Changing Company Cultures in Oil & Gas Midstream: Sustainability Through Safety

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Researched by Industrial Info Resources (Sugar Land, Texas)--As times change, cultures change. This is true in nations as it is in companies. Three decades ago, it would be unthinkable to have yoga balls for chairs, a bar in the office or unlimited paid time off, things that are seen more in 21st century offices. Similarly, the term "Environmental, Health and Safety" is relatively new, and its focus has gone from making sure the project is built on time to protecting human lives, the environment and the health of living things affected by the construction. As such, the typical midstream company "safety guy" of the past has been replaced by an entire department. The projects and spending by these companies are informed by their culture, meaning likely increases in spending on inspections, remediation and asset maintenance.

While the federal government sets guidelines for pipeline safety compliance, it is important to note that these guidelines have been heavily negotiated and are billed as absolute minimum standards. As opposition to pipelines grows in size and sophistication, a revision of these standards may be on the horizon, but, for now, midstream companies need only to be compliant with the federal standards as well as local standards. However, compliance does not necessarily equate to safety.

In 2010, Pacific Gas & Electric Company (PG&E) (NYSE:PCG) (San Francisco, California) bore witness to the consequences of inadequate safety procedures. The San Bruno incident was a gas explosion where a 54-year-old pipeline ruptured and exploded in the middle of a residential area, resulting in eight deaths. The legal fallout resulted in heavy financial losses for PG&E and provided the impetus for the company to revamp its safety practices. In doing so, it is positioned to become something of a standard-bearer for increasingly safety-conscious midstream companies. Actions taken by PG&E involve adopting industry standards for safety--such as self-reporting defective assets and investing heavily in replacing older, defective assets--rather than only the minimum federal safety guidelines.

As original pipeline infrastructure ages, awareness of defects in the line and taking action to repair leaks is more important and more prolific. Inspection technology has improved vastly and regulations regarding the frequency of pipeline inspection have been implemented. As such, the amount of investment in the in-line inspection business is set to grow, and as PG&E's stock continues to grow steadily since the San Bruno explosion, the industry is sure to notice that safety and profitability are not mutually exclusive.

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