With the market price for Brent crude sitting below $50 per barrel at time of writing, in many basins this is well below the production cost. The industry is working in an environment where significant amounts of capex on exploration and development activities have been postponed or canceled.

Operators are looking for ways to further reduce outgoings, and among other cost-saving measures, the industry has experienced headcount reductions both within the operator community and throughout the supply chain.

Given the desire (read: “need”) to reduce costs to ensure long-term economic survival, operators are looking to see where opex can be reduced, and routine integrity management activities are coming under increasing scrutiny.

Can we save money?
The question is: Can we save money on integrity management in this industry?

The majority of my career has been spent working with oil and gas pipelines, which are expensive to install and are low-redundancy items (i.e., there is unlikely to be a “spare”). Catastrophic failure means our export route to market is lost.

Therefore, high focus is placed on ensuring that these assets remain viable, and we (generally) do not tolerate failure of pipelines for both societal and economic reasons.

In an oil price downturn, an operator’s corporate priorities and therefore its integrity management organization’s priorities remain unchanged, namely the protection of human life, the environment and the organization’s business aims.

To reduce opex spend on integrity management, we need to understand the impact on the risk profile for our assets. Ideally we will be able to maintain an equivalent (i.e., acceptable) level of risk. If we cannot, then we need to make a conscious decision to accept the new risks for our operations.

Effect on assets
We need to interrogate our operations to understand how the downturn has affected the functioning of assets. To use a pipeline example, has anything changed that would affect the threats (and hence risk given that the consequence of failure will remain unchanged) that infrastructure is exposed to? For instance:
• Are our pipelines experiencing more start-stops (accelerated fatigue accrual)?
• Are there periods where pipelines are standing or experiencing reduced flow with the potential for water drop-out (enhanced corrosion)?
• Are the pipelines operating at reduced pressure (potential extension of fatigue life)?
• Has a strategic decision been made to reduce the required remaining operating life (i.e., can we tolerate greater pipeline deterioration)?

These (and similar) questions help us to review our risk-based inspection strategies. We might find that a reduced short-term spend on integrity management is justified and identify where the potential for cost savings can be made.

We also must recognize that this activity could indicate that a continued or increased spend on integrity management is justified during the current economic epoch.

Nobody likes bad surprises
In summary, I believe there are three points regarding integrity management during a downturn worthy of consideration.

First, understand the risks the infrastructure is exposed to. Changing operating conditions and future life expectations brings the opportunity to reevaluate risk-based inspection strategies with the potential for cost savings. Conversely, if required cost savings result in an increase in risk or a lesser understanding of risk, then this needs to be understood and accepted at corporate level.

Secondly, plan for recovery. We need to avoid putting our infrastructure into a position where degradation cannot be economically recovered from. Early catastrophic failure could well spell the end for otherwise viable (or marginally viable) fields.

Finally, nobody likes bad surprises. Integrity management has a lot to offer, so make sure you do enough to avoid the unexpected.