Introduction
Oil and gas industry constitutes one of the major elements of Oman’s exports. Despite the country’s effort to diversify its economy, the use and production of natural resources remain one of its primary revenue streams, with daily production rated at 943,000 barrels a day and gas production at 31.4 million tons of oil equivalent per year (MtoE) (ORPIC 2019). While the country remains a relatively small exporter of gas when compared to other countries, with 70% of its excavated resources used to satisfy the domestic demand, the Omani oil sector is able to compete with the rest of the countries of the Gulf Cooperation Council (GCC) (ORPIC 2019).
Oman Oil Refineries and Petroleum Industries Company is one of Oman’s largest natural resource extraction companies. It possesses a full production cycle of operations ranging from oil and gas rigs to refineries as well as aromatics and polypropylene facilities located near Suhar and Muscat (Challenges facing OPRIC growth 2019). It allows ORPIC to provide a multitude of products, such as fuel and plastics, satisfying demand in Oman and other countries. The company was created as a result of a merge of large government-owned properties in 2011.
As it stands, it employs over 3000 employees and works with more than 500 private contractors. Some of the noteworthy properties owned by ORPIC include refineries in Muscat, Suhar, Jifnaain, Raysut, as well as the new plastic plant in Liwa along with a gas reservoir in Fahoud (ORPIC 2019). The company’s total refining capacity is estimated at 198,000 barrels per day. ORPIC is considered to be one of the fastest-growing businesses in the Middle East. One of the primary humanitarian concerns of the company lies in reducing its accident rates. According to the 2019 report, the number of non-lethal accidents in ORPIC was 27 per 1,000 employees, with the goal for 2019 to reduce that number by 10% (ORPIC 2019). The majority of work-related incidents happen in the high-risk area of operations, such as excavation and maintenance.
Problem Statement
Accidents in the workplace are a significant threat to ORPIC, as they cause injuries and potential loss of human life, financial expenditures and a loss of reputation. Although it is impossible to rule out the probability of accident due to the human factors, the company must make an effort to minimise the potential for harm and death among its workers. The purpose of this paper is to analyse factors affecting safety issues in the ORPIC’s excavation and oil rig maintenance department and provide a potential solution to achieve the goals for 2019.
Analytical Tools
The tools selected to be used in the analysis and evaluation of the situation in ORPIC’s are Fishbone and McKinsey’s 7S method. Fishbone is an analytical tool typically utilised as a part of the Sigma Six evaluation. It helps visualise the causes and effects of various problems in order to identify its root causes (Desai, Desai & Ojode 2015). The diagram consists of the Head section, which illustrates the major problem (in this case, accidents in the excavation and oil rig maintenance department), whereas the bones of the diagram would illustrate major causes of incidents. Additional factors would be added to each bone in order to represent the symptoms of the larger problem. The instrument was chosen for its versatility and effectiveness in keeping the attention on systematic solutions rather than temporary measures.
McKinsey’s 7S model is another tool to be used in the evaluation and analysis of safety issues in the ORPIC’s excavation and oil rig maintenance department. It is an organisational analysis tool that could help evaluate the existing systems and the internal situation within an organisation (Stowell & Welch 2012). The purpose of 7S is to analyse all of the aspects of organisational performance, which include strategy, skills, style, systems, shared values, staff and structure, in order to understand how well these elements work on their own and in conjunction with one another. The knowledge provided by McKinsey’s model would be invaluable in the development of potential solutions to the problem of safety and accident prevention.
Root Cause Analysis
The following section will evaluate the main causes of accidents in the ORPIC’s excavation and oil rig maintenance department using a Fishbone analysis framework. McKinsey’s 7S model will demonstrate potential issues in the organisational structure of the department. In the information dissemination section, it will be possible to find the connections between different factors as well as detailed explanations of the accident-related processes.
Fishbone Analysis
As demonstrated in Figure 1, the major causes of accidents in ORPIC include personal employee mistakes, organisational inadequacy, inadequate work standards and force majeure events. Statistically, most accidents in the department occur due to personal mistakes of the employees while on the job (ORPIC 2015). An employee might suffer from a lack of attention due to tiredness, extensive periods of labour, weather conditions or negligence, resulting in an accident. These types of accidents are almost always caused by human factors. These usually result in minor injuries and damage of the product or equipment.
Force majeure events typically result in the largest number of grievous injuries and deaths. These occur due to a combination of various factors inside and outside of the company’s control. Large-scale fires, floods, explosions and other events that have the potential to lead to the mass loss of life are classified as force majeure events. The last known accident in ORPIC occurred in 2007, an explosion of stored fuel and chemicals causing the deaths of 28 employees (ORPIC 2015).
Inadequate working standards are typically connected to large force-majeure events and smaller-scale accidents. Typically, they occur as a result of equipment mishandling, poor or inadequate standards of labour quality and safety, managerial negligence and outdated equipment. The latter is the most prominent issue for ORPIC. Aside from their new facility in Liwa, most of their refineries are over 20 years old (Kalyanam 2018). Although they receive upgrades, the overall exhaustion of major system components and the outdated technology poses an increasingly significant threat to the employees.
Lastly, there is organisational inadequacy, the effects of which are harder to estimate. Oil and gas industry require its employees to be supremely qualified and physically resistant to work in excavation and oil rig maintenance. Due to these requirements, it is often hard to fill out vacancies, which results in increased workloads for the remaining staff. Alternatively, vacancies are filled with subpar candidates, which increases the probability of accidents. Additional issues arise from inadequate or outdated training methods. Hard-pressed to provide stable outputs, ORPIC seldom results to training employees on the job, which increases the probability of work-related injuries (ORPIC 2015). Lastly, there are communicational issues between line managers and middle-class managers responsible for operational safety. Typically, line managers discover potential issues with work safety first. However, instead of taking immediate decisions on the ground, they are required to relay the information to middle-managers, who then make the appropriate decisions and outline courses of action. As a result, valuable time is lost, during which the potential danger might escalate.
McKinsey’s 7S Framework
Now that the main causes of accidents in ORPIC have been identified, it is time to evaluate the organisational structure of the company’s excavation and rig maintenance department in order to determine how it contributes to the issues outlined in the previous section.
McKinsey’s 7S framework, as illustrated in Figure 2, enables the analysis of ORPIC’s departments using
hard and soft elements, which determine the functionality of the organisational cluster. These elements are as follows (Stevens 2016):
Hard Elements
- Strategy. ORPIC’s business strategy revolves around providing its customers with the best balance of quantity and quality (Stevens 2016). However, latest events and the company’s explosive growth rates show that the focus lies on increasing production outputs to satisfy the growing demand for petroleum products.
- Structure. The ORPIC’s excavation and rig maintenance department is a traditionally-organised hierarchical structure with a clear division of responsibilities and an established subordination system (Stevens 2016). Due to slowness in change adaptation, typical of oil and gas industry, ORPIC did not make significant changes to its structure in decades. The typical information and decision-making process is described as follows (Stevens 2016):
- Employee spots an issue;
- Line manager is informed. If the issue can be dealt with using their own resources – it is dealt with. If not – the middle manager is contacted, while all work goes on standby.
- Middle manager investigates the issue and allocates resources to fix the problem.
- Systems. The company has an integrated KPI system to tract worker and division progress. Some of the parameters relevant to excavation and maintenance include extracted barrels per day (bpd), accidents per quartal/year and budgetary expenditures (ORPIC 2015). Increased productivity, a lack of accidents and the ability to fit the budget are rewarded.
Soft Elements
- Skills. Departmental skills include the abilities to excavate and maintain gas and oil-rigging facilities, estimate potential issues with production and maintenance, evaluate the condition of the systems and provide damage control in an event of an accident (ORPIC 2015).
- Staff. The majority of employees is comprised of men aged 25-55 years old, with younger members occupying the lower bracket and performing hands-on labour, whereas older and distinguished employees often find themselves in the positions of leadership as line managers, middle managers and maintenance experts (Sumbal et al. 2017). All members of the workforce are expected to have an educational background in gas and petroleum-related disciplines, possess a high degree of functionality, punctuality and responsibility, while being capable of enduring the harsh conditions of employment (Sumbal et al. 2017).
- Style. There are high levels of disengagement in the lower tiers of workforce. The most common complaints include high intensity of work, long shifts, uncomfortable weather conditions and outdated equipment. Line managers are often conflicting with both the employees and the middle managers due to not meeting the required production quotas (Berkowitz, Bucheli & Dumez 2017). Middle managers possess higher motivation and retention, but are often disconnected from the situation on the ground.
Shared values
Based on the evaluation of the hard and soft elements presented above, it is possible to outline shared values of the organisation. It is a traditional top-down structure focused largely on increasing production values. The compensation system, although featuring several additional parameters, is largely focused on the short-term goals of receiving profit from higher quantities of delivered goods. The relationships between managers and employees revolve around completing the plan and maintaining budget parameters rather than ensuring the quality of life and labour.
Dissemination of Information
There is a connection between the existing rate of accidents and the overall organisational structure that the ORPIC’s excavation and rig maintenance department currently implements. As it was demonstrated in Figure 1, the major issues that lead to workplace accidents involve organisational inadequacy, poor work standards and force majeure events. The primary shared value of the department is economic efficiency, which is supported by the company’s resource-based management strategy. It focuses on maximising profits in the short-term perspective and ensuring immediate growth rather than focusing on the existing assets. As a result, fuel production is the primary factor that counts. Employee training, specialised retention strategies, tools and systems upgrades, as well as organisational changes and risk protection are considered to be expenses that lower the yearly bottom line. All four major risk factors that affect the accident rate can, therefore, be attributed to the short-term resource-based approach to extracting profit.
Recommendations
In order to solve the issues related to worker safety and workplace accidents, the ORPIC’s excavation and rig maintenance department needs to change its perception towards value creation. As it stands, the emphasis lies on quantity, which is a decent strategy for expansion in a stable and friendly economic environment. However, with prices for oil remaining unstable due to the political situation in the Middle East, it would be prudent for ORPIC to adopt a different approach, which would, by extension, affect its accident rate. The proposed changes are as follows:
- Switch from quantity to quality. Installing new facilities, providing timely upgrades and investing in the employees and worker productivity will not only decrease the number of work safety-related incidents, but also provide the company with greater oil outputs in the long-term perspective (Redutskiy 2017).
- Update the decision-making structure. As it stands, ORPIC operates using a traditional hierarchical model popular during the 1990s. Although it establishes clear responsibilities, it also removes the decision-making centres from the ground level, creating an information lag and the level of disconnection between line managers and middle-managers (Moody-Stuart 2017). The proposed solution is to shift the bulk of responsibilities to line managers, allowing them the authority to deal with safety issues on sight, while providing the resources necessary to do so.
- Invest in appropriate HR strategies. The gas and oil industry worldwide is suffering from the “change of the crew” phenomenon, where the old generation of oil workers is approaching retirement and there is not enough young employees to replace them. Understaffing results in higher turnover rates, burnout and higher accident rates in employees, which leads to human, material and economic losses.
- Develop a safety-conscious workplace culture. As it stands, the ORPIC’s excavation and rig maintenance department is one of the most accident-prone elements of the company. The capability to spot issues early and report them to line managers lies almost entirely on vigilance of ground employees (Moody-Stuart 2017). At the same time, the knowledge of safety standards and requirements among them remains relatively subpar. Providing training and improving awareness is likely to reduce the number of safety-related accidents through direct prevention.
- Introduce change management education to junior and senior management staff. The recommendations provided above require significant alterations to be made in the company’s and the department’s structures. Oil and gas industry is notorious for being one of the most change-resisting industries due to a large age gap and the lack of contemporary management education (Moody-Stuart 2017). Providing new ways of leadership, such as transformational or transitional types of leadership, is likely to make the organisation more prepared for the proposed changes.
These are the primary suggestions that could be implemented in ORPIC’s division of choice or the organisation as a whole. Other departments are likely to have issues unique to their own specifications and peculiarities. For example, the financial department is unlikely to encounter any safety-related issues and should focus on efficiency and productivity instead.
Conclusions
Oman Oil Refineries and Petroleum Industries Company is one of the largest and most rapidly-expanding companies in the region, amounting for over 15% of the country’s crude oil output and over 25% of its petroleum, plastic and polypropylene production. Nevertheless, it remains a high-risk industry for its employees due to various peculiarities of the company’s overarching goals and the general trends found in oil and gas industry. As it stands, the company’s non-fatal accident rate stands at 27 incidents per 1,000 employees, with the goal to reduce it by 10% within a year. The majority of these cases are related to oil extraction and rig maintenance, making the object of potential intervention. The situation was evaluated using fishbone and McKinsey’s 7S frameworks. The proposed solutions to the problem include changing the overall strategic goals from quantity to quality, updating the technological assets of ORPIC, focusing on employee retention and changing the command structure to allow more organisational independence to line managers. The promotion of safety-focused working culture is also an important aspect of the proposed change. Most of the proposed solutions are unlikely to be fully implemented in the scope of one year, but a combination of initial efforts that do not require significant time and resources to utilise, such as change training and safety culture improvements, are likely to produce the required 10% results.
Way Forward
Although ORPIC is one of the major players in Oman’s energy and export strategy, it shares the majority of weaknesses with other companies in the industry, both inside and outside of the company. A literature review shows similar traits in American, European, Russian and Chinese fuel giants that are connected to government economic and political interests in some way or measure. The evolution is taking place, but it will require time to transform the industry deeply stuck in the 20th century to modern standards.
Reference List
Berkowitz, H, Bucheli, M & Dumez, H 2017, ‘Collectively designing CSR through meta-organizations: a case study of the oil and gas industry’, Journal of Business Ethics, vol. 143, no. 4, pp. 753-769.
Challenges facing ORPIC growth 2014.
Desai, KJ, Desai, MS & Ojode, L 2015, ‘Supply chain risk management framework: a fishbone analysis approach’, SAM Advanced Management Journal, vol. 80, no. 3, p. 34.
Kalyanam, S 2018, ‘Challenges of gas and oil mega-projects: Suhar refinery’, Abu Dhabi International Petroleum Exhibition & Conference, pp. 12-15.
Moody-Stuart, M 2017, Responsible leadership: lessons from the front line of sustainability and ethics, Routledge, New York, NY.
ORPIC 2015, Risk assessment report for petrochemical plant at Sohar, Web.
ORPIC 2019, Assets, Web.
Redutskiy, Y 2017, ‘Conceptualization of smart solutions in oil and gas industry’, Procedia Computer Science, vol. 109, pp. 745-753.
Stevens, P 2016, Economic reform in the GCC: privatization as a panacea for declining oil wealth? Chatham House for the Royal Institute of International Affairs, Chatham.
Stowell, F & Welch, C 2012, The manager’s guide to systems practice: making sense of complex problems, Wiley, New York, NY.
Sumbal, MS, Tsui, E, See-to, E & Barendrecht, A 2017, ‘Knowledge retention and aging workforce in the oil and gas industry: a multi perspective study’, Journal of Knowledge Management, vol. 21, no. 4, pp. 907-924.