T H E O I L A N D N AT U R A L G A S I N D U S T RY ’ S M O S T VA L U A B L E R E S O U R C E
A N Y T H I N G B U T S TA N D A R D ?
I M A G I N E I F E V E RY N U T A N D B O LT I N T H E
Plain and simple, that’s why standards are so important.
W O R L D W E R E M A D E I N A D I F F E R E N T WAY.
Standards cross the realms of manufacturing, science and
technology, and safety and security. They’re a big part of
And imagine that every time you needed to put a nut
everyday life.
and bolt together, you needed a different tool to do it,
depending on where and from whom you bought them.
Standards enhance the safety of industry operations, assure
quality, help keep costs down, reduce waste, and minimize
Think of how difficult it would make your life. Think of
confusion. They help speed acceptance and bring products
the amount of money you’d have to spend on all the
to market quicker. And they avoid having to reinvent the
different tools just to match each nut and bolt. Think
wheel every time a product is manufactured.
about all the problems there would be building equipment,
manufacturing products, and providing services.
Since 1924, API has been a cornerstone in establishing and
maintaining standards for the worldwide oil and natural gas
If we all just arbitrarily used different nuts and bolts for
industry. Our work helps the industry invent and manufacture
putting things together, we’d be facing problems with
superior products consistently, provide critical services,
virtually everything.
ensure fairness in the marketplace for businesses and
consumers alike, and promotes the acceptance of
products and practices globally.
Our work is anything but standard.
I T ’ S A B I G W O R L D . S O M E B O D Y H A S T O S TA N D A R D I Z E I T.
SOMEBODY LIKE YOU.
T O D AY ’ S O I L A N D N AT U R A L G A S I N D U S T RY
REACHES AROUND THE GLOBE, TOUCHING
T H E L I V E S O F M I L L I O N S O F P E O P L E E V E RY
S I N G L E D AY.
It’s an industry that relies on high-quality equipment,
materials, and methods that meet the industry’s growing
demands worldwide. It’s an industry that relies on API
standards to get the job done right.
In today’s environment of increased workload and decreased
human resources, standardization has become a paramount
concern of the world’s oil and natural gas companies,
equipment manufacturers, and suppliers.
It’s standardization that keeps the oil and natural gas industry
moving forward, allowing it to operate safely and reliably
anywhere in the world. And it’s standardization that should
be at the top of your priorities.
By understanding the value of participating in API industry
standardization efforts, you and your organization will help
ensure the industry as a whole benefits. And when the
industry benefits, you’ll receive tangible benefits too.
But why support the standardization of petroleum and
refining equipment, materials, and operating practices?
Because your organization will realize both tangible and
intangible benefits that apply to all facets of the oil and
natural gas industry. Benefits such as improved reliability,
safety, quality, and environmental performance that will
help position your organization at the forefront of an everchanging industry. Plus, your standardization efforts will
help assure compliance with government requirements
and ensure equipment interchangeability, demonstrating
you can meet the needs of a global industry.
The oil and natural gas industry is becoming more and
more standardized. And though it may be difficult to put
a dollar figure on the value of standardization work, some
studies clearly show the magnitude and types of benefits
of industry participation.
Let us show you.
T H E K E Y T O R E D U C I N G C O S T S L I E S I N M A X I M I Z I N G T H E U S E O F S TA N D A R D
E Q U I P M E N T A N D M AT E R I A L S A N D T H E A P P L I C AT I O N O F S TA N D A R D D E S I G N S
AND PROCEDURES.
C R I N E S T R AT E G I E S F O R C O S T R E D U C T I O N T H R O U G H S I M P L I F I C AT I O N A N D S TA N D A R D I Z AT I O N O F S P E C I F I C AT I O N S ,
U K O O A / I P, 1 9 9 4
THE SAFETY OF EMPLOYEES AND THE
The work done by API’s Standardization Committees assure
COMMUNITY AT LARGE IS A MAJOR CONCERN
that API product standards, combined with API quality and
OF THE OIL AND NATURAL GAS INDUSTRY.
certification programs, provide companies with procurement
specifications that significantly reduce the resources spent
An operator can minimize safety hazards through the use
developing and maintaining their own internal procurement
of equipment and materials designed and built to industry-
specifications.
developed API specifications and operated according to
API recommended practices.
In addition, API committees have found that introducing
third-party witnessing programs managed by API for the
API standards add value to the equipment or materials by
industry also leads to greater reliability. This approach
helping to manage liability while reducing the operator’s risk,
allows companies to leverage their engineering resources
assuring that equipment and materials satisfy regulations
by providing technical input for documents that can be
and laws, and providing valuable information for training
regarded as true industry standards. Once a standard is
and educating workers. In addition, API standards are
established, the industry benefits as a whole, allowing end
crucial to developing greater public trust by assuring that
users to reap cost savings by procuring standard, readily
equipment and designs meet certain performance levels
available equipment at lower costs, and by having access
with appropriate safety margins, thus enhancing the
to the industry’s “lessons learned” and best practices.
operator’s ability to meet public expectations regarding
safety. All of these intangible benefits are measures of
Industry standards written to meet the industry’s needs
the industry’s “license to operate.”
provide the essential foundation for minimizing internal
company specifications, leading to lower capital and
operating costs. Manufacturers also realize savings since
they need fewer manufacturing practices and related quality
systems to meet the requirements. Without proper standards,
these savings cannot be realized.
API standards also play a significant role in modifying,
supplementing, or clarifying government regulations.
In many cases, recommended practices that address
common industry operations are standardized and then
referenced by government agencies in regulations.
Standards written by the industry and referenced in
government regulations are invaluable because they
are written by industry experts and interested parties,
in technical terms familiar to industry personnel. This
saves the industry the time and costs associated with
obtaining interpretations from government agencies on
vague regulatory language.
In addition, industry-developed standards can mitigate
the adverse economic impact and impractical operating
effects of regulatory standards developed by sources
outside of the industry. Industry standards usually reflect
real world operating conditions and practices. They help
make regulations more straightforward and less onerous
to implement while still meeting the intended purpose of
the regulation.
T H E D E V E L O P M E N T O F A N D U S E O F V O L U N TA RY T E C H N I C A L S TA N D A R D S A R E
E S S E N T I A L T O P R O M O T I N G I N N O VAT I O N , R E D U C I N G E X P E N S E S , I M P R O V I N G
Q U A L I T Y A S S U R A N C E , M A R K E T I N G G O O D S A N D S E RV I C E S , A N D A L L O W I N G T H E
U . S . T O C O M P E T E I N A G L O B A L E C O N O M Y.
“ I M P O R TA N C E O F V O L U N TA RY S TA N D A R D S F O R F E D E R A L A G E N C I E S ”
C . K A L L A U R , A S S O C I AT E D I R E C T O R , U N I T E D S TAT E S M I N E R A L S M A N A G E M E N T S E R V I C E , 1 9 9 8
TAKE THE OVERALL ECONOMIC VALUE THAT
Numerous examples exist for actual cost savings, or micro
STANDARDIZATION PROVIDES ALONG WITH
economic benefits, of standardization. For instance:
SPECIFIC CASE STUDIES OF COST SAVINGS
AND YOU CAN EASILY SEE THE TANGIBLE
4 The customer of an offshore fabricator had project
BENEFITS, BOTH FROM A MACRO AND MICRO
specifications for welding processes and practices
POINT OF VIEW.
considerably in excess of normal industry practices.
The fabricator estimated that the “customization” of
The tremendous impact of standards cannot be
the special requirements was responsible for an eight
underestimated at the macro level. In March 2003, the
to nine percent premium on the fabrication prices.5
U.S. Department of Commerce (DOC) announced its
Standards Initiative in response to industry concerns that
4 A North Sea operator investigating the cost of subsea
standards are among the greatest barriers to expanding
equipment found that the variety of subsea christmas
imports. The DOC estimated that standards-related issues
trees used on a number of projects was too great.
impacted 80 percent of world commodity trade.1 Given that
The operator standardized the pressure limitation and
the world trade in petroleum was about 44 million barrels
the configuration, and allowed for alternate use of
per day in 2003, the impact of standards for this industry
production or water injection. By configuring to this
2
is crystal clear.
base standard, they found the cost of the trees was
reduced by 30 percent.6
Also at the macro level, the German National Standards
Body, or DIN, recently studied the direct economic benefits
4 A petrochemical manufacturer reduced plant turnaround
of standardization. In this study, published in 2000, the
costs by $2.5 million in one year by implementing an
direct economic benefit of standardization was found to
industry-developed risk-based inspection methodology
3
be one percent of Gross Domestic Product, or GDP.
for process equipment. The optimized inspection plan
For the oil and natural gas industry, the estimated capital
allowed the facility to remove many low-risk pieces of
expenditure, or CAPEX, is between $150–$200 billion
equipment from its turnaround plan while focusing its
annually. Using the DIN value, this translates into an annual
resources on equipment with the highest probability
savings attributed to standardization of between $200 to
and consequence of failure.7
$500 million.4
4 A valve manufacturer estimated that approximately
4 In the development of the Andrew field by BP, one of
65 percent of the valves manufactured during a recent
the ten minimum conditions of satisfaction (MCOs) for
calendar year from one of their facilities were non-
alliance contractor selection was to “pursue design
standard. Customers paid premiums of 10 percent
philosophies and standards to deliver a safe, operable
to 75 percent for these “customizations.” In the opinion
minimal intervention platform and minimize asset life
of the manufacturer’s engineering and quality control
cycle costs.” Through this and additional innovative
staffs, the vast majority of the customization required
techniques, the project was completed with a 23
by the customer specifications did not add sufficient
percent decrease in planned expenditures.10
performance or safety improvements to justify the
additional cost. The customized specifications typically
4 One petrochemical plant operator reported a cost
included special material, packing, and similar
savings of $2 million by using reconditioned valves
requirements that were based on company or individual
versus new valves. The majority of these valves are
preference but did not alter the performance of the
stainless or alloy materials and were reconditioned in
valve.8
accordance with an API standard.11
4 One manufacturer reported that a recent update to
an API standard on subsurface safety valves (API
Specification 14A) saved them $500,000 per year by
detailing when design changes necessitated third-party
testing.9
1
U N I T E D S TAT E S D E PA R T M E N T O F C O M M E R C E N E W S R E L E A S E ,
MARCH 2004
2
B P S TAT I S T I C A L R E V I E W O F W O R L D E N E R G Y, 2 0 0 3
3
E C O N O M I C B E N E F I T S O F S TA N D A R D I Z AT I O N , D I N , 2 0 0 0
4
A P I S T R AT E G I C S TA N D A R D I Z AT I O N TA S K F O R C E R E P O R T, 2 0 0 3
5, 6
E C S S TA N D A R D I Z AT I O N R E P O R T, 1 9 9 5
7
API RBI USER GROUP MINUTES, OCTOBER 2000
8
E C S S TA N D A R D I Z AT I O N R E P O R T, 1 9 9 5
9
A P I S T R AT E G I C S TA N D A R D I Z AT I O N TA S K F O R C E R E P O R T, 2 0 0 3
10
N O B U S I N E S S A S U S U A L , A N E X T R A O R D I N A RY N O R T H S E A R E S U LT,
T. K N O T T, 1 9 9 6
11
S U B C O M M I T T E E O N VA LV E S C H A I R M A N ’ S R E P O R T T O T H E A P I C O M M I T T E E
O N R E F I N E RY E Q U I P M E N T, 2 0 0 0
ABOUT 80 PERCENT OF GLOBAL MERCHANDISE TRADE IS AFFECTED BY
S TA N D A R D S A N D B Y R E G U L AT I O N S T H AT E M B O D Y S TA N D A R D S .
“ T H E R O L E O F S TA N D A R D S I N T O D AY ’ S S O C I E T Y A N D I N T H E F U T U R E ”
R AY M O N D G . K A M M E R , D I R E C T O R , N AT I O N A L I N S T I T U T E O F S TA N D A R D S A N D T E C H N O L O G Y, T E C H N O L O G Y A D M I N I S T R AT I O N ,
D E PA R T M E N T O F C O M M E R C E , 2 0 0 0
T H E U S E O F S TA N D A R D S A L S O H A S A
Use of these standards results in reduced compliance
P R O N O U N C E D VA L U E F O R M A N U FA C T U R E R S
costs and improved reliability. One specific example of a
A S P I R I N G T O W O R L D M A R K E T S TAT U S .
standard used in place of government regulations is the
Safety and Environmental Management Program (SEMP).
In one case, a Russian oil field equipment manufacturer
The U.S. Minerals Management Service (MMS) issued a
reported that their export market had increased ten-fold
notice of intent to develop SEMP requirements for offshore
since converting to industry standard products under a
oil and gas operations. API, in response, produced API
12
globally recognized quality management system. They also
Recommended Practice 75, Safety and Environmental
reported that their non-conforming product rate dropped
Management Programs, and demonstrated to the MMS
from 10 to 12 percent to three to four percent during the
that offshore operators, who helped develop the documents,
same time period. In another case, a Chinese manufacturer
would voluntarily comply with these practices. The savings
13
reported a similar increase.
to the industry was conservatively estimated at $200 million
for the first year and $20 million a year thereafter. This
To quantify the benefits of standardization from the
perspective of improved industry reliability and reduced
regulatory burden, one needs to understand the role of
standards in regulation. In the United States, the National
Technology Transfer and Advancement Act (NTTAA)
requires that U.S. government agencies use consensus
standards whenever they meet their needs, and encourages
agency personnel to participate in their development.14 As a
result, many API standards are referenced in government
regulations. In fact, approximately 15 percent, or 100 of
API’s 600 standards, are referenced in the U.S. Code of
Federal Regulations (CFR) in over 270 separate regulations.
activity resulted in the 1994 Safety in Seas award.15
Use of standards by regulators in international waters
Furthermore, the goal was to replace NORSOK standards
has resulted in cost savings as well. In the North Sea,
with international standards as soon as possible. This
the Norwegian oil industry has developed some 80
effort has resulted in fewer company specifications, and
harmonized specifications, called NORSOK standards,
the Norwegian Petroleum Directorate (NPD) has reduced
freely available on the Internet. This work was started in
its regulations from over 1,200 pages to just 300 pages
1993 under the industry effort to enhance the Norwegian
through the use of referenced standards, including both
Continental Shelf Competitive Position. The goal was to
international and global standards such as API, IEC, ISO,
replace company specifications and detailed regulatory
and NACE.16
requirements and cut cost by up to 50 percent and project
completion time by up to 25 percent. These cost reductions
A final example of cost savings and improved industry
include savings from shortened project schedules and
reliability is the case of API Standard 19.2, Evaporative
refined engineering, along with capital and operating
Loss from Floating Roof Tanks, previously published as
cost savings.
API Standard 2517. Regulators in Louisiana and California
were considering strict requirements on emissions related
to slotted guide poles in large aboveground storage tanks.
The API committee responsible for this standard worked
closely with the industry and regulators and updated the
document, addressing emission factors for these guide
poles, thereby avoiding over $97 million in compliance
costs.17
12
F I R S T I N T E R N AT I O N A L C O N F E R E N C E O N A P I A N D R U S S I A N O I L I N D U S T RY,
TA C I S , F E B R U A RY 6 - 7 , 2 0 0 1 , M O S C O W, R U S S I A
13
API NETWORK CONFERENCE, MARCH 10-12, 2003, BEIJING, CHINA
14
N AT I O N A L T E C H N O L O G Y T R A N S F E R A N D A D VA N C E M E N T A C T O F 1 9 9 5 ,
PL 104-113
15
1 9 9 4 N AT I O N A L O C E A N I N D U S T R I E S A S S O C I AT I O N S A F E T Y I N S E A S
A WA R D , S P O N S O R E D B Y C O M PA S S P U B L I C AT I O N S
16
N O R G E W E B S I T E , W W W. S TA N D A R D . N O
17
P R O J E C T R E P O R T F O R 2 5 1 7 D , D O C U M E N TAT I O N F I L E F O R A P I S TA N D A R D
2517, EVAPORATIVE LOSS FROM EXTERNAL FLOATING ROOF TANKS
S TA N D A R D S A R E L I K E D N A ; T H E Y A R E T H E B A S I C B U I L D I N G B L O C K S
FOR ALL TECHNOLOGY AND ECONOMIC SYSTEMS.
D O N A L D E . P U R C E L L , C H A I R M A N , C E N T E R F O R G L O B A L S TA N D A R D S A N A LY S I S , 2 0 0 4
S E V E R A L O I L C O M PA N I E S H AV E C O N D U C T E D
A study by another global, integrated company concluded
I N T E R N A L S T U D I E S R E L AT E D T O T H E
it was necessary to streamline standardization activities
VA L U E O F PA RT I C I PAT I O N I N I N D U S T RY
and make more use of international standards. This study
S TA N D A R D I Z AT I O N .
recommended that much of the time and effort previously
invested in developing and maintaining internal company
In one study, an integrated, global company noted it is
standards should be redirected toward developing industry
difficult to predict in advance the return on investment from
standards that would be global in scope. In this way,
participating in industry standardization; however, a historical
duplication of effort was reduced. This company spent
perspective showed the benefits of standardization were
approximately seven man-years per year on industry
almost eight times the cost of developing the standards.
activities, and approximately 35 man-years per year on
Additionally, the company realized intangible benefits,
developing and maintaining internal company standards.
such as:
It was anticipated that a more focused approach to
4 Contacts with other companies’ experts to learn
from their experiences.
participating in industry-wide standards would result in
considerable savings by reducing the internal workload.19
4 Sharing “lessons learned” to prevent problems
before they occur.
4 Personnel development and technology transfer.18
18
ANSI AIF MINUTES, 2000
19
E C S S TA N D A R D I Z AT I O N R E P O R T, 1 9 9 5
Companies can realize many tangible and intangible
benefits from supporting industry standardization efforts.
API, through its industry committees, continually manages
its standardization process to meet the users’ needs for
standards that incorporate the best and most current
value-added practices. To meet this goal, however,
continued participation and support from both users
and manufacturers is required.
The best way for petroleum and related equipment
companies to be competitive in today’s environment of
continuous improvement with shrinking technical support
is by leveraging each company’s manpower through
industry standardization efforts.
After all, it’s a big world. Somebody has to standardize it.
Somebody like you.
This information was prepared by API’s Executive Committee
on Standardization of Oilfield Equipment and Materials
(ECS), the API Committee on Refinery Equipment (CRE)
and the API Committee on Petroleum Measurement (COPM)
in conjunction with API staff.
For more information, contact the API Standards Department
at [email protected].
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USA
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O T H E R C O U N T R I E S . P R I N T E D I N T H E U N I T E D S TAT E S O F A M E R I C A .
A P I G L O B A L C R E AT I V E : 2 0 1 2 - 3 2 8 | 0 1 . 1 4 | 1 5 0