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This transcript has been prepared by a source external to the Department of the Parliamentary Library.


It may not have been checked against the broadcast or in any other way. Freedom from error, omissions or misunderstandings cannot be guaranteed.


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Background Briefing

Sunday 28 October 2001

Oil pressure


Stephen Skinner: Access to secure supplies of fuel has been an issue in all wars for more than a century, and it's an issue again now. Australia's oil refining industry is in big financial trouble. Today on Radio National's Background Briefing the industry reveals it's just had its worst-ever year. It warns of the implications for defence and the wider economy if it doesn't start making money again.


And money's tight for investment in maximum safety too. The oil, gas and petrochemical industries as a whole are below world's best practice on this score. And State governments are way behind in forcing them to meet the highest standards on safety.


Hello, I'm Stephen Skinner.




It's industry day at this year's Sydney Motor Show and we're mingling with company executives, car dealers and prospective buyers in the Mercedes section. Beautiful cars shine while beautiful people serve champagne and hand out brochures on the latest SL model.


SOUNDUP "It's the story from the very beginning of the SL. The SL story. All the way to the new one which you will see being launched very very soon. Are you interested in the SL today?"

"In a different kind of way".


Stephen Skinner : Then comes the moment everyone's been waiting for - the official unveiling.


SOUNDUP "Ladies and gentlemen please welcome the stylish new Mercedes Benz SL".


On stage a silky-looking cover is slowly p ulled back to reveal a sleek new car. Model Christy Hinze is sitting in the passenger seat.


Christy checks her lippy in the rear view mirror then gets out. She's wearing a revealing evening dress and proceeds to drape herself over various parts of the car's anatomy. The mostly male audience is transfixed.


SOUNDUP "Ladies and gentlemen, please put your hands together for the lovely Miss Christy Hinze. To capture the essence of the style please join both Christy and myself on stage with the new Mercedes Benz SL."


Of course you can't run a car without petrol, and that's why Bryan Nye was at the Motor Show. Mr Nye is executive director of the Australian Institute of Petroleum, which represents the four major oil companies in Australia, and they're BP, Caltex, Mobil and Shell.


Bryan Nye has a got a tough job. Australians love cars, but they don't love petrol companies. Most motorists believe the oil companies are making huge profits at their expense. Petrol prices became a massive political issue when they hit a dollar a litre last year.


The oil companies are making good profits at the upstream end of their businesses; that is, getting the crude oil out of the ground and selling it. But the companies aren't making money downstream out of refining the oil in Australia and then selling the petrol, diesel and aviation fuel the nation depends on. Bryan Nye revealed to Radio National's Background Briefing new figures showing that Australia's eight oil refineries lost $184 million between them last year. It's the worst position the companies have ever been in.


Bryan Nye : Well the big four refiners and marketers at the moment in the downstream area are in quite a crisis situation financially. The return they're getting on their capital investment is 0.07% which is less than the bond rate and is unsustainable. So we're in quite a crisis situation across the industry.


Stephen Skinner : You might elaborate on what that figure means.


Bryan Nye : Well what it means is the actual refining industry across the eight refineries in Australia are all operating at a loss. And the reason they're operating at a loss is that they're competing with Asian refineries who have excess capacity of petroleum liquids, importing it into Australia. And as well the hyper competition in the market place between petrol stations in different outlets means there is very low returns in the marketing as well. So overall the industry is operating at a loss.


Stephen Skinner : Bryan Nye from the Institute of Petroleum. His revelations will be a surprise to many motorists who think they're being ripped off by rich oil companies. But nearly all the petrol price is the cost of crude oil plus tax.


Bryan Nye : The clear facts are that we have the cheapest petrol in the OECD world, pre-tax. Even our taxes are lower. So apart from the USA we have the cheapest petrol in the world, in the developed world. There are places that might have cheaper petrol such as Libya and that, but who wants to go and live there. I mean the issue is we have very cheap petrol and the consumer in Australia benefits by this intense competition. How long it can last, that's a good question.


Stephen Skinner : There hasn't been much incentive to invest in Australia's oil refineries for a long time. And that's because they're very old and small by world standards; the Competition Commission takes a hard line on mergers; the companies are only allowed to control a few of the service stations they supply; and independent petrol importers like Woolworths have fueled the price wars.


For years it's been expected that two of the refineries would close or merge. But it can cost more to close a refinery than to keep it open - on things like cleaning up contaminated soil.


The latest slug to hit the industry is new standards to make petrol and diesel cleaner. It will cost the companies more than a billion dollars between them to upgrade the refineries to meet the new standards. But Bryan Nye says there's no guarantee all the companies will be prepared to spend the money.


Bryan Nye : The question is whether all the companies will actually make that investment, and if they don't we could see some refineries close. There has been a debate, and it's quite genuine debate, that we probably have one or two too many refineries in Australia. But if we end up closing two too many, then we really have a problem with supply.


Stephen Skinner : So if we close two too many, you mean if we close four of the eight, what are the implications of that?


Bryan Nye : Well if we closed four of the eight then Australia would have to rely quite heavily on imported fuel out of the Asian region, and we'd then be at the beck and call of the market place in Asia. And the other issues that really come to mind, and very focused on that, is the security of supply. The arc of instability to our north means that our fuel comes through what is not regarded as very safe waters.


Stephen Skinner : What if only two refineries close, as seems inevitable sooner or later?


Bryan Nye : Once two refineries close we will still have to have imported fuels. I mean there will be less capacity in Australia than actual demand being met. Demand is increasing and you can't increase the refinery capacity in Australia. So we will have to rely on imports, and that's something that the Australian market place has not seen yet.


Stephen Skinner : Potential supply problems for the wider economy is one thing, but supply problems for the fuel guzzling Defence Force is a bigger worry. Bryan Nye.


Bryan Nye : The current crisis in refinery margins could lead to a lack of investment in Australian refineries and some closures of Australian refineries. If that did occur -- and that was a worse case scenario -- the implications for defence would be quite severe. And I think the government really needs to carefully look at that because if it didn't, it could end up with the market place moving off to close refineries and there would not be enough indigenous supply to provide enough for not only the population, but defence, the industry in Australia, without sizable imports.


Stephen Skinner : Bryan Nye isn't just doing his job of lobbying on behalf of the fuel industry. For a start he knows a lot about the Defence Force, as a former Navy Captain. And secondly the Defence Force itself acknowledges a big problem if refineries close. Here's a reading from a Defence working paper written early last year and available on the Internet. It's referring to fuel supply.


ADF READING "The possible reduction in domestic refinery as a result of competitive pressure from Asian markets may have a dramatic effect on Defence's vulnerability in this area. Reliance on overseas supplies may delay ADF response or sustainment during periods of mobilisation.".


Stephen Skinner : Elsewhere the report says this:


ADF READING "A domestic refining industry ensures the shortest possible supply chain for the petroleum products in Australia. Supply sources outside of Australia may not attach the same priority or importance to meeting our demand, particularly if supplies are disrupted".


Stephen Skinner : Readings from a Defence Force paper on fuel supply.


Bryan Nye says neither the Defence Force nor the government has discussed with him contingency plans should refineries close.


Bryan Nye : There has not been that dialogue yet. We'd welcome that dialogue because we think the debate must go on now. We must get into more of a public forum the issues that are facing the industry and the consequences, not only to Defence but for the whole general public as well.


Stephen Skinner : And what sort of specific items would you expect that you'd need to talk with them about?


Bryan Nye : Well some of the things is the establishment if refineries do close, that we need tankage for strategic reserves -- where would they go; the location of refineries if certain refineries closed -- how would that would impact on supply lines, where would they get their fuel from, how would it be delivered and the infrastructure required. They're all things that need to be carefully discussed.


Stephen Skinner : But they haven't been discussed with you?


Bryan Nye : No they haven't been and that's something we'd welcome in the future.


Stephen Skinner : Because what potentially could be the effect on our Defence Force of having the reliability and sustainability of fuel such as diesel and jet fuel wound back?


Bryan Nye : Well I think the sustainability in areas such as the North West of Australia, where the supply lines are very long, if you didn't have a refinery in Western Australia, the nearest refinery is in Adelaide or in Brisbane, and they're very long supply lines. How would you get the strategic reserves there? And how would you get the fuel there?


Stephen Skinner : What's your answer to that?


Bryan Nye : I think we need to do a lot more work on that and actually have some logistic plans and discussions of how we would achieve those objectives.


Stephen Skinner : Director of the Australian Institute of Petroleum, Bryan Nye.


The head of the Defence Force's National Support Unit told Background Briefing that the Defence Force will be consulting with Mr Nye about these serious refinery supply issues.


But the Defence Force wouldn't talk to us about security for the refineries. Refineries are obvious potential terrorist targets. People would be killed and industry disrupted. But it's impossible to guarantee security at Australia's oil installations and petrochemical plants. They can cover vast areas of land close to public roads, with lots of lonely fenceline. There's been a recent security scare in Australia at Shell's Clyde refinery in Western Sydney.




That's the roar of the Shell refinery from the fenceline. Earlier this month it was reported that police were investigating an incident where two suspicious characters had tried to get into the Clyde refinery. Background Briefing has independent confirmation of this incident. Another suspicious pair had previously been seen photographing valves and pipes linked to Shell's crude oil terminal on Sydney Harbour. The Police Service said they could not comment.


But never mind the risk of sabotage -- there's enough risk of serious incidents in the oil, gas and petrochemical industries at the best of times. Internationally the worse case has been Britain's Piper Alpha oil rig disaster in the North Sea in 1988. Explosions and fire killed 167 people.


Australia's had its share of serious incidents over the past decade. They include a big oil spill from a ship at the Shell terminal on Sydney Harb our; fire fighting equipment found to be unworkable at Shell's refinery in Geelong; a big oil spill from Mobil's refinery in Adelaide; the tanker Kirki losing its bow and 17,000 tonnes of oil off the West Australian coast; the massive explosion of a Boral LPG tank in Sydney; a big fire at the Caltex oil refinery in Sydney last year; a worker being killed by an explosion at the Moomba gasfield earlier this year; and of course the explosion at Esso's Longford gas plant in Victoria, which killed two men, injured eight and cut off Victoria's gas supply for a fortnight.


And just over ten years ago half a dozen tanks of the petrochemical product benzene blew up on Coode Island in Melbourne.


PAUL MURPHY "PM" SOUNDUP "Major chemical explosions rocked the inner suburbs earlier this afternoon as a chemical storage depot went up in flames. A cocktail of substances is now burning from several storage containers, but fire authorities say the blaze is well under control. However the fire has caused enormous anger within the Melbourne community."

TRUCKIE SOUNDUP "I heard an explosion, the truck rumbled a bit and I looked around and seen this flame. And we all just dived out of our truck and just bolted. Turned around and seen one of the tanks shoot up in the air about 50 odd metres."


Stephen Skinner : Coode Island was the catalyst for the State and Federal governments to get together and come up with a national standard for safety. The standard was finished way back in 1996. Its main feature is what's called the safety case. And under the safety case, dangerous operations have to prove they're doing everything they possibly can to prevent disasters happening before they can be granted a license to operate. The process includes a thorough risk analysis of all potential hazards.


But now, five years later, only one state, Victoria, has brought in safety case laws for existing plants based on the standard. Queensland is close to enacting safety case legislation. But laws haven't been brought in for NSW, South Australia, Western Australia, Tasmania, the ACT or Northern Territory. And the Federal government hasn't brought them in for defence facilities either.


Barry Durham chairs the Working Group on Major Hazard Facilities, advising state and federal governments. He says we're looking at 2006 until safety case legislation is fully implemented across Australia -- a full 15 years after work first began on the issue. This is an unacceptably slow state of affairs, says Barry Durham:


Barry Durham: : I wouldn't defend the pace of change in this area, other than to say that it's an area that does require significant technical expertise, and there's very little of that expertise in the country. Certainly the regulators have a great deal of difficulty in getting the sorts of people they need. For example the Victorians had to recruit both from the US and the UK as part of building their team, and that was largely because they couldn't get the sorts of skills they needed within Australia.


Stephen Skinner : Well overall how would you describe the pace of progress -- the pace or otherwise of progress?


Barry Durham : Oh you put your finger on it, the pace has been very slow. It's always dangerous to speculate on when an incident might or might not occur. But on the upside there have been very few serious incidents. On the downside the risk still sits there, and I think the regulators generally across the country are unanimous in their view that both they and industry have to do better.


Stephen Skinner : Barry Durham, Chair of the National Working Group on Major Hazard Facilities.


In Melbourne's west, steam hisses from a pipe behind a fence near a busy road.




On both sides of Maidstone Road at Altona is the Qenos petrochemical complex. Qenos takes oil and gas feedstocks from the Mobil refinery and the Longford gas plant and turns them into all sorts of plastic and rubber products. The company is half owned by the world's biggest oil company, Exxon-Mobil. The other half is owned by Orica. There are four large plants here - Qenos resins, plastics, elastomers and olefins.


I walk over to the fence near the hissing pipe:


I'm standing at the front of a gate at the Qenos olefins plant and the gate's wide open. There's a sign on one side saying Warning: High Pressure Gas Pipeline, Qenos Pty Limited - in an emergency contact … a particular phone number. The sign that I'm standing in front of here says Danger: Do Not Enter. This is a hazardous site. Unauthorised entry is forbidden. If you enter without an authorisation you may expose yourself to potential dangers and risk to life.


Now despite that quite stern warning, the gate's wide open and absolutely anybody could wander in if they wanted to. The fence is reasonably solid with barbed wire at the top, but that's not much good if the gate is open.


In a statement to Background Briefing, Qenos said the gate could have been left open by a variety of people with access to a key from Qenos security -- rabbit cullers; firemen doing training; pipeline inspectors and so on. The statement says that the gate only leads to a pipe laneway, not to the facilities themselves.


The Qenos plant has a belching problem, with what are called pressure release valves. These valves let gas and vapour escape from the plant when too much pressure builds up in the system.


A pressure release is better than an explosion. Most of the pressure releases are steam. But some of them are various sorts of hydrocarbon gases. Two years ago there were 200 pressure releases. The figure is averaging at about 45 a year now, but that's still a long way short of the company's target of just one per year.


Sometimes pressure releases of gases can be smelt by residents nearby.




Nessie Hardy moved into her modest weatherboard home two kilometres away from Qenos the same year the plant moved in - forty years ago. She says there are a lot less smells these days, but still enough to be concerned about.


Nessie Hardy : I think there are people who are more sensitive to different chemicals than other people, and pregnant women, babies, that sort of thing. I'd rather have the sea breezes, which is what we do get, we get a nice southerly. When the southerly is blowing, everything is fine. Sometimes when the northerly is blowing, it's not.


Stephen Skinner : Nessie Hardy, who is on the Altona Petrochemical Complex Neighbourhood Consultative Group. Two years ago one of the breezes she talks about brought a sinister new, fuel-like smell to many residents at Altona. Five tonnes of butadiene gas had escaped from the Qenos plant. Butadiene is a highly flammable gas made from petroleum, and it's used to make the sort of synthetic rubber that goes into tyres. Lower exposures can irritate the eyes, nose and throat. Higher exposures cause birth defects in laboratory animals, and have the potential to cause cancer in humans. Nessie Hardy had thought the Qenos plant was really lifting its game until the butadiene leak.


Nessie Hardy : Yes that was very poor. I was really upset about that because they should have done better basically. We've been working with them for 12 years now, talking to them, trying to convince them it was really important to look after us, and to look after their own workers too. Workers that are canaries in the mine. And then they go and do something like that, that was extremely dangerous. So they have promised to fix that up and that's another thing that they've sort of realised cannot be allowed to happen again. We're just worried about what's going to happen next, often. You know, it's always something new, that they haven't thought would happen.


Stephen Skinner : Nessie Hardy.


The Victorian Environment Protection Authority took Qenos to court over the butadiene release, and the court placed Qenos on a two year good behaviour bond. The EPA says the residents' exposure would not have been enough to cause serious health problems. The Qenos community relations officer told Background Briefing that the plant has just now, two years later, been changed so that any pressure release of butadiene would be burnt off in the flare rather than just escaping into the atmosphere.


Qenos half-owner Exxon Mobil made more than 20 billion dollars profit worldwide last year. But Qenos itself is struggling financially, like the rest of the petrochemical sector as a whole. It's a similar story to the oil refineries: a lack of investment in plants which are old and small by world standards, and which no longer enjoy tariff protection from increasing Asian imports.


The peak body for petrochemicals is the Plastics & Chemicals Industry A ssociation. Executive Director is Martin Jones. Mr Jones says the severe economic pressures in the industry do not mean that safety and the environment are being compromised. He says the industry target is no leaks, spills or fires.


Martin Jones : The target for the industry is 100% containment every day in every way, and that's the goal.


Stephen Skinner : What does that mean?


Martin Jones : That means that the ultimate goal is that we have no unexpected events.


Stephen Skinner : Well in terms of those specific goals, how are we compared to the rest of the world?


Martin Jones : I haven't got specific measures for the rest of the world, but we do measure our own performance and the top companies, well the majority of the industry, is continuing to improve.


Stephen Skinner : Martin Jones of the Plastics and Chemicals Industry Association.


A few kilometres east of the Qenos plant is the Yarra River. Children fish with their grandfather off a pier under the Westgate bridge near Port Phillip Bay.


A couple of hundred metres away is the Mobil Yarraville fuel storage, fully owned by the same company which half-owns Qenos - Exxon Mobil. The Yarraville Mobil terminal supplies the majority of Victoria's petrol, diesel and aviation fuel.


In the early hours of July 5 this year about four thousand litres of petrol spilled into the Yarra as it was being loaded on to a Mobil petrol tanker, the Tasman. Nearby resident Luke Molan was woken by the stench of petrol fumes.


Luke Molan : I actually was woken up because the smell was so strong. I'm about a kilometre and a half away and yeah it was so strong that it woke me up, and the whole house permeated with the smell of petrol, and that extended all the way down to Newport. Because the smell was stuck inside, you went outside and the smell of petrol was there as well, so you couldn't escape it.


Stephen Skinner : So thousands of people were affected by it?


Luke Molan : It's hard to say, there were certainly a lot of reports of people with headaches. Not everyone suffered the same effects. I guess some people are more susceptible to petrol fumes, but I know I certainly felt headaches as a result of it and I know other people who did.


Stephen Skinner : The unleaded petrol formed a slick three kilometres long. Most of it evaporated through the day and no one was injured. But if various factors had all gone the wrong way, things could have been much worse. Luke Molan again.


Luke Molan : In terms of safety it was scary because there was hundreds or thousands of litres of unleaded petrol just sitting on the surface of the Yarra here. And it was so volatile that they weren't actually able to deploy boats to contain the spill or even to control boat traffic. So potentially if small boats had have been going through, and say somebody threw a cigarette butt, the whole thing could have gone up.


Stephen Skinner : And obviously it's lucky that it happened early in the morning.


Luke Molan : Yeah it was lucky it did happen early in the morning, and the other thing is, it was a weekday. But on weekends there's a lot of boat traffic through here - even today you can see we've seen a couple of ferries go past. There's boats going back and forth.


Stephen Skinner : And there's the culprit ship as we speak, docked there. Exactly what happened? What went wrong?


Luke Molan : What we're told went wrong was that they started loading the ship with unleaded petrol. At the same time they were discharging ballast water, which is normal practice. However the tank was ruptured, the fuel tank was ruptured where they were putting the fuel into, and that sits on top of the ballast water. So what was happening is that fuel was going into the ballast water and then getting pumped out into the Yarra River.


Stephen Skinner : Mobil says the normally routine loading operation was being watched by staff on both the deck of the ship and on the dock. But things still went wrong. Mobil spokesman Alan Bailey says the company has now improved its monitoring.


Alan Bailey : We have upgraded our de-ballasting monitoring procedures at Holden Dock and at other ports in response to this. We now have procedures in place to go beyond the normal international standards.


Stephen Skinner : Such as?


Alan Bailey : Well we've just installed facilities to check for the presence of hydrocarbon in the ballast system, and we will be carrying out more regular visual checks during deballasting operations.


Stephen Skinner : Mobil's Alan Bailey.


The spill is still being investigated by the Victorian EPA. Mobil says it's following all the minimum legal requirements at its Yarraville fuel operation. Radio National's Background Briefing asked Mobil if it goes further, by having security cameras and motion monitors on the Yarraville boundary fences And we asked Mobil if it is blanketing fuel tanks in nitrogen to help prevent them catching fire. But despite a week's notice of these technical queries, the company did not have answers. Alan Bailey.


Alan Bailey : I haven't got all the details about every individual aspect of the operations there Steve, but what I can say is that in all aspects of our operations in all our sites, we fully comply with all relevant regulations and requirements of the licensing authorities and engineering standards. So if those standards call for all of those sorts of things, then we would certainly be complying with them.


Stephen Skinner : Well why wouldn't you go those few extra yards to be world's best practice?


Alan Bailey : Well I'm not sure what world's best practice necessarily means in that regard. Where does one draw the line? I think what we do is we say we conform fully with the requirements of the regulatory authorities and with appropriate engineering standards.


Stephen Skinner : Mobil spokesman Alan Bailey.


Two years ago Mobil merged with fellow American oil giant Exxon, to form Exxon-Mobil.


It was the Exxon Valdez which ran aground on the Alaskan coast in 1989 spillin g 40 million litres of crude oil. After the Exxon Valdes disaster the United States brought in a law stipulating that oil tankers operating in US waters all have to be double-hulled by 2015. At present if they are only single-hulled they can be no more than 14 years old.


But there are no such laws in Australia, despite the fact that 100 oil tankers a year ply the narrow passes of the Great Barrier Reef. The Australian Bureau of Transport Economics estimates that there is an 80% chance of a major spill there in the next twenty years.


Mobil spokesman Alan Bailey says a mixture of tanker types are used in Australia.


Alan Bailey : We use vessels that comply fully with all international and domestic requirements and moreover we use vessels which are subjected to a very comprehensive and intensive pre-assessment process which has been instituted by our global shipping company. So we use ships which are suitable for the task.. Whether they're single-hulled or double-hulled is not necessarily a criteria.


Stephen Skinner : Mobil spokesman Alan Bailey.




Stephen Skinner : Exxon-Mobil has had some bad PR in Australia in recent years. First there was the explosion three years ago at its Esso subsidiary at Longford. Esso tried to blame workers for the disaster, but earlier this year a Judge found the company was to blame and fined it two million dollars.


Then there was the Mobil AVGAS fuel contamination debacle two years ago. Much of Australia's small aviation industry was grounded for weeks.


But more recently Exxon-Mobil has been the target of an international environmental campaign over its opposition to the Kyoto Protocol. The company is out of step even with other oil companies on the greenhouse debate. Here's a reading from the official Mobil website.


READING FROM EXXON WEBSITE "The public has become concerned about the wide range of views on the issue and by some upper end projections that show serious future effects from changing climate. However such projections are based on completely unproven climate models or more often on sheer speculation without a reliable scientific basis.

We do not believe that the current scientific understanding justifies mandatory restrictions on the use of fossil fuels and we are certain that large economic harm would result from reducing fuel availability to consumers by the adoption of the Kyoto Protocol or other mandatory measures."


Stephen Skinner : That claim doesn't wash with the CSIRO's division of atmospheric research. Despite it being very much a minority view, eight high schools around the Mobil refineries in Melbourne and Adelaide are referring their students to the website. That's because the Mobil site is one of the resource materials for an educational program called Refining the Future, developed in conjunction with the schools. It's good PR for Mobil, and the relationship with the company is good for cash-strapped schools.


Bayside Secondary College at Altona has received more than $80,000 from Mobil over the past eight years. One of its campuses is just a kilometre from the Altona Oil Refinery fence. The school is grateful for the help. On the phone, principal Michael Kerin :


Michael Kerin : It's just a wonderful difference in the sense that it provides the sorts of money, if you like, and hardware and support -- the extra little bit that's hard to get. We get a school global budget if you like that pays for a whole range of things from maintenance to staffing. But to provide the extra bit is very difficult in the public system. And to have a company or an organisation come forth with either a program, or some money, or a way of doing things, just puts the icing on the cake for public schooling.


Stephen Skinner : But Mr Kerin didn't want to comment on what he thinks of the science behind Exxon's claims.


Michael Kerin : As far as I am concerned it's not my business. My business here is to run and organise our college, which we do as a team. And if I can get community support in any way at all to help us do that, then I certainly will try to do that. And so that's my job, not to comment on their policy.


Stephen Skinner : Michael Kerin, principal of Bayside Secondary College in Melbourne.


The nearby Altona Mobil oil refinery is going through its 'safety case' now as part of the new Victorian legislation. The National Union of Workers says it is satisfied with safety at the refinery.


One of the world's best practice ways that a company can prove its 'safety case' is to do what's called a HAZOP. That stands for Hazard and Operability Study. HAZOPs are expensive and they take a team of people months to do. They pore over processes and equipment, working out all the potential hazards - all the things that can go wrong in a worst-case scenario.


Exxon in the US recommended that its Esso subsidiary in Australia do a HAZOP on the Longford gas unit in 1996, but it never happened - with fatal consequences. Safety expert Barry Durham:


Barry Durham: It's well documented in the report of the Royal Commission into Longford that Esso had failed to undertake a HAZOP on gas plant one, which was the one that blew up. And a lot of professional opinion is of the view that had a proper HAZOP been conducted there, then that very serious incident wouldn't have occurred.


Stephen Skinner : Exxon-Mobil is now doing HAZOPs at Longford as part of its safety case there. It's also doing HAZOPs -- or the hazard studies -- at the Altona refinery and at the Yarraville fuel storage. But Mobil spokesman Alan Bailey says HAZOPs are not being done at all the company's operations elsewhere in Australia.


Alan Bailey : To the extent that the regulations will require it we're certainly learning from what we're doing at Altona and Yarraville, and where it's appropriate we will be applying similar approaches in other locations. My expectation is that similar regulations will before very much longer become the norm for other states anyway.


Stephen Skinner : Mobil spokesman Alan Bailey.


Safety case legislation, with its cutting-edge tools such as HAZOPs, has not been implemented for existing major hazard facilities in NSW.


At the Caltex oil refinery on the Kurnell peninsula at the mouth of Botany Bay in Sydney, contract maintenance workers knock off after the day shift.




Of course oil refineries and fires don't mix. But last year Caltex Kurnell had 18 fires, two of them serious enough to need the outside fire brigade to attend. One of the fires flamed 20 metres into the air forcing Sydney Airport on the other side of Botany Bay to stop planes flying over the refinery.


Background Briefing has staff newsletters and some internal company documents from Caltex. They show t hat also at the Kurnell refinery last year there were about 200 equipment failures - most of them minor - and 24 medically treated injuries. One man was sprayed with sulphur. It's lucky more workers weren't injured because twice, lumps of concrete broke off buildings and fell onto walkways.


Barry Durham says that generally-speaking, these sorts of incidents are cause for concern.


Barry Durham : Every one of those comparatively minor incidents is a potential major incident. If you take for example the Longford explosion, that was the culmination of a long series of minor incidents. And they all came together into what was quite a catastrophic outcome. So one of the things that the regulators certainly look for is a plant that operates within its planned parameters, that doesn't have a series of those sorts of seemingly minor incidents.


Stephen Skinner : And we're not there in Australia yet obviously?


Barry Durham : No, but I think we're also not far away from being as good as anywhere in the world. It's a matter of getting better to the point where you can be confident that you're not going to get a major incident.


Stephen Skinner : Safety expert Barry Durham.


Caltex has also had its problems in Victoria. Last year there were three major spills at its Newport fuel terminal on the Yarra River. The worst incident was a spill of 300 thousand litres of diesel in September last year. The main problem with the spills and overflows is the risk of fuel getting down into the soil and groundwater. A plug of old groundwater pollution is just about to seep into the Yarra. The ideal way to prevent new contamination is to lay sealed concrete on the ground between the tanks and their protective levee banks a few metres away. But Caltex isn't doing this because it's not required by law for old tanks.


Caltex spokesman Richard Beattie says the ground outside the Newport tanks is impermeable clay, which meets the current EPA requirements. He says that in response to the spills, the company has begun a program of installing high-level alarms on all its fuel tanks around the country.


In Sydney at Caltex's Kurnell oil refinery a team of international experts came up with a report earlier this year on all aspects of the refinery's operations. Some of the recommendations require capital spending. But others involve better industrial relations, multi-skilling of staff and fewer staff. Caltex spokesman Richard Beattie:


Richard Beattie : What we're looking to achieve is a competitive workforce, one that for instance has a level of manning and a level of labour costs that are able to be reconciled with the sorts of numbers of people that are working in our competitor refineries. Don't forget that there are no tariffs, there's no protection for petroleum products. So anything made in Singapore or Thailand can very readily be brought down into Perth or Sydney. So we have to be competitive.


But the other important thing is that you've got to operate these places as safely as possible and an excessive number of people working in a refinery is not necessarily the safest way to operate. It's a bit like when you've got driver training underway and you've got two people in control of the vehicle. It's not really as safe as having one in control of the vehicle -- the other can imagine that the alternative driver is going to take the necessary action. So you can think of the same sort of thing in a refinery. It's best to have an optimum number of people with the best modern control equipment to ensure that it's both safe, environmentally no risks will be taken, and it's economically sound.


Stephen Skinner : Caltex spokesman Richard Beattie.


Mr Beattie says Caltex is not doing HAZOP risk assessments throughout its facilities in states other than Victoria because it doesn't have to.


The Australian Workers Union has members in many oil refineries and petrochemical plants around the country. Director of occupational health and safety for the union is Yossi Berger. Mr Berger is a straight talker, and a warning to sensitive listeners that he uses some colourful language.


Mr Berge r says the big job cutbacks in many oil and petrochemical plants in recent years have led to more dangerous plants. He says that with less workers there's less of what he terms P.O.T.A. or "POTA".


Yossi Berger: POTA stands for phenomenology of twitching arseholes, and essentially the idea came to me from a worker who saved his life at the Longford explosion. And when I asked him a couple of days later how he did that, was it the health and safety system; was it the OIMS -- the operations integrity management system -- was it anything like paperwork or matrices? He looked down at his boots and he said, 'it was my arsehole that saved me. It was my twitching sphincter that alerted me to the fact that there were problems going on there'.


I thought at first he was joking, but he was not. And I have since learned with many workers they have a knowledge - a sense of disaster, a sense of failures, which you could say is creeping skin or your hair is standing on end or warbles in the chemicals , or if you are a woman you might say you felt it in your waters. But essentially it means some form of intuitive or tacit knowledge, not unlike tip of the tongue phenomenon, where you don't know what the word is, but you know that you know the word, but you don't even know how you know the word. That's what I mean by phenomenology of twitching arseholes, or POTA, to try and divert company's attention -- and health and safety directors in these companies' attention -- away from paper work and so-called benchmark paper work, to what really matters. And in this case to make it a bit dramatic, I'm asking them to attend to workers' sphincters.


Stephen Skinner : You believe that nothing can replace humans, no machine can do as good a job as a human in lots of cases?


Yossi Berger : Certainly at the moment I haven't seen any machine or instrument or scale or matrix that can replace what I call colloquially workers' sphincters. I have not seen anything that's as sensitive as workers' intuitions. When a worker says to me with a dark look in his eye, that the pump over there is making a strange whumping sound which indicates that we've got problems, I don't know of any machine that's been invented that can tell you 'pump making whoomping sound'.


Stephen Skinner : Yossi Berger of the Australian Workers Union. He says that part of the job-shedding at many plants has been in permanent maintenance workers.


Yossi Berger: We have in many many areas where maintenance has been down by 50% as it was at Longford Victoria, where it went from about 90 to 40 - that was a 50% drop. And certainly workers there argue, today they still argue, that had there been enough workers they may have picked those early signs. I guess what they are saying is that two sphincters are better than one, and the more you have the more likelihood there is of picking it up. And in the process of cutting back, cutting back the numbers, cutting back in people on the ground, you are cutting back maintenance and therefore you will become as a manager, you will become opportunistic, where you will do things only as you have to, and you will call it priorities.


Stephen Skinner : Yossi Berger from the Australian Workers Union.


Andrew Hopkins is an academic at the Australian National University. He's written a book called The Lessons from Longford.


Andrew Hopkins: Well I think the petroleum industry is very focused on safety, but they tend sometimes to not have a clear enough idea of what's involved in safety. I think one of the problems with Esso at Longford was they were focused on safety in relation to the sort of things that can cause relatively minor injuries to the workforce, and they were very, very good at managing those kinds of things. They're called lost time injuries. Any kind of event that can cause someone to take at least a day off work is called a lost time injury. And they were very, very good at managing those kinds of things.


But partly I suppose because they hadn't had any kind of catastrophic event there for a long period of time, they had become complacent with respect to the management of those major kinds of hazards. So I think one of the lessons of Longford is the importance of refocusing on major hazards. And I think a lot of industries in this country have learnt that lesson and are trying very hard to refocus their efforts on major hazards.


The problem with major hazards is that they don't generate catastrophes for decades, and so it's very easy to become complacent about them.


Stephen Skinner : Mr Hopkins laments the cutbacks in experienced staff in the oil and gas industry, including engineers. He says plants need to be staffed for emergencies.


Andrew Hopkins: What happened in particular at Longford was the removal of engineers, professional people who'd been on site and who played a very important kind of back-up role. They were to some extent redundant in that in the normal course of events their skills wouldn't necessarily be called upon. But when things start to go wrong it's very important to have those professional people there who can assist the operators and bring insights to bear which the operators don't necessarily have.


Now because they were seen to be to an extent redundant, Esso had removed them back in 1992 as a cost-cutting measure. And that's a pressure which all of industry is under. So that's a very important lesson that you really need to be prepared to put up wi th some kind of staffing redundancy, particularly of professionals.


Some petroleum companies have learnt that lesson and have kept their engineers on site. Some have not. So it really is a mixed response I think.


Stephen Skinner : Andrew Hopkins from the Australian National University.


His concern about engineering staff is shared by the Australian Institution of Engineers. An Institution report about to be released says that industry hasn't learnt as much as it could and should have from the Longford tragedy. One of its recommendations is that all major hazard facilities throughout Australia should do HAZOP risk assessments.


Bryan Nye from the Institute of Petroleum insists that the financial problems in the oil industry are not impacting on safety and the environment. He says staff cutbacks are not at a dangerous level.


Bryan Nye : I think that's certainly not the case. The companies would genuinely say, and evidence is there to support that they are not taking shortcuts on safety. They're very sensitive of that, from the highest corporate levels, that safety is incredibly important. It is true that they're using technology to optimise the operations of the refinery. And where they can use technology to replace personnel they will certainly do that. But they must prove that technology and check that technology before it is implemented. So I think it is important to note that the Australian refineries benchmark their safety practices against international standards, as well as other refineries in their own companies. And any evidence would show that the Australian refineries mightn't be the best in the world, but they're certainly nowhere near the bottom, they're ranking in the higher order across the eight refineries in Australia on their safety records.


Stephen Skinner : Given the state of world affairs against which these domestic issues are being argued, it's as well to remember that there's another threat facing oil installations.


Bryan Nye : Well since recent world events every one of the oil companies has been extremely aware and have increased their awareness of the need to be more security (minded). They have all put in place more vigilant measures to make sure that their refineries are secure. And I'm not going to go through what those measures are, but they are very aware of the need to be more vigilant and they have put quite strong security measures in place.




Background Briefing's co-ordinating producer is Linda McGinness; technical operator Mark Don; research and additional interviews Katrina Bolton; our executive producer is Kirsten Garrett; I'm Stephen Skinner and you're with Radio National.