A Users Guide to Policy Implementation:

Perspective of the Author

Presented at

The 6th Young Leaders Program University of Hawaii Scott M. Shemwell, D.B.A.
August 6, 2011

Copyright 2011 Knowledge Ops, Inc. All Rights Reserved.

Disclaimer
The views, opinions, positions or strategies expressed by the author and those referenced organizations and/or individuals are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of the Northeast Asia Economic Forum, The 6th Young Leaders Program, University of Hawaii, sponsors, Knowledge Ops, Inc., or any employee thereof. The author make no representations as to accuracy, completeness, suitability, or validity of any information contained herein and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its use. Moreover, the author does not endorse any of the organizations or products referenced in this discussion. Links to their web sites are provided only as a courtesy for those interested in additional information/research. Knowledge Ops, Inc. is an Oracle partner.

About Knowledge Ops, Inc.

Field Operation Processes & Decision Support
Field Based Information Infrastructure Operations & Maintenance Logistics

Principals have extensive experience in upstream field operations

Acknowledged expertise Published Senior executives with major industry players Industry Military

Vetted Solutions

Knowledge About Operations Spinout

Business Process Modeling (BPM) Information and Data Flow Established professional services firm Extensive tested and documented methodology

Discussion Points
Two Brief Energy Case Studies
Gulf of Mexico Drilling Moratorium Marcellus Shale, New York

Policy Automation
One Solution

Marcellus Shale

BP Macondo aka Deepwater Horizon Incident

April 20, 2010
Game Changing Incident More than just another industrial accident Eleven deaths Lost of Transocean drilling rig ~$750 million asset

Six Month Deepwater Drilling Moratorium

Economic Impact

De facto ALL Gulf of Mexico shallow water drilling too

J.R. Mason

New / Onerous Regulatory Reform

BOEMRE October 12, 2010

Up to 19,000 jobs lost Wages lost ~ $1.1 billion ~ $500 million lost tax revenue At least one drilling company bankruptcy Environmental impact still unfolding + BP staggering costs!

Compliance Influencers
Health, Safety, Environmental (HSE)
Heightened Visibility License to Operate

U S Deepwater Regulatory Compliance Landscape

Interested Constituents
US Federal Elected Officials
Commissioned Panels President Congress U.S. Department of the Interior; BOEMRE

Regulatory Authorities

Federal Deepwater Drilling

Industry Groups
U.S. Chemical Safety and Hazard Investigation Board API IADC SPE ISA

Financial
Capital Markets Insurance Rating Agencies

HSE Compliance

Key State Agencies

Texas Railroad Commission Louisiana Office of Conservation and the Office of Mineral Resources

Changing Landscape
Regulations Other influences

Local
Governments Groups Other Industry Segments Population

Best Practices
Project Management institute DNV WCID Safety Case

Key Federal Agencies

U S Coast Guard U S Dept of Labor (OSHA) U S EPA Natural Resource Damage Assessment (NRDA)

The New Reality

Judiciary
Federal State Local

US NTSB

Other
Media Academic Think Tank

Disclaimer: EXAMPLE ONLY The constituents depicted on this graphic are not all inclusive, but are typical and only shown to address the complexity of this issue. The company and/or its authors shall not be responsible or liable for the accuracy, usefulness or availability of any information herein, and shall not be responsible or liable for any decisions made based on such information.

Copyright 2011 Knowledge Ops, Inc. All Rights Reserved.

Oil & Gas Deep Water Drilling Regulations Compliance

October, 14, 2010, BOEMREs Increased Safety Measures for Energy Development on the Outer Continental Shelf (75 FR 63346) released.

Extensive new regulations, tracking, and reporting requirements Offshore drilling has changed forever How will energy companies respond to this wave of increased regulation, control, and oversight? How will energy companies quickly understand these new regulations, model the risk, and communicate to the organization?

Liability of Macondo Accident over $35B

Compliance
Analogous to Sarbanes-Oxley

License to operate requires

Drilling Risk Assessment Process

Operating Procedures Task Force: Well Construction Interface Document (WCID)

Industry Best Practices

Drilling Contractors Safety Management System
W Construction ell Interfacing Docum ent

Well construction interface / Basis of design

Lease Operators Safety Management System

Well Basis Of Design

Location & environment Geologic and geophysical Well design Well barriers (with much detail) Casing design Well execution plan (with detail) Critical well Risk Assessments Operators MOC

Drilling contractor safety case and lease operator SMS interface

Management structure / RRs / Acct Drilling Contractor MOC Personnel management Well control procedures Risk management processes Emergency response Monitoring, auditing and review

Drilling Contractors Safety Case

Risk Analysis & M itigation M anagem of Change ent Personnel Com petency

Well Execution Plan

Critical Well Activity Risk Assessments

Energy Industry Compliance Matrix

Probable License-to-Operate Regulatory Compliance Matrix
Hydrocarbon Value Chain
Offshore (maritime operations) Firm / Function
Operators Drilling Contractors Engineering Companies Service Companies Manufacturers Suppliers Drilling 2011

Onshore Midstream Downstream

Refining 2011 Manufacturing 2011 Transportation 2011 Storage 2013?

E&P
Production 2012 Gathering 2011

Legend Compliance Criticality

Most Critical Year

Least Critical

Source: Knowledge Ops, Inc.

Originally published by Shemwell, Scott M. (2011, January) The Blast Heard Around the World. Petroleum Africa Magazine. pp. 32-35.

Issues in the Marcellus

Primary concern is ground water contamination from Hydraulic frac fluid
Multiple municipal, state, & federal regulations Pennsylvania generated $2.3 billion in total value added, more than 29,000 jobs, and $240 million in state and local taxes during 2008. Considine et al

New York
Stronger regulatory requirements New York Viewed by some in the industry as less attractive state in which to invest

Managing Complex Regulations

Challenging Evolving Required

Enterprise Policy Automation

Business & SOPs Contractual Obligations Company Culture Industry Practices Mandates, Regulations and Legislation Tribal Knowledge Embedded in Legacy Systems and Documents

Available to All Across the Extended Enterprise Network

Regulatory Case Study:

Compliance & Beyond It's 2011, Are You Ready For Enforced Compliance
NERC's mission is to ensure that the bulk electric system in North America is reliable, adequate and secure. Founded in 1968, the North American Electric Reliability Corporation (NERC) is the selfregulatory Electric Reliability Organization (ERO) that spans North America, with Federal Energy Regulatory Commission (FERC) oversight.
develops and enforces reliability standard monitors the bulk power system; assesses future adequacy; audits owners, operators, and users for preparedness; educates and trains industry personnel.

Governance, Risk, Compliance is the New Normal

Requirements Increase in Number and Complexity
Service Level Compliance Compliance & Ethics Programs IT Governance Records Retention Anti-Money Laundering

Financial Reporting Compliance

Audit Management

Supply Chain Traceability

Legal Discovery

Data Privacy

People
Finance Suppliers R&D Mfg Sales HR Legal Customers

Technology
Enterprise Data Applications Warehouse Database Mainframes Mobile Devices Apps Server

Regions

Mandates

NERC FERC

SOX

Patriot Act

OFAC

FCPA

ITAR

PCI

HIPAA

SB1386

Source: Open Compliance and Ethics Group

The tipping point

Biggest Blackout In U.S. History August 14th, 2003

Does this sound familiar?

Concluding Comments
For a variety of reasons and over a very long time, the oil & gas industry has earned greater scrutiny However, the process is manageable Industry can demonstrate to agencies this solution Should NOT affect profitable operations and value to the society
"The Democrats are right that the oil companies can make money even with tighter regulations. We can require them to meet those regulations. And the Republicans are right that there are more places we can and should be drilling to find oil and gas," says Amy Myers Jaffe, Director of the Baker Institute, Houston, TX.
- Wall Street Journal, June 9, 2011
http://online.wsj.com/article/SB10001424052702304778304576373922398928448.html

Contact Us
Knowledge Ops, Inc. Dr. Scott M. Shemwell Email: Sshemwell@KnowledgeOps.com www.KnowledgeOps.com

Scott M. Shemwell, D.B.A.

Dr. Scott M. Shemwell is an acknowledged authority and thought leader in field operations and risk management with over 30 years in the energy sector leading turnaround and transformation processes for global S&P 500 organizations as well as start-up and professional service firms. He had been directly involved in over $5 billion acquisition and divestitures as well as the management of significant projects and business units. Most recently, he worked at Wescorp Energy, Inc. as Chief Operating Officer after merging Strategic Decision Sciences, Inc. in 2007 where as CEO he helped global clients tackle difficult strategic problems and attain operational excellence. Mr. Shemwells unique background and expertise in oil-field management make him highly qualified to guide oil and gas companies in creating economical and efficient oil fields of the future. Prior to starting Strategic Decision Sciences in 2003, he directed Oracles Energy Practice as vice president responsible for driving the strategic direction and business development efforts for Oracles global energy and chemical business sectors.

In 1997, Mr. Shemwell was brought into MCI Systemhouse to expand its energy practice where his most notable achievement was the development and implementation of the firms Y2K practice with a focus on the realtime systems responsible for both upstream and downstream petroleum production operations.. He also has industry leadership experience as CEO of Real-Time Data Solutions, Inc., director at Halliburton Corporation and head of its Information Technology line of business. While serving on the Halliburton Energy Services Leadership Team, he was directly engaged in the transformation of the company into its Integrated Solutions business model as well performing as the CIO of the $2 billion Terra Nova project.
Mr. Shemwell is recognized as an authority in risk management, technology, knowledge management, industry change, process change management/modeling and simulation, and logistics and operational supply chain management, having authored over 300 articles and presentations on these subject matters. He is the author of Essays on Business and Information, a collection of short essays focusing on the relationship between business processes and information technology, written from his perspective as an energy industry executive and adviser. Formerly a Commissioned Officer in the United States Army Air Defense Artillery, he holds a Bachelor of Science in physics from North Georgia College, a Master of Business Administration from Houston Baptist University and a Doctor of Business Administration from Nova Southeastern University.

Additional Resources
Two recent articles by the author address these issues further
The Blast Heard Around the World, January 2011 A Date Which Will Live, October 2010 OPA Maturity Model, July 2011