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How to Perform Quantitative Risk Assessment for Oil & Gas

Risk & Compliance

The oil and gas industry is notoriously dangerous and presents a host of safety challenges. Of course, this industry can also be incredibly lucrative and firms within this particular sector can do very well. The key for many companies is to ensure that all possible risks are considered and planned for, as the financial consequences of any mistake or disaster can push even the most well-funded firm to the brink of or even into bankruptcy. Here are some of the important things to consider when performing a quantitative risk assessment:

Potential Situations

Different companies in the oil and gas sector obviously engage in different facets of the process from drilling to distribution. Of course, the more dangerous aspects take place when establishing oil sites and beginning the drilling and extraction process. The scope of the project, the equipment utilized, and the topographical nature of the locale will all influence the types of problematic situations that may arise during the course of operations. Thus, one of the initial steps to take to quantify the potential risks involved with a project is to formulate the various scenarios the company may encounter. Granted, there is always the possibility that something unexpected will happen and there is no guarantee that the matter will take a specific direction. Nonetheless, it would be foolish not to come up with the problems that are most likely to occur so that some proactive problem solving and mitigation tactics can be set into motion. In addition to thinking about how much these issues could cost and what it would require to rectify them, the steps that follow will likely be an offshoot of the different types of situations anticipated or they may actually be problems on their own.

Hazards to Humans

Oil spills, explosions, and toxic fumes are valid concerns when it comes to working in anything that is oil and gas related. As a result, one of the more important components of the risk assessment is an analysis of the potential hazards that the project will have on the workers directly working at the site, as well as the residents in any surrounding areas. Unfortunately, these hazards may occur irrespective of a disaster or accident, and weighing the cost and benefit must occur to ensure that it will not result in unnecessary human exposure to dangerous chemicals. In addition to ensuring there is a proactive view as to the potential hazard, it is certainly within the realm of possibility that injuries or medical conditions that arise could lead to some kind of litigation. Therefore, it is important to consider the many costs that may be associated with those sorts of lawsuits.

Environmental Impact

Even if the risk to humans is relatively low, there is always the possibility of harming the environment, which can end up having long term deleterious effects on local residents. Plus, if the environment becomes polluted, whether by massive spill or unknown leakage, this can disrupt the local food supply, as recently happened in the Gulf. The environmental impact can end up costing significant sums of money, as the price of cleanup and restitution to those affected can be an ongoing issue for years and years into the future. Of course, it is also unwise to be the company that destroys precious land, and the damaged reputation will result in a whole bunch of other financial ramifications that are difficult to quantify.

Economic Implications

It is highly unlikely that the oil and gas industry will disappear any time soon, as there is continued global dependence on fuel and a fair amount of resistance to or simple disinterest in seeking viable alternatives. And, as mentioned and widely known, there is no denying the fact that this is a highly lucrative business, even though it is also a highly risky one. The reality is that all businesses must engage in risk assessments and take steps to mitigate risks as much as feasible. In this sector, it is obviously vital to perform these assessments on a regular basis and to ensure that they are accounted for in the annual budget. This requires sophisticated modeling and financial projections, so it is best to seek the advice and counsel of a seasoned professional.

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