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API SPEC Q2 FOR AUDITING

STANDARDIZATION OF INDUSTRY EXPECTATIONS FOR OIL AND GAS

Stacey W. Hagen ExxonMobil Development Company Drilling Services & Systems Team Lead API Sub-Committee 18 Chairman - Quality

Bo Creek Orion Drilling Company Quality Assurance / Quality Control Manager


AGENDA

Objective – Provide History and Industry Expectations on API Q2

Outline – Brief History of API – Business Drivers for New Industry Standard – API Q2 – API Q2 Overview – Benefits


BRIEF HISTORY API SPEC Q1


History of API and Spec Q1 • July 28, 1914 – November 11, 1918 • National Petroleum War Services Committee • Pooling Program • 1919 – American Petroleum Institute • Program was transitioned into a third party audit

program in the mid 1980’s under the Specification of Quality Programs, API Spec Q1 that is now in its 9th Edition

• Just as there were drivers for the Monogram Program, one now exists for the certification of services


BUSINESS DRIVERS FOR API SPEC Q2


Absence of a Corporate Management System

Inconsistency in Risk Mitigation

Lack of Implementation

Lack of Oversight

BUSINESS DRIVERS


BUSINESS DRIVERS

Increasing complexity of wells • Need for improved service technology and

equipment / tool reliability Increasing spread rates on rigs • Need for systems to ensure uninterrupted

operations


BUSINESS DRIVERS

Service centers have more than one customer • Additional requirements typically

specified by one or two customers • A customer may only be 10% of total

business • Implementation / compliance of

requirements only 10% of the time is next to impossible


BUSINESS DRIVERS - Perception The incident killed 11 workers and spewed more than 200 million gallons of crude in what is touted as the country’s worst oil spill ever. Subsequently, a moratorium was imposed on offshore drilling.


ROOT CAUSES OF NPT LACK OF:

Service execution planning

Personnel Competency

Lack of or not Following

procedures

Lack of using history logs

Contingency planning

Quality Checks, Inspection and Test

Preventive Maintenance, Inspection, Test Programs (PMITP)


INDUSTRY RESPONSE


INDUSTRY RESPONSE

• Realization that ISO 9001 , ISO TS29001 and API Spec Q1 apply to manufacturing

• API Task Group (TG) 5 developed under API SC18

• Specification for QMS Requirements for Service Supply Organizations

• Identify the expectations for execution of upstream services including well construction, intervention, production and abandonment

• Published December 15, 2011


API SUBCOMMITTEE 18

Life Cycle Management

API Spec Q2

API Spec Q1

Auditor Effectiveness

Min. Mfg. Requirements

Welding Monogram Program

TG2 TG1 TG3 TG4 TG5 TG6 TG7

SC18

CSOEM


API TG5 MEMBERS


API SPEC Q2 HOW IS IT DIFFERENT?


PROCESS-BASED QMS (ISO 9001, 29001 & API Q1)


CUSTOMER REQUIREMENTS CUSTOMER

SATISFACTION

INPUT OUTPUT

CONTINUAL IMPROVEMENT

PROCESS- AND RISK-BASED QMS (API Q2)


OVERLAP - API SPEC Q1 VS. API SPEC Q2

General Requirements

Quality Manual

Control of Documents & Records

Quality Policy

Quality Objectives

Planning

Management Review

Control of Monitoring and Measurement Equipment

Measurement, Analysis and Improvement

Training

Corrective and Preventive Action


SERVICE-SPECIFIC Additions - API SPEC Q2

No Claims to Exclusions

Competency of Personnel

Risk Management

Detection Equipment

Service Design

Contingency Planning

Control over Critical Suppliers

Service Quality Plan

Preventive Maintenance, Inspection and Test

Service Performance Validation

Management of Change

Corrective and Preventive Action resulting in a change of controls

Customer Notification

Traceability of Critical Services and SRP


Elements Requiring Procedures

• Personnel Competency / Training • Document Control • Control of Records • Risk Assessment • Service Design • Contingency Planning • Purchasing • Verification of Purchased Services &Service

Related Product • Execution of Service • Identification & Traceability • Service Related Product Status

• Customer Property • Preservation of Service Related Product • PMIT • TMMDE • Service Performance Validation • Nonconformities • Management of Change • Monitoring, Measuring & Improvement • Internal Audit • Analysis of Data • Improvement • Corrective Action • Preventative Action


1.2 EXCLUSIONS “When an organization performs activities addressed by this document, including the provision of service-related product, all requirements shall be performed and no claims to exclusion of those requirements shall be permitted.” Service-related products (SRP): Materials, equipment, and software used in the execution of a service.


COMPETENT

4.3.2 PERSONNEL COMPETENCE

NEW • Risk Based • Problem Solving

Competency = • Education • Training • Skills (OJT) • Experience


4.3.2 PERSONNEL COMPETENCE THE FOUR LEVELS OF LEARNING

Novice

Not expected to be able to perform

Competent

Expected to perform to

basic standards

Expert

Creates knowledge

and teaches others

Experienced

Beyond understanding of what must

be done


5.3 RISKS Management

Immediately

1 years 5 years

10 years


5.3 RISK MANAGEMENT

Maintain Procedures to controls Risk throughout Service Execution • Identify service related risk • Implement controls • Notify customer of remaining risk


5.4 Design & Development

Every Service includes Design and Development

Planning Inputs Outputs Review Verification Changes API Q1 Products

Validation

Planning Inputs Outputs Verification Changes API Q2 Services

Final Review

Failing to understand what is and is not critical will impact the service design which will result in increased risks, lack of controls and potential for loss.


5.5 CONTINGENCY PLAN

Contingency planning shall be integrated into services and supporting processes between the organization, its suppliers and the customer”.


5.5 CONTINGENCY PLAN

• Actions required for significant risk

• Assignment of responsibility & authority

• Internal and external communications

Outputs

Integration

Disruption Prevention

Mitigation Measures

Spares

History Risk

Reliability



5.6 PURCHASING & CONTROL OF SUPPLIERS

• Determine criticality of the services and SRP

• Evaluation & Onsite audits for critical suppliers.

Critical – That deemed by the organization or customer as indispensable or essential, needed for a stated purpose or task, and requiring specific action


5.7.2 SERVICE QUALITY PLAN

Customer Specific for the Service being performed Takes into account Environmental & Operational Conditions

Design and

Development

Personnel

Competence

Contract Requirements Identification of

Equipment

Risk Assessment



5.7.3 IDENTIFICATION AND TRACEABILITY

• Identification controls must be put into place to clearly identify all stages of delivery, installation, repair (maintenance), and redress

• Service-related product shall be identified.

• Critical service-related product shall be identified and traceable.


5.7.8 PMITP Is applicable to Service Related Product (SRP)

Equipment Maintenance is handled under Work Environment.

Corrective Preventive

Predictive • Expensive

• Results in NPT

• Minimizes Corrective Maintenance

• Focus of API Spec Q2

• SRP Integrity and Reliability


5.7.8 PMITP

Corrective Preventive

Predictive • Expensive

• Results in NPT

• Minimizes Corrective Maintenance

• Focus of API Spec Q2

• SRO Integrity and Reliability

• Reports that document history use, repairs, modifications, remanufacturing, inspection and test activities that all direct verification for reuse of product;

• List of critical spare parts requirements by the customer and/or technical requirements including those by the OEM

• Controls that ensure equipment integrity to original performance requirements and design acceptance criteria are maintained

• Original performance requirements that cannot be met shall undergo the MOC process


5.7.8 PMITP

• OEM • Application, use, environments • PMIT = OEM Recommendations + Owner

of the equipment


5.9 SERVICE PERFORMANCE VALIDATION

Validation must be:

• Differs from Validation for manufactured product

• Validations occur during and after execution of service(s)

• Carried out in accordance with Design (5.4), SQP (5.7.2) and acceptance criteria


5.10.4 CUSTOMER NOTIFICATION

• Customers shall be notified:

– When service execution, does not conform to requirements

– When SRP does not conform which has been delivered or used in the execution of a service


Management of Change

Process Execution Changes

Management System

Changes

SRP & Design Changes

Risk Assessment

Customer Notification

No

Yes

No

Customer Accepts?

Higher Risk? End of Process

End of Process

Change in Personnel &

Suppliers

Yes

5.11 Management of Change


Impact on Drilling Operations

Reso

urce

s

-90+ 0 40 10 20 160+ 80

Risk Assessment

Drilling Operations

Design of Service

PM Programs


Maintenance & Critical Spares

• Assembly Insp / Test

QA/QC

• Service Performance Validation

•BHA Inspections

•MOC

Critical Suppliers

Time ( rig days) (AFE) Spud

Operations Support

• Well Integrity Reduction of NPT

Contractor Influence

API S

pec

Q2

• Tool Insp @ delivery

Competency

Service Quality Plans


SUMMARY & BENEFITS


INDUSTRY IMPACT

Operators Service Providers

Suppliers Regulators and other Interested

Parties


It is not a template that you fill in and claim

compliance.

It is not a cross

reference between your management system and your customer’s.

It is not a manual with new buzz words that you present to your

customers.

WHAT API SPEC Q2 IS NOT


It is about service quality and risk mitigation supported by validation and actual service provider performance.

WHAT API SPEC Q2 IS


Benefits of Standardization

• Improves service related product reliability

• Minimizes risk through identification, planning & controls

• Identifies critical tasks that impact quality, safety and the environment

• Minimizes service related risk and improves efficiencies

• Improves communication between service providers and their suppliers and operators.


INDUSTRY COLLABORATION


Industry Collaboration Beta Test Site Assessments: • Gaps, hurdles and milestones for auditing to Q2 • Identify competencies / training for API Staff / Auditors • Identify needed resources • Types of certifications needed to meet industry needs

• Baker - Completed • Schlumberger – Completed • Weatherford – Completed • Halliburton – Completed • Orion Drilling – Completed


Industry Collaboration

API Spec Q2 Mock Audit: • Halliburton – Bakersfield, CA • July 29th – August 2nd 2013 PSL Covered • Drilling Fluids & Solids • Cementing • Completion Tools • Production Enhancement • Directional Drilling / MWD / LWD • Wireline and Perforating


Industry Collaboration API Spec Q2 Reviews: •Orion Drilling •Maersk Drilling •Akita Drilling •Parker Drilling •Transocean •MI Swaco


EVOLUTION OF API SPEC Q2

DEVELOPED PUBLISHED BETA TESTING COMPLIANCE CERTIFICATION

API Spec Q2 was developed in 2010

through 2011.

API Spec Q2 was published in

December 2011.

A combination of operators and service providers participated

in the beta test.

Service providers start getting their

QMSs in compliance with API Spec Q2.

Service providers become certified in

API Spec Q2.

EXPECTATION

Service providers shall be in compliance in order to bid on jobs

requiring API Spec Q2.


QUESTIONS ?

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