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Address to the APPEA Oil and Gas Safety Conference, Perth.



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Address to the Appea Oil and Gas Safety Conference

Martin Ferguson posted Wednesday, 11 August 2010

Good morning Ladies and Gentlemen. Thank you for the opportunity to once again address the APPEA oil and gas safety conference.

The excellent attendance at this conference confirms the industry’s commitment to improving occupational health and safety standards - a commitment of central importance in the context of the major events of the past 12 months.

The blowout on the Deepwater Horizon rig in the Gulf of Mexico on April 20 this year resulted in the tragic loss of 11 lives. Seventeen others were injured. It also resulted in the largest oil spill in the history of the offshore petroleum industry.

The environmental, social and economic impacts of this disaster are still unknown, as are the regulatory implications. The event has seized headlines around the world, generating fear and deep concern on the part of governments, the community and the industry at large.

There is no more powerful reminder of just how dangerous this industry can be and of the constant vigilance and continuous improvements that are needed to maintain the safety of workers, facilities and the environment.

The Department of Resources, Energy and Tourism has been working closely with its counterparts in the United States to share information and learnings both from this incident and from our own well blowout incident at Montara last year, and will continue to do so.

It was only days after last year’s conference, on 21 August, that the uncontrolled hydrocarbon release from the Montara wellhead platform commenced. This major incident followed a pipeline rupture on Varanus Island just over a year earlier, also a major uncontrolled hydrocarbon release that interrupted Western Australia’s gas supplies for several months.

Fortunately, neither of these incidents resulted in loss of life.

In the case of Montara, all 69 personnel on board were evacuated safely, but it was not until 3 November that the uncontrolled release of oil and gas was stopped. The incident lasted for a total of 74 days, but the ramifications will be felt for much longer.

If we are to avoid similar incidents in the future it is imperative that there be an objective examination - by governments, by operators and their employees, by contractors and by regulators - of all of the factors that contributed to the incidents.

That is why I moved amendments to the offshore petroleum legislation to allow an independent Commission of Inquiry to be established to examine the likely causes of Montara.

I received the Inquiry report on 18 June 2010 and the process of obtaining appropriate advice and concluding proper Government consideration of the report is continuing.

As I have always said, I am committed to releasing the report publicly when these due diligence processes have been completed, just as I have released previous reports on the Varanus Island incident and the two maritime safety incidents that occurred in December 2008. I note that the Western Australian Government is yet to make available its report on the Varanus Island incident and I hope that will be forthcoming in the not too distant future.

While we are completing consideration of the Montara report, there are two pressing issues on which I have taken immediate action.

The first relates to PTTEP Australasia’s continuing operations in light of evidence presented to the Commission that indicated serious shortcomings on the company’s part.

PTTEP Australasia’s parent PTTEP has provided the Government with an action plan to comprehensively deal with those shortcomings.

This plan details how PTTEP proposes to ensure PTTEP Australasia’s ongoing operations and management conform with industry best practice and fully leverage the resources, experience and capabilities of its parent company.

I have directed my Department to commission an independent review of PTTEP’s action plan and report back to me on how it measures up to industry standards. Importantly, the review will also assess the progress being made to fully implement the Action Plan and ensure that all necessary measures have been taken to prevent any future incident like Montara.

The outcome of this review will be central to PTTEP Australasia’s ongoing licence to operate.

With regard to the integrity of the five remaining wells on the Montara wellhead platform additional safety measures have been put in place.

PTTEP Australasia has been issued with a direction under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 prohibiting any activity that may adversely impact on the integrity of the remaining five wells at the Montara Field unless the activity is agreed and accepted by the Commonwealth Designated Authority or the delegate of the Designated Authority.

Furthermore, PTTEP has included within its Action Plan key steps that clarify well barrier integrity requirements. A work program for testing of the well barriers has been completed. The NT DoR has been assisted by the Western Australian Department of Mines and Petroleum in assessing the work program for the testing of the well barriers.

The results from PTTEP Australasia’s well barrier testing have been shared with WA for co-assessment and auditing and results of this testing have been forwarded for third party validation.

The second pressing issue relates to the regulatory role of the NT Designated Authority in light of evidence presented to the Commission that indicated serious deficiencies in the carrying out of the regulatory function.

In relation to the NT Designated Authority, I have commenced a process with the NT Chief Minister and the NT Minister for Primary Industry, Fisheries and Resources to address my concerns regarding the NT Government’s administration of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 in the Ashmore/Cartier and NT offshore areas.

The NT Government has provided me with a set of actions it is currently taking to address the issues raised in evidence presented to the Commission. These include, but are not limited to:

Co-assessment of approval decisions by interstate regulators, primarily WA.

Clarification of approvals and compliance responsibilities.

Review of delegation processes and procedures.

Closer liaison with my department and Geoscience Australia.

I am currently considering whether the NT’s proposed actions are sufficient to address the deficiencies indicated through the Inquiry process in advance of my proposed establishment of a national offshore petroleum regulator from 1 January 2012.

The move to a single national regulator is one that I will be vigorously pursuing if the Gillard Labor Government is returned to office on 21 August.

The current Designated Authority arrangements for Australia’s offshore petroleum industry have led to:

· Significant duplication.

· Slow and inconsistent decision making.

· The inefficient use of scarce expertise.

· A resistance to change with the adoption of a lowest common denominator approach to regulation, approval conditions, and problem solving.

At the moment, NOPSA is restricted to OHS functions over the structural integrity of pipelines, wells and well-related equipment. The House of Representatives has passed amendments granting NOPSA power to regulate non-OHS structural integrity matters. These amendments are vital if we are serious about safety because the simple truth is that the health and safety of people is inextricably entwined with the integrity of facilities.

Under the new national arrangements I am proposing, we will take these measures much further to recognise that safety cannot be separated from day to day operations processes or environment protection procedures either.

In summary:

· Commonwealth jurisdiction will be withdrawn from current state and territory regulators.

· It is my intention that the functions of the National Offshore Petroleum Safety Authority (NOPSA) will be expanded to cover the integrity of facilities and wells, the protection of the environment, and day to day operations.

· It is also my intention that a new statutory authority will be created to advise jointly the Australian and the relevant state or territory ministers on title decisions and administration, and major questions of resource management and development.

This commitment is consistent with the findings and recommendations of the Montara Commission of Inquiry in my possession, and goes further than the recommendations of the

Productivity Commission Review of the Regulatory Burden on the Upstream Petroleum Sector last year.

Recognising that Australia is part of a global industry and that we have an obligation to share our experience and contribute to continuous improvement of both industry practice and regulation, I am announcing today that a re-elected Gillard Labor Government will host an international conference, in Australia, of legislators, regulators and industry to review our collective learnings from both the Montara and Gulf of Mexico incidents.

But it should not take traumatic events such as these to move our safety performance forward.

We must be engaged in a process of continuous improvement with an industry wide cultural and organisational commitment to 'safety first'.

APPEA Initiatives

Industry leadership is vital, and I thank APPEA in this regard.

Events like this conference encourage a safety culture of active participation to bring about sustained improvement.

So does APPEA’s ‘Stand Together for Safety’ program.

In particular, I thank the health and safety representatives in the field.

They are the ones putting the vision into practice on the front line to ensure a safe return home for workers to their family and friends.

As we know, workplace priorities come and go.

In many cases, they’re shifted by prevailing economic circumstances.

Values are different.

Values create a sense of passion and commitment to achieve high results.

Health and safety is the core value.

NOPSA

To further contribute to this discussion I present to you NOPSA’s second annual offshore health and safety report.

NOPSA’s CEO Jane Cutler will go through the trends evidenced in this report with you later in the conference but I recommend it to you today as a valuable tool outlining the safety trends and challenges in the Australian offshore petroleum industry.

Regrettably, hydrocarbon releases continue to be a concern and I urge the industry to continue to focus on how these releases can be reduced in both number and severity.

During what has been a challenging time for the industry, I commend NOPSA for maintaining day-to-day regulatory responsibilities to a high standard.

These standards will be further enhanced through the implementation of the recommendations arising from reports of:

· The 2009 Offshore Petroleum Safety Regulatory Inquiry - Marine Issues (an inquiry into two maritime incidents in December 2008).

· The 2009 Offshore Petroleum Safety Regulatory Inquiry - Best Practice and the Effectiveness of NOPSA (an inquiry into the Varanus Island incident in June 2008).

· The 2008 Review of NOPSA Operational Activities.

A final response and implementation strategy for the recommendations of these three reports will be released by the incoming government, building on the draft response and the submissions made on the response in June this year.

Growth of Industry

The number of oil and gas installations continues to grow in our offshore waters, including new large scale technologies such as floating LNG.

No doubt, new technology has improved safety standards across the industry.

But equally, it brings with it new work procedures we have to master and new things we need to learn about materials, equipment, fittings, processes and instrumentation.

Offshore petroleum extraction is a technically-challenging business where equipment failures or human error can have significant consequences.

The safety of people, the integrity of facilities, and the protection of the environment must always be top of mind in this industry if we are to grow it into the future to provide jobs and prosperity for the next generations of Australians.

We need to give the community confidence that we can grow the industry safely and sustainably.

Conclusion

I am looking to industry and the workforce for input and unreserved commitment to make our offshore petroleum industry the best and safest in the world.

I congratulate APPEA for driving forums like this one to help achieve our goal of safer and healthier workplaces.

After all, safety is a core value, not just an industry priority - particularly in a performance-based regime like ours.

In developing a culture where workers and companies come together to improve safety, I encourage the whole industry - at all levels - to embrace this philosophy.

Thank you.

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