on oil and gas companies to do their part to protect the environment and energy companies look for more sustainable methods to carry out operations, environment health and safety services have assumed the top priority for risk management teams in 2023.
Transportation Risks
A small leak in a gas pipeline could be devastating — not just for the environment but also for the health and safety of all employees involved. Since most of the cargo shipped from an oil rig is flammable, even a small spark can escalate into a massive explosion.
Additionally, natural calamities, such as hurricanes, often threaten to disrupt transport operations, leading to delays and severe financial losses.
To counter such risks, organizations could look toward employing engineering consulting services and onboarding piping design engineers who can construct leak-proof systems to transport gas and oil safely.
Health and Safety Risks
When working with complex machinery for long hours in hazardous conditions, employees are at an immense risk of workplace injuries. According to the U.S. Bureau of Labor Statistics from 2020, 1.4 out of 100 full-time workers in the energy industry suffer from non-fatal injuries and illnesses while on the job.
Therefore, one of the biggest responsibilities of a risk management team is to ensure proper safety and monitoring processes across operations.
Through mechanical engineering services, organizations can ensure that their machinery is working at optimal safety and output. Quality assurance consulting firms can update organizations about the status of their equipment, ensuring much fewer injuries caused by malfunctioning machinery.
Cost Risks
Operating and maintaining an offshore drilling rig is a costly undertaking. The high costs are further compounded by various international regulations, fluctuating global prices, and the measures required to hire and retain highly-skilled employees.
The oil and gas industry is a capital-intensive industry, with every new project facing a new price risk. Risk management teams must work with cost reduction consulting firms to keep operations running smoothly and cost-effectively.
Digitization Risks
As most industries rapidly move toward digitization to increase productivity and profits, there has been a subsequent rise in cybersecurity threats.
Risk management teams must ensure maximum online security to protect organizations’ intellectual property and employees’ personal data. By working with digital technology experts, organizations can develop innovative solutions to integrate new technologies and invite little to no risk of cyberattacks.
Geological Risks
The oil and gas industry develops non-renewable energy sources, which means that they will run out of places to drill at some point. To deal with such concerns, the biggest players in the industry look to drill in unconventional environments — such as in the middle of the ocean — and rely on newly developed extraction techniques to get the most out of their operations. This broadens the scope for geological risks, which can be minimized by carrying out frequent site tests.
With the help of instrumentation engineering services, companies can leverage advanced sensors that observe several variables, including pressure and temperature changes, before starting drilling procedures.
What These Risks Have in Common
When considered at a distance, many of the risks facing the energy industry are connected. Major accidents on site can impact costs, transportation, health and safety, and the environment. But by optimizing certain processes and establishing safety systems as early as possible, organizations in the energy sector can effectively mitigate most of the risks associated with their operations.
Some of the most common factors that contribute to these risks include:
- Inadequate safety procedures
- Lack of hazard analysis systems
- Defective oil field equipment
- Negligence
- Lack of shutdown protocols
- Lack of communication about hazards
When these issues are addressed at a fundamental stage, through consultation with specialized engineering consultants, for instance, or by having well-defined safety meeting topics, risk management is no longer a struggle.
Conclusion
Risk management is critical in the energy industry. Without proper systems in place, organizations are left vulnerable and risk incurring immense business and financial losses.
Vista Projects is an integrated engineeringThe process of integrated engineering involves multiple engineering disciplines working in conjunction with other project disciplines to e... services firm able to assist with your risk management goals on your next energy industry project. With offices in Calgary, Alberta, and Houston, Texas, and Muscat, Oman, we help clients with customized system integration and engineering consulting across all core disciplines. Contact us today!