ABSTRACT
Recent events in the oil and gas industry have raised concerns regarding the level of safety of petroleum activities, in particular in relation to offshore drilling operations. We examine whether stress testing, suitably implemented, can be a useful tool to further enhance the safety level of these activities. Analogously, following the 2011 earthquake in Japan the European Commission requested all nuclear power plants in Europe to undergo a stress test to verify that they comply with the highest safety standards. Such tests were also applied in the financial sector following the recent economic crisis to test the robustness of banks in the event of an extreme adverse economic scenario. Drawing on some lessons from other industries, this paper examines some of the challenges and limitations of stress testing, and discusses some of the potential benefits, and how these tests could be related to existing risk assessment and management practices in the oil and gas industry.
