Y2k article from...Shell
This is a sample of what I expect to be seen more frequently: assertive communication by companies that are advanced in Y2k remediation compared to competitors.
'In Downstream, as with Shell Expro, asset integrity is likely to be
the most difficult and costly area to resolve. The impact can range
from refinery process control and safeguarding systems, via
pipeline control and terminal operations, through to commercial
and retail activities.
____________________
'BEATING THE BUG `THE INFRASTRUCTURAL
CHALLENGES AHEAD'
John Mills
Director of Corporate Affairs, Shell UK Limited
The Petroleum Economist, 6th North Sea Conference
21st April, 1998
The subject of this year's conference, 'The Infrastructural
Challenges Ahead,' is a timely and important one. At the outset,
we should acknowledge that Beating the Millenium Bug is anything
but a challenge for the future. I don't need to remind this audience
that the Year 2000 and the potential problems which go with it
needs to be addressed now.
Today, we know enough about the Millenium Bug to know that like
that irritating summer fly, it just won't go away. And squashing this
Bug will take more than a rolled up newspaper and a lucky swat.
As companies and individuals, we have all become only too
familiar with the Bug problem. We all face the problem of updating
computer and control systems which are so essential to our
everyday life.
If we get it wrong, we will all be affected. From airports to
hospitals, from welfare benefits to banks, from defence systems
to international communications, computers and control systems
are an integral part of all our lives. The oil and gas industry is no
exception.
For Shell UK, beating the Bug is critical to all of our operations
from the North Sea to the forecourt. And my remarks this
afternoon will reflect that important reality.
Put simply, it is not good enough just to get it right upstream, if we
fail to overcome equally important challenges downstream. For
example, ensuring marine terminal operations are not affected is
critical to both parts of the oil and gas business. I can tell you this -
if anyone gets it wrong, no journalist is going to be too bothered
about the distinction between upstream and downstream!
So, both sides of the business can learn from each other. We only
have one go at getting this right, so its important that experience
and expertise in one area of our operations is shared and made
widely available to others. And this general point about internal
communication and planning can be expanded to include Shell
UKs external relations. In our dealings with partners, contractors
and customers, we are committed to working with them to ensure
that problems are addressed, remedial action agreed, and
satisfactory levels of assurance guaranteed.
Like other companies represented here today, at Shell UK we
have been working hard since the mid 1990s to prepare our
systems for the new millenium. At the outset, we asked ourselves,
"what will happen if we adopt a wait and see approach?" As much
as we all like flexible deadlines, we quickly realised that the
Millenium Bug doesn't give us that luxury!
Detailed planning, the allocation of resources and a clearly defined
strategy are all essential. Time is against us, but already, Shell UK
has made real and important progress.
We do not claim to have all the answers, but our experience
suggests that if we are to "get it right" in the run up to the Year
2000, and and into the next century, significant resources in terms
of personnel, finance and management decision-making need to
be devoted to meeting the Year 2000 challenge.
Since January 1996, Shell UK has passed a number of important
"milestones" in developing a coherent and positive strategy on this
issue. We have assembled a specialist team of engineers and
analysts. We have identified what needs to be done. And finally,
we have begun the intensive task of implementing changes, and of
upgrading and replacing systems. We estimate that the total cost
to Shell UK will be in the region of œ30-40 million.
We have set ourselves the target of completing the Year 2000
project by the end of this year. That's an ambitious programme,
but it has to be. We have deliberately built into our targets a year
for testing, and for important contingency planning.
Our goal is achievable. It is to develop and implement plans for all
perceived threats, and to achieve assurance levels which reflect in
each case the business criticality of that threat. The aim is to
reduce the impact of the Year 2000 problem to manageable levels
in all areas, a target we are confident can be achieved. We
explicitly recognise that we don't have the time and the resources
to solve all potential problems. And there is therefore an overriding
need to prioritise.
We recognise that our responsibilities lie first and foremost in
ensuring that our own systems work as smoothly as possible in
the run up to day one of the new Millenium, and indeed, beyond.
But our wider responsibilities to our customers, our contractors
and our suppliers go beyond that immediate goal. That is why we
have produced the Year 2000 Survival Action Guide which is being
used by other companies within the Shell Group, as well as
outside companies and organisations. If anyone would like a copy
of the Guide, you can find a leaflet on the desk outside the
conference room. This gives further details and a contact address.
There is an old saying that no man is an island. We cannot
insulate ourselves from what's happening outside Shell. We must
ensure that critical supply chains are not broken and that the basic
infrastructure on which our business depends is not affected. We
need to work closely with contractors and small businesses
supplying goods to us to ensure that they understand and are
addressing the problem. This is an area of crucial importance to
us. In upstream, some 700 SMEs provide essential goods and
services to Shell Expro. We also need to re-assure our customers
and to take steps to guarantee that our business with them is not
affected.
These are responsibilities we all share - both inside and outside
Shell, both inside and outside the industry. Recently, the
Government announced substantially increased funding for Action
2000. We welcome in particular, the emphasis placed on
promoting awareness and understanding among SMEs and in
encouraging large companies to stimulate greater interest among
small businesses in their supply chains.
For our part, we have identified three distinct Year 2000 problem
areas:
First, Asset Integrity. Asset integrity affects the physical
infrastructure of our operations. This includes control and
monitoring systems in offshore platforms, onshore gas
fractionation plants, refineries, retail sites and offices.
Second, Business Computing. This covers the effects on
electronic business information systems and the data that drives
them. It incorporates Information Technology telecommunications
and infrastructure.
And Third, Commercial Integrity. This refers to our relationship
with third parties such as customers. We cannot afford to ignore
the potential effects on our business, if third parties fail to
overcome the Year 2000 problem.
Let's now look at each problem area in turn. Specifically, I want to
examine how each area impacts on Shell UKs two main
businesses, Shell Expro and downstream, Shell UK Oil Products,
and how we have set about prioritising our work.
First, Asset Integrity in Shell Expro
Most of our Year 2000 investment, approximately 70%, is going
into Asset Integrity and for a very simple reason. The
consequences for the company and for the country of a platform
failure for example would be great. Deferred production costs
alone could run well in excess of œ1million per day. Similarly, if the
St. Fergus gas fractionation plant were to fail, a large part of the
North Sea would be unable to operate.
So what are we doing to ensure that this doesn't happen? The first
task we set ourselves was to identify the potential problem areas
in our installations and sites and to categorise them. In particular,
hazard analysis techniques have been used to identify those
systems which are critical to the business.
A typical offshore platform or onshore gas plant uses 50-100
"embedded systems." These are sets of electronic code used to
control equipment which are effectively sealed, and cannot be
altered by the users. These systems contain anything up to 10,000
individual microchips. We have found that up to half of these
systems are critical in terms of production and the impact of our
activities on the environment.
Having identified these critical systems, the next stage has been to
agree a comprehensive plan of remedial action. This can involve:
chasing vendors for evidence that they will be able to cope with the
Year 2000; testing the equipment itself; and developing
contingency plans in the event of a system failure.
This action must be agreed, planned and then scheduled with
each of at least 60 vendors. It has to be extremely well
co-ordinated and planned as no shutdowns are scheduled. And
b> the logistics of this exercise are of course considerable. It is not
something that can be left to the last minute or even 1999! Above
all, the remedial process has emphasised once again the
importance of early planning and detailed action to address the
Year 2000 problem.
In Downstream, as with Shell Expro, asset integrity is likely to be
the most difficult and costly area to resolve. The impact can range
from refinery process control and safeguarding systems, via
pipeline control and terminal operations, through to commercial
and retail activities.
Pipeline control and terminal operations have become a
particularly computer intensive operation, relying on computer
systems to control pumping and to detect any leaks. At our
shipping terminal at Tranmere on the river Mersey for example,
which handles 12 million tonnes of crude oil for our nearby
Stanlow refinery every year, visitors are often astonished to
discover that we only have three full-time staff on duty at any one
time.
Similarly, a modern refinery relies heavily on automated control
systems. The basic systems are usually supplied by large
specialised companies which are actively developing Year 2000
compliant upgrades. However, most control systems have many
local user applications added as enhancements. These all have to
be checked for hidden date dependency. As in other areas, the
devil is in the detail, but its the detail that could catch us out.
Concern for safety is paramount and is driving remedial action in
the different business sectors. Each sector is currently
investigating its own area of responsibility with a dedicated project
manager providing guidance and co-ordination.
In retail, the problem is more the sheer number of sites,
approximately 1800, than technical complexity. Areas to be
addressed range from point of sale equipment and the wide range
of fuel and credit cards they must handle, to the forecourt pump
controllers. And we must not forget our SMART loyalty card! I can
picture only too well the scenes we would be faced with if irate
truckers get their diesel but not their SMART points. They'll be less
than impressed.
Second, Business Computing
While this is the most widely understood aspect of Year 2000
problems, business computing has not been the highest profile
issue for the upstream oil and gas industries. For Shell Expro,
business computing is not a major business exposure issue to the
same extent as asset integrity. Nevertheless, Expro is devoting
considerable resources, some œ2.5 million, to remedying this
problem.
This figure is smaller than original estimates of œ5-10 million for
several reasons. First, we are replacing many vulnerable
computing systems with an integrated business operations
package which is designed to be fully Year 2000 compliant.
Second, we have been able to use systems supplied by Shell
Central Offices, at a fraction of the cost of developing new Expro
systems. And finally, much of the software is of a purely technical
nature. This means that we have a low incidence of dates in our
data processing compared to the typical retail or financial
organisation.
In Downstream, the business computing challenge covers all
Mainframe, Midrange and PC based applications in the following
areas: finance, marketing, retail, commercial, human resourcing
and of course, manufacturing. We estimate that the total cost of
remedial work in all these areas will be approximately œ3 million.
This figure is not set in stone however. We recognise that a key
part of this process involves the discovery of unforeseen
problems. It is impossible to predict accurately every remedial
step required until applications are actually assessed for Year
2000 compliance.
We know that most of our systems can be corrected by upgrades,
but some have already been identified as targets for replacement.
Both upgrading and replacement options have important
consequences in terms of staff time, the availability of technical
expertise and the increasing pressure on outside contract staff.
This is a common challenge faced by us all. As Millenium Bug
fever begins to take hold, these specialist contract staff are in
heavy demand, costs are rising and there is an increasing scarcity
of appropriate skills. We will inevitably have to face the issue of
retaining specialist staff. And some smaller companies may face
severe problems in achieving compliance if they are unable or
unwilling to meet these rising costs. This problem can only get
worse as we approach the Millenium.
Last, the problem of Commercial Integrity.
This is perhaps the least discussed aspect of the Millenium Bug
problem. In Upstream oil and gas we are particularly vulnerable to
third parties' Year 2000 problems because so many of our
operations are contracted out.
Mobile drilling, Subsea Engineering, Seismic Operations and
Platform Maintenance are all services which we, and many large
oil and gas companies, no longer provide internally. As a minimum
therefore, we must satisfy ourselves that the contractors providing
these services are paying enough attention to the Bug problem.
This inevitably requires considerable effort and above all, a
co-operative approach. Both operators and contractors must
realise that they are in this thing together. No company in this
industry can isolate itself from the problem. As an industry, we
must be more open about our remedial plans and more willing to
discuss the progress and pitfalls of meeting them.
We recognise however, that many of these small and medium
sized businesses do not have the financial and technical
resources to meet this challenge in isolation. That is why we are
committed to collaboration whereever possible. This involves Shell
Expro workshops, and the preparation of user friendly manuals
and guidance, including a detailed Year 2000 web-site.
Two new and important forums for sharing information have been
set up. The Shell upstream group meets regularly to review
progress, to share experience and to disseminate information. The
31 company UK Offshore Operators Association (UKOOA) group
has an active programme of talks to local chambers of commerce
and business groups, and maintains an informative web-site.
These networks will help to initiate action among key third parties,
promote the sharing of technical information, and work to ensure
that different companies resolve to pursue the problem in a
consistent manner.
In Downstream, the survival of key suppliers and customers
throughout and beyond the year 2000 is of critical importance.
Again, initiatives are already in place to encourage companies to
tackle this problem seriously. Suppliers are being assessed on
their criticality to our business continuity and on the availability of
alternative sources of supply. All key suppliers are being asked to
provide us with a statement of their approach to Year 2000
compliance.
For many of our customers, the Year 2000 still remains a distant
issue. Whilst we are keen to minimise the extra burden on small
businesses which Year 2000 compliance implies, we do believe
we have a responsibility and, indeed, a vested interest to raise and
keep raising this issue with our customers. It's important that
potential problems are not ignored or overlooked. We are doing
this through a number of marketing initiatives and a programme of
one-to-one contacts through the customer's regular marketing
contact point. This programme will be intensified during the
remainder of 1998.
As we look ahead to the Year 2000, it is difficult at times not to get
carried away with all the hype. And we've had an awful lot of it! In
recent weeks, newspapers have been full of stories urging us not
to fly, not to be ill, and not to expect money from cash machines
on New Year's Day, 2000.
In part, industry and the public sector have no-one to blame but
themselves for this trend. With little more than eighteen months to
go before the new Millenium, too many companies find themselves
still at the planning stage. Some have not even advanced this far.
How many of us however, could have seriously predicted, even
twelve months ago, how much time, planning, and effort would be
required to beat the Millenium bug?
Of course no-one is infallible. No single company can claim to
have all the answers. But, at Shell UK, we know that we will only
remain unscathed if we take the appropriate measures now and
that includes raising awareness among suppliers and customers,
and helping them to address these issues. Our staff, our
suppliers, our customers, and the country are expecting us to get
it right. We need to do more, all of us, to ensure that our industry,
from the smallest supplier to the biggest producer, meets and
beats the Bug. Thank you.
shell.co.uk |
