PwC Operational Risk:

Digital operational excellence for increased HSE performance

25.10.2018

Business imperatives for digital

Execute well along the following 3 dimensions

Benefits of data & analytics to operators (refiners) – The “Levers”

Revenue Cost Capital efficiency

1 2 3

Decrease maintenance

and inspection spend

Decrease

unplanned outagesDecrease raw

material spend

1 2 3

Reduce maintenance, repair

and operations costs (10-15%)

Increase workforce utilization &

multi-skilling (2-4%)

Reduce loss due to planned or

unplanned downtime (5-8%)*

Improved efficiency of maintenance

management (20-30%)

Improved safety as well as

regulatory compliance

Please Note - Percentages represent savings except, * represents utilization improvement

Increased capital efficiency

(10-15%)

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Industry Trends

5%

6%

3.4%

46%

Average annual growth of industry in the next 5 years

Annual revenue to be spent on digital operations solutions by various companies over the next 5 years

sExpected cost reduction per annum

Companies that have reached advanced levels of digitisation in product development & design

Developing the Digital Enterprise

...bright future for industry...

Source:Industry 4.0: Building the digital enterprise, 2016 Global Industry 4.0 Survey, PwC, 2016

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Common Industry Challenges

Area Challenges Impact

Technology Steady transformation of the industry in the last 10 years but expected to radically increase in the next 5

Companies who cannot sustain this change will be left behind.

Slow but steady technology implementation to reap its benefits

Radical changes on day-to-day operations can trigger major blowback from employees.

Environmental Sustainability

Construction industry facing forefront issues combatting their adverse effect on the environment as they produce 25-40% of the world’s carbon emissions.

Making significant changes in carbon emissions requires an entirely new project management approach focused on reducing energy emissions and water consumption.

Health & Safety Increased scrutiny for health & safety violations and incidents, heightening attention to job/task safety

Operating companies will face greater scrutiny of accidents, including potential criminal prosecution for workplace injuries that in the past may have been treated solely as traditional accidents.47% of contractors say that an inexperienced labor

force is a health & safety concern

Source:Industry 4.0: Building the digital enterprise, 2016 Global Industry 4.0 Survey, PwC, 2016

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Why Digital Operations Now?

✓ In the face of rapid regional and global change, operators need to re-examine what really creates value.

✓ Leading reliability and integrity performance remains elusive for most operators.

✓ Despite significant investments operators continue to struggle to reach leading reliability and integrity performance and safety (as well as environmental) performance lags behind desired levels.

✓ There is no doubt that operators make more money and have fewer accidents if their operators and supervisors have the right information, when they need it.

✓ Increasingly digital solutions, including mobile ones, are being used for a growing number of operational applications in the asset intensive (petroleum and process) industries.

✓ Digital solutions enable easy access to critical information: they are faster than paper-based systems and ensure standardization.

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Proactive HSE Digital and Analytics Approach

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By taking a proactive approach to HSE, companies can drastically reduce the number of accidents that occur or prevent incidents altogether. Using data – not just health and safety data, but all the other diverse data sets that are often created across an organization - combined with sophisticated machine learning analytics techniques, organizations can better understand where the risks are and roll out targeted interventions.

Benefits of SuccessfulPrograms

Promotes performance management and recognition

Improved safety and operational performance

Optimized talent management and training

Enables workforces with technology and actionable intelligence

To holistically analyze and evaluate HSE risk, many factors and scenarios must be evaluated. Needed information can span operations, maintenance, training, weather, incident and hours worked. In addition organizations must address the needs of the next generation workforce by enabling them with tools, technology and actionable insight.

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Improving HSE capabilities decreases the probability of costly, adverse events

Cost Control

Better Coordination

Increased Visibility into

Risk/Control Effectiveness

Improved Regulatory

Response

Improved Processes/

Efficiency

Better Compliance, Internal

Audit & Risk Management

• Decrease in amount of time spent in data aggregation and reporting on HSE processes

• Better upfront management of cost and resources to mitigate and minimize failure and the

potential for failure thus decreasing accidents/incidents

• Reduction in manual processes due to data aggregation, assessment and scoring capabilities,

auto generated findings, remediation efforts and enablement via automated workflows

• Increased flexibility to allow staff to focus on concerns/issues and answer business questions

instead of administrative tasks/burdens

• Improved coordination and real-time sharing of data and information between Compliance, Internal

Audit, Risk Management functions and business operations

• Ability to target/focus efforts on the areas of most critical risk and communicate efforts and risks to

contractors, suppliers and vendors

• Better response to regulatory expectations of a broader analytical underpinning for risk

assessment, regulatory change management, monitoring, auditing and reporting activities

• Reduced level of effort in preparing for regulatory requests (e.g., success with Program Audits)

• Enhanced visibility into real-time information and critical emerging risks and compliance

issues/concerns for senior management to make informed decisions

• Stronger ties to asset integrity and overall corporate as well as operational risk management

• Streamlines and automates workflows within Compliance, Internal Audit, Risk Management and

other business operations, reduces manual errors and increases efficiencies

• Allows for the automation of policies and procedures, issues of non compliance management,

regulatory change management

Benefits of Enhanced HSE Capabilities

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HSE Maturity/evolution model

8

DescriptiveDescriptive statistics,

summary tables, Influence diagram

HSE example:Accidents and incidents,

injuries and fatalities, loss of containment,

TRIR, spills and releases

29%

DiagnosticANOVA, Factor analysis,

clustering, conjoint analysis

HSE example:Root cause incident

analysis

30%

Where decisions are being made currently*

PredictiveRegression methods, Tree based

methods, Bayesian network, Econometric models

HSE example: Incident prediction modeling and preventive action plans

21%

PrescriptiveAI, Robotics (IPA, RPA), NLP, Deep learning, Optimization,

Simulation (Agent based, System Dynamics)

HSE example:Real-time incident prediction

and recommendation for incident remediation

20%

02 0304

05

06

Data CollectBasic Reporting

01

Business Intelligence/Dashboarding

Statistical Analysis

PredictiveModels

PrescriptiveModels

07

Process Optimization

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Training is risk-based and

more robust, procedures

are more visible and

followed, MoCs are

completed faster and more

frequently, meeting time is

reduced - resulting in

improved operations,

decision making and

customer satisfaction

Critical Information is easy

to access and more

automated: HSE systems

are faster than paper-

based systems, links to

other operational systems

(e.g. EAM) allowing

improved data tracking

and facilitation of work

across multiple regions

A mature HSE organization will have more mobile, efficient, and effective operations

Mobility and Real-

Time Access

Data entry is closer to the

point of data creation as

Managers and Field

Operators are able to input

readings, see compliance

obligations, and access

technical documents,

which improves the

accuracy of data captured

and overall quality of work

Digital Speed &

Standardization

Day in the Life of a Mature HSE Organization

Data Entry & Review

Measurements & Monitoring

Records Close-out &

Recording

En

han

ced

Cap

ab

ilit

ies

Tasking / Permitting

Reporting

Management / Site Reviews

1

2

3

4

5

6

Supervisors & operators

incorporate associated

risks and compliance

obligations into planning

and execution activities,

equipment selection or

location allowing them to

further drive HSE into

compliance related field

operational activities

Increased Operations

and HSE Efficiency

Preparation for Maintenance

Rounds & Routine Duties /

Shift Turnover

Planning & Execution

More Effective

Performance

Training

Procedure Reviews

Meetings & Briefings

10

11

12

7

8

9

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Digital Speed & Standardization

Mature HSE organizations have centrally stored data, less downtime and make quicker, more effective decisions

Tasking / Permitting Reporting Management / Site

Reviews

• Providing supervisors

the right information

in real-time

• Increased

accountability and

transparency at all

levels

• Faster, more

automated and

accurate task

assignment / execution

• Higher visibility to task

assignment, status,

completion and

associated evidence

Mobility & Real-Time Access

Data Entry & Review Measurements & Monitoring

Records Close-out & Recording

• Closer integration of data

capture and generation

• Input readings, logs, and

tasks in one place

• Enhanced ability to

assess performance

• More effectively communicate changes to

all relevant stakeholders

• Ability to view critical data in real-time

• Make on-the-spot decisions

• Change course before an incident occurs

• Manage requirements, tasks and documentation in one place

• Allows enhanced reporting to management and external parties

• Ability to conduct trend analysis to inform key learnings

Day in the Life of a Mature HSE Organization: Enhanced Capabilities

1 2 34 5

6

• Enhanced organization

• More effective

responses internal /

external stakeholders

• Quickly identify and

mitigate risk of audit

findings or shutdowns

More Effective Performance

Training Procedure Review

Meetings & Briefings

• More sophisticated training materials

(both classroom and system-based)

• Quicker, more effective training that is fit

for purpose

• Focused on continuous improvement

• Fewer incidents related to human error

• Easy access to and understanding

of critical documentation

• Increased awareness of business

and legal requirements

• More frequent, efficient and

effective updates to procedures

• Less downtime due to informational meetings

• Meetings are focused on proactive, value enhancing ideas activities

• More effective, data-driven decision making inform prioritization

Increased Efficiency & Safety

Rounds & Routine

Duties / Shift TurnoverPreparation for

Maintenance

• Risk-based approach

to work management

• Quicker, real-time

decision making and

escalations

• Increased workforce

utilization

• Consistent handovers

improving health &

safety

• Proper care in job

design to limit

unwanted events

• Reduced

maintenance and

related costs

• Reduction in

planned or

unplanned downtime

Planning &

Execution

• Integrate risk based

approach into

business planning

and decision making

• Proactive mindset

focused on

anticipating

regulatory changes

• Incorporation of

lessons learned from

successful solutions

10 11 128

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Connecting the digital model

Big data

(Sensors, equipment and

process monitoring)

Conventional data sources

(Inspection data and testing)

Optimal solution –

made possible by

digital enablement

Mobility and

real-time access

Field operators input

readings, access

documentation and

technical drawings, track

assets and inventory, and

don’t need to spend time

pen-pushing.

1

Enable easy access to

critical information: they

are faster than paper-

based systems and ensure

standardization across

business units.

Digital speed and

standardization

2

Providing Supervisors &

operators the right

information, in a

standardized manner,

when needed, makes work

safer and provides more

efficiency in training,

planning and

executing tasks.

Safe, efficient and

responsible

3

Impact of digital solutions

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What does good look like (single representation of multiple targets/opportunities)?

Automated

Controller

Process

Automation

Information

Data

Dashboard

or report

Knowledge

Documents

Alert or

Alarm

Operator utilization &

multi-skilling (2-4%)

Integrity

Inspection

Controller

Indicators

or sensors

Integrity

Manager Equipment

utilization (5-8%

increase)

Maintenance (10-15%) and

Outages/shutdown (20-30%)

Improved operator

health and safety

Improved

environmental

performance

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Case studies

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Case Study: Oil and Gas HSE

Risk Management

Policy ManagementAutomation

Incidentmanagement

Compliance Automation

Regulatory Management

Internal AuditAutomation

Policy ManagementAutomation

R&C Platforms

Major

Focus

Being proactive and managing health, safety and environmental (HSE) issues

well in advance of an actual situation is critical.

PwC worked with a client to create a tool that not only made it easy to report

issues, but one that also serves as a HSE engine that would alert directly and

collaterally impacted resources in case of any incident.

Context

COO CIO

VP

BU3BU1 BU2

Equipment

and System

Reliability

Real Time

Data

Availability

Personnel

Safety

Reliable,

Secure Data

Exchange

Pain Points Addressed

Stakeholders

Data Silos

Field Worker

CEO

• Monitoring ground situation by

means of KPIs derived from

real time data is possible

• Digitization reduces time spent

in data aggregation &

collection

Field Supervisor

Impact

• Dashboards allow for better

understanding of data and

easier decision making

• Data accessible to all

Business Units, preventing

silos

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Gave valuable insights to reduce the likelihood of infrequent but high cost accidents to a leading oil and gas company

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Business Problem Project Impact and Outcome

• The client was facing problem due to accidents caused which was leading to a large revenue loss.

• The client wanted to identify a method/model that will help predict the occurrence of such an accident

• The relevant data available with the client, for this engagement , was very scarce (only around 300 data points).

• The relevant data was collected and cleaned and an appropriate metric was identified for the client and an appropriate dashboard was created

• The data was classified by risk themes and control themes and basic profiling exercise was executed. The trends observed thereafter provided significant insights into the problem and was employed by the client subsequently

Worked with the a leading multinational oil and gas company to reduce the likelihood of infrequent but high cost accidents.

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Gave insights to reduce the likelihood of accidents due to external factors

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Business Problem Project Impact and Outcome

• The client was facing problem due to accidents caused which was leading to revenue loss.

• Client had used analytics at different points in time and in pockets throughout the organization and had developed a conceptual model for analytics (Safety Management System Process Model)

• However, they wanted assistance to augment the current state of analytics in the organization in order to strengthen decision making, operations, and financial performance

• Designed an analytical framework and provided analytic process expertise

• The client was able to track the key areas of failure and understand their root causes

Worked with the a leading airlines company to reduce the likelihood of accidents due to external factors

HSE Analytics Case Study

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Background

An energy company sought to understand how it could better leverage and analyze its internal business performance and safety data to predict, prevent and proactively report on likely increases and decreases in safety risk. Their primary concern was in identifying business-unit-specific and general leading indicators from operational performance data that have an impact on safety risk.

Our Solution

PwC initiated the engagement by hosting a workshop for key stakeholders within the client’s safety and executive teams, allowingthem to contribute their own hypotheses as to why safety incidents occur. Based on the availability of data, six of these testable

Client Benefits

‒ An interactive dashboard enabling improvements to safety performance and maintenance efficiency‒ Key insights into six high priority hypotheses related to safety risk

hypotheses were identified as high priority. Building on the business understanding provided by the workshop, we subsequently performed an exploratory analysis of the client’s data assets to extract interesting relationships to safety risk. This culminated in the development of a self-organizing map (SOM) – a machine learning tool capable of clustering the client assets into distinct groups with varying risk profiles. The solution was delivered to the client by means of an interactive dashboard allowing them to explore the clustering and data associated with each of their assets. In turn, these insights will lead to improvements in safety and efficiency of maintenance operations.

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PwC Capabilities

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•PwC is organized by industry group which enables

us to deliver the best and highest quality services to

our unique client portfolio.

•PwC firms have offices in 771 cities in 158 countries

with more than 180,000 people who are committed

to delivering quality in assurance, tax, and advisory

services.

•PwC serves over 2500 Oil & Gas clients such as

ExxonMobil, Shell, and Chevron as well as three of

the most influential and growing National Oil

Companies, Gazprom, PetroChina, and Saudi

Aramco.

•One of the tenets of our Oil & Gas practice is to

provide our clients with the ‘first and best’

information they need to develop their strategy and

respond effectively to change.

•PwC has global Oil & Gas expertise in its 15

integrated Centers of Excellence (COE), conducting

the following:

•Industry research

•Industry-based knowledge management

•Aggregation of knowledge capital

•Benchmarking mechanism for collecting Best

Practices

•Engagement Support

•Resource hubs for industry expertise

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Contact Information

Von B. GusaHouston, TX

+1 (281) 536-6058von.b.gusa@pwc.com

Director – Energy Operations