Supply chain management
Rigorous contractor selection
Cairn’s Invitations to Tender (ITTs) set out our expectations and emphasise the requirement for all contractors to behave consistently with the Cairn Group Business Principles, our HSE and quality standards, corporate governance requirements, joint venture/partner agreements, and the need to adhere to legislative and regulatory requirements. All potential contractors must confirm their capability to comply, and we assess their ability to do so, which takes substantial planning and checking. We seek to promote use of local suppliers where possible but our standards must not be compromised.
We continue to consider responsible working in the entire contracting lifecycle, from selection and management of our contractors to applying lessons learned in new programmes. In 2016, our contractor selection process was reviewed at the end of the phase two drilling programme in Senegal and lessons learned were applied by further embedding CR matters, including human rights issues (see also Human rights), as pre-qualifying requirements for all key contractors. Based on International Association of Oil & Gas Producers (IOGP) good practice, the phase three contractor assessment process consisted of an initial review against key criteria and the issue of a CR questionnaire alongside ITTs. Returned ITTs were assessed to determine whether our standards were met. Contractors who passed this assessment progressed to the next round and were subject to further follow-up, including site visits to verify responses before further assessment and selection.
Effective management and control
We commissioned independent specialists to audit rigs, vessels and aviation before we contracted them for the phase three Senegal programme, to ensure effective management was in place before operations commenced in January 2017.
Some operational activities are managed directly by Cairn whereas others are the responsibility of the contractor, although the contractor remains accountable to Cairn at all times. For example, rig contractors perform drilling activities under agreed procedures whereas Cairn retains assurance processes such as reporting, performance measures, audits and reviews. The allocation of duties and responsibilities is part of our Project Delivery Process and bridging arrangements. These are in place to ensure our CR management systems and those of our contractors remain effective and clarify which party maintains primacy over an activity.
Monitoring during operations
During operations, conformance to our requirements and performance is measured using audit activities and maintaining regular engagement at various levels. Cairn recognises that leadership plays a vital role in embedding appropriate HSE behaviours in our organisation and expects the same attention from all contractors and service providers who undertake work on our behalf. Our HSE focus originates at the Board level and that commitment is communicated to all contractors throughout the project cycle.
Our contractor performance management process includes a number of contractor health, safety and environment KPIs. Key contractors are required to complete and deliver a regular scorecard detailing their HSE performance, which includes both leading and lagging indicators. We use this to assist in assessing whether they are meeting expectations, or their performance requires improvement or is unsatisfactory, in which case immediate action is taken.
Where Cairn is a minority joint venture partner and does not have operational control, we conduct due diligence and engage constructively with partners to ensure familiarity with the operator’s standards before an agreement to proceed on operations is made. This included significant input in support of our partners and their contractors in the Catcher and Kraken development projects (see Economics and funding).
We continue to encourage our contractors where performance can be improved, including proactive engagement and follow-up of incidents and issues. In 2016, this included a comprehensive review of accident and emergency incidents during the construction of the Catcher and Kraken floating production, storage and offloading (FPSO) units. Findings from this review were shared with the Board, which allowed lessons to be learned and shared across the Group and between the similar development projects.
Planning for success in 2017
Overall in 2016, the hours worked were 0.96 million (0.62 million contractor hours), which rose from 0.67 million (0.47 million) in 2015. This was due to the completion of the second phase programme in Senegal and planning for 2017 compared to a shorter operational period in 2015.
For the 2015/16 Senegal exploration and appraisal drilling campaign, Cairn appointed ConocoPhillips (COP) as our well activities delegate. However, with the improvement in contractor availability (see Economics and funding) and the acquisition by Woodside Petroleum of COP’s share in the licence, we decided to change our contracting model for the 2017 programme. Much of the second half of the year was spent evaluating contractors and preparing bridging arrangements to ensure the 2017 programme could commence in a timely manner and in accordance with our CR requirements. Our key contractors have worked hard to be in a position to satisfy our requirements and be ‘drill ready’ by early 2017.