INTERNATIONAL LAW, HISTORY AND THE DEVELOPMENT OF SOVEREIGN
CLAIMS BY TIMOR-LESTE AND AUSTRALIA IN THE TIMOR SEA:
LESSONS TO BE LEARNED FROM THE MONTARA OIL SPILL REGARDING
SAFETY AND SUSTAINABILITY1
1.
The first wave of migration to the island of Timor was the Australoid
indigenous groups from New Guinea and Australia, followed by
Austronesians, Malays and then about 400 years ago the Portugese. The
Portugese established the Colony of Portugese Timor in 1769. It became
known as East Timor because it was the eastern half of the island of
Timor.
2.
The western half of the island was colonized by the Dutch and it was in
1914 that the Permanent Court of Arbitration established the definitive
border for the east and the west which continues to this day.
3.
The Portugese virtually abandoned the colony of East Timor after the
Portugese Revolution of 1974. It was 1975 when East Timor declared its
independence after 400 years of Portugese colonisation and it was in
that same year that East Timor was invaded by Indonesia. In 1976 it
became Indonesia’s 27th Province.
4.
In 1979 Australia recognized Indonesia’s sovereignty over East Timor.
5.
After the Suharto resignation a UN sponsored agreement between
Indonesia and Portugal facilitated a referendum in August 1999 with a
result and a consequence. The result was a resounding vote for
1
All web sites cited were visited between 15 May and 20 June 2013.
1
independence. The consequence was significant and violent resistance
between factions in East Timor (with Indonesian support).
6.
Indonesia relinquished control of East Timor in 1999.
7.
An Australian Peace Keeping force restored order.
8.
The UN Transitional Administration of East Timor was established in
1999. Its Peace Keeping mission ended in 2012.
9.
East Timor became the first new sovereign State of the 21st century on
20 May 2002. It is known as Timor-Leste. An interesting historical
perspective is given by Myrttinen.2
10.
The Democratic Republic of Timor-Leste is in South East Asia and it is
the eastern part (about half) of the island of Timor. The other half is
Indonesian West Timor. The IMF describes Timor-Leste as the ‘most oildependent economy in the world.’3
11.
‘Leste’ is the Portugese word for ‘east.’ ‘Timur’ is the Malay/Indonesian
word for ‘east.’ So far as I am aware there is no Irish in the Timorese
heritage – to be sure to be sure.
12.
Its area is about 15400 km2. It is mountainous, the highest peak being a
little under 3000m. It is tropical, hot and humid
13.
Timor-Leste became a member of the UN on 27 September 2002.
Myrttinen, Henri Timor-Leste – A Relapsing “Success” Story Taiwan
JnlofDemocracy July 2009 219.
3 International Monetary Fund PIN 11/31 8 March, 2011
http://www.imf.org/external/np/sec/pn/2011/pn1131.htm
2
2
14.
The United Nations Convention on the Law of the Sea (UNCLOS) of 10
December 19824 was ratified by Australia on 5 October 1994 (including
Part XI) and by Timor-Leste (including Pt XI) on 8 January 2013.
15.
‘Territorial Sea’ is a limit not exceeding 12 nautical miles measured from
baselines determined in accordance with UNCLOS (Art 2).
16.
In addition the ‘Exclusive Economic Zone’ is the area beyond and
adjacent to the territorial sea, subject to the legal regime established by
Part V of UNCLOS. It is an area which does not extend beyond 200
nautical miles from baselines from which the breadth of the territorial
sea is measured.
17.
Part XI of UNCLOS contains provisions in respect of the ‘Area’ which is
defined in Art 1 to mean ‘the seabed and ocean floor and subsoil thereof
beyond the limits of national jurisdiction.’
18.
So you have a measurement of 12 and 200 nautical miles over which a
coastal state (Australia and Timor-Leste) has sovereign rights (UNCLOS
Art 56, including exploring and exploiting natural resources) or, national
jurisdiction. But Australia and Timor-Leste are separated by less than
400 miles of water and the configuration of the seabed is such that one
of those States does, but the other does not, have an entitlement under
the rules of paragraphs 4 to 7 of Article 76 of UNCLOS to a continental
4http://www.un.org/Depts/los/convention_agreements/convention_historical_
perspective.htm
http://www.un.org/Depts/los/convention_agreements/texts/unclos/unclos_e.p
df
3
shelf extending more than 200 nautical miles from the baselines from
which the breadth of the territorial sea is measured.5
19.
Many of the basic documents including the agreements between the
Australian and the Indonesian Governments and the Treaties, notes,
letters and aides-memoire between Portugal, Indonesia, Australia and
Timor-Leste are to be found in Kreiger, ‘East Timor and the International
Community: Basic Documents’ Cambridge Series 1997. They are
numerous.6
20.
Generally, the boundary negotiated between Australia and Indonesia in
the Timor Sea area (see the map below) was influenced by a number of
historical factors. Unfortunately the boundary between Australia and
Indonesia in the East Timor area, known as the "Timor Gap", has been
controversial, and a cause for Australian concern for at least 30 years.
No negotiations took place with Portugal before it left East Timor in
1975. With Indonesia occupying East Timor, Australia could not resolve
it for many years. The Treaty signed in 1989 with Indonesia established
a ‘Zone of Cooperation’ without determining the actual seabed
boundary. The Timor Gap Treaty was never intended to be a final
agreement on the "continental shelf" boundary. It was a temporary
compromise concluded "without prejudice" to the ultimate resolution of
the maritime boundary dispute. With an independent East Timor, the
Serdy, Andrew Is There A 400 Mile Rule In UNCLOS Article 76(8)
An historical time line can be seen at:
http://www.gmat.unsw.edu.au/currentstudents/ug/projects/baltyn/timlin.pdf
5
6
4
original Timor Gap Treaty has of course lapsed and a "New" Timor Gap
arrangement was signed in July 2001.7
Below is the location of the Timor Gap and the Zone of Cooperation
(ZOC).8
21.
When the United Nations Transitional Administration in East Timor
(UNTAET) became the administering authority in 1999 it negotiated the
Baltyn, Martin Australia and the Timor Gap UNSW
http://www.gmat.unsw.edu.au/currentstudents/ug/projects/baltyn/baltyn2.ht
m
8 Produced by AUSLIG (Australian Surveying and Land Information
Group)http://www.dist.gov.au/resources/timor-gap/
7
5
continuation of the 1989 Treaty, and on 5 July 2001 (prior to
independence) the Timor Sea Arrangement (TSA) was agreed upon
between the UNTAET, the Australian Government and representatives of
the East Timor Constituent Assembly. The TSA was not signed as a
treaty. The treaty entered into force on 2 April 2003 following an
exchange of diplomatic notes between Australian and Timor-Leste
Governments and was backdated to 20 May 2002 (the date the TimorLeste nation came into existence). The treaty runs to 2057 (by reason of
the CMATS Treaty of 2007).9 It is known as the Timor Sea Treaty (TST).
22.
The TST establishes a Joint Petroleum Development Area (JPDA) that is,
in geographical terms, a carbon copy of Area A of the previous Zone of
Cooperation under the 1989 Timor Gap Treaty between Australia and
Indonesia. The TST significantly alters the distribution of the proceeds of
production in the JPDA as compared with the previous arrangements.
Under the TST, production will be split on a 90-10 basis in favour of East
Timor as compared with the 50-50 split under the previous Zone of Cooperation Area A arrangements. The TST is "without prejudice" to the
future and final delimitation of the continental shelf between Australia
and East Timor. This is consistent with international law, which requires
that provisional arrangements of a practical nature, pending a final
delimitation, are to be "without prejudice".10
23.
Timor-Leste is in possession of legal advice (now of some age but
relevant in the context of Timor-Leste’s continuing dissatisfaction with
Below paras. 30-36
Bialek, Dean The New Timor Sea Treaty
http://www.etan.org/news/2002a/05gap.htm
9
10
6
the treaty) which is not discouraging of its discontent with the
arrangements in the TST. The advice suggests that Timor Leste's
potential claims under international law are significantly beyond those
implied by the JPDA boundaries. In fact, the advice suggests that a
current claim to a Timor-Leste EEZ under UNCLOS and relevant
principles of international law might include not only the Bayu-Undan
gas deposits (currently within the JPDA), but also the
Laminaria/Corallina oil fields (currently in operation to the west of the
JPDA) and the whole of the Greater Sunrise gas deposit (straddling the
eastern lateral boundary of the JPDA).11
24.
Timor-Leste’s discontent can be partly, but nevertheless significantly,
understood in the context of Article 9 of the TST:
11
Bialek ibid.
7
“East Timor and Australia agree to unitise the Sunrise and Troubadour
deposits (collectively known as 'Greater Sunrise') on the basis that
20.1% of Greater Sunrise lies within the JPDA. Production from the
Greater Sunrise shall be distributed on the basis that 20% is attributed
to the JPDA and 79.9% is attributed to Australia.”
25.
On this basis, Timor-Leste would only be entitled to 18% of the
production to flow from the Greater Sunrise deposits. An expanded
Timor-Leste claim to Greater Sunrise would be based on a lateral
extension of a Timor-Leste EEZ claim beyond the current eastern
boundary of the JPDA and largely depends on a reconsideration of the
validity of what was the eastern boundary of the Timor Gap Treaty Zone
of Cooperation, Area A (ZOCA). In essence, Timor-Leste would argue that
the 1989 Timor Gap Treaty (Australia/Indonesia) failed to adequately
take into account the claims that an independent Timor-Leste might
have had over this region. In doing so, Timor-Leste could turn to
principles associated with the rights and interests of a third party or
State whose interests are affected by the terms of a bilateral
agreement.12 The argument is not without some support in principle. In
the ICJ in 1995, in an action commenced by Portugal against Australia,
concerning ‘certain activities of Australia with respect to East Timor for
failing to observe the duties and powers of Portugal as the administering
authority and the rights of the people of East Timor to self
determination,’ the ICJ dismissed the case because Indonesia did not
consent to the jurisdiction of the ICJ, required where, to determine the
12
Bialek ibid.
8
question, the ICJ would have to rule on the lawfulness of the conduct of a
third party State, that is, Indonesia (you will recall that Indonesia
relinquished control of East Timor in 1999) ([29] of the ICJ decision).
26.
The remaining 79.9% of Greater Sunrise is subject to further
negotiation. Under normal international practice all of Greater Sunrise
would be in Timor-Leste’s waters. Australia is, to say the least, reluctant
to fix a timetable for negotiations on the remaining 79.9% of Greater
Sunrise not in the JPDA. From a transcript of a meeting between Mr.
Downer and Mr. Alkatiri (then the PM of Timor-Leste) in October 2003
the following was said by Mr. Downer:
“We don’t have to exploit the resources. They can stay there for 20, 40,
50 years. We are very tough. We will not care if you give information to
the media. Let me give you a tutorial in politics – not a chance.”13
Although succeeding governments in Australia have not adopted the
words of Mr. Downer, the position in fact remains the same.
27.
The Timor Gap Treaty has been a thorn in the side of Timor-Leste for a
long time. In Horta v Commonwealth [1994] HCA 32; (1994) 181 CLR
183 in its original jurisdiction the High Court was asked in a case stated
to answer questions including one in respect of the constitutional
validity under the external affairs power in s51(xxix) of legislation
implementing the Timor Gap Treaty of 1989 with Indonesia. Remember
it was overlapping claims in respect of the area which resulted in the
treaty. And remember Timor-Leste has its eye on the Timor Gap because
it has lots of oil and hydrocarbons, outside the territorial waters of each
13
ETSA http://groups.yahoo.com/group/ETSA/message/1335
9
country but potentially within the exclusive economic zone of each
depending on the interpretation of the complex provisions of UNCLOS.
Paragraphs [3] and [4] of Horta give an important historical context to
the question. Without any attempt to be facile about the Horta
arguments, he did argue that the Timor Gap Treaty was invalid and
therefore the implementing legislation was invalid as not being a proper
exercise of the external affairs power. The argument was not successful
because, even assuming the treaty was invalid, the legislation was prima
facie a law with respect to ‘External Affairs’ for the purpose of s51 (xxix)
({8]-[10].
28.
Unfortunately, Timor-Leste is having difficulty finding a forum to make
out or to re-agitate its arguments. Australia has withdrawn consent to
the compulsory International Court of Justice and UNCLOS dispute
settlement mechanisms with respect to disputes pertaining to the
delimitation of maritime boundaries. That probably prevents TimorLeste from forcing Australia to become a party to a binding arbitration
declaring the boundaries between them.
29.
To encapsulate one of the simmering issues:
“Only 20 percent of the Greater Sunrise field is in Australian territory—if
the maritime border between Australia and East Timor was drawn
according to international law. But Canberra withdrew from the
International Tribunal for the Law of the Sea in 2002—a decision that
the Rudd [and subsequent Labor] government has not reversed. In the
face of intense pressure from the Howard government, including threats
to cut off aid and obstruct all oil and gas production, the Timorese
10
government agreed to split Greater Sunrise tax and royalty revenues
about 50-50 between the two countries and drop its border claim for at
least 50 years.”14
30.
Indeed it is informative to read the letter from Mr. Downer and the
response from Mr. Ramos-Horta in June/July 2004 to the Wall Street
Journal.15 Amongst other things Mr. Downer said ‘Australia is committed
to negotiating permanent maritime boundaries with East Timor.’ The
negotiations from Timor-Leste’s view anyway, are frustratingly slow,
particularly in circumstances where the revenues are distributed,
according to it, contrary to its interests if not its lawful rights.
31.
So it has come to pass that Timor-Leste is having another tilt at the
Timor Sea Treaty arrangements. On 23 April 2013 Timor-Leste notified
Australia that it initiated arbitration proceedings under the 2002 Timor
Sea Treaty in respect of a dispute related to the 2006 Treaty on Certain
Maritime Arrangements in the Timor Sea (CMATS). The dispute relates
to the validity of the CMATS Treaty in that Timor-Leste ‘alleges Australia
did not conduct the CMATS negotiations in 2004 in good faith by
engaging in espionage.’16
Head, Mike Australia-East Timor conflict intensifies over Greater Sunrise gas
project 9 June 2010 http://www.wsws.org/. See also Billington, Mike Timor
Leste’s Xanana Gusmao: Justice is Not Revenge
http://www.larouchepub.com/elw/public/2005/2005_1-9/2005-2a/pdf/4953_2_lnttimor.pdf
15 http://www.etan.org/et2004/July/22/05letter.htm
16 Joint media release Ministers Carr and Dreyfus 3 May 2013 - Minister for
Foreign Affairs.
14
11
32.
Further, Timor-Leste alleges in the course of negotiating the treaty
Australian officials were aware of confidential information belonging to
the Timorese negotiating team.
33.
The arbitral tribunal will comprise 3 members and it may be suggested
that one of its first tasks will be to determine if it has jurisdiction to hear
the dispute on the grounds notified.
34.
Under the terms of the CMATS, if a development plan for the Greater
Sunrise field has not been jointly approved by February 2013, either
party may terminate the treaty on giving three months' notice.
Since no development plan had been agreed as of that date, an observer
may wonder why East Timor has initiated arbitration proceedings in
favour of its right of termination. This is because the CMATS continues to
apply, notwithstanding termination, if the Greater Sunrise field is
produced at any time following such termination.
35.
If the CMATS were to be held invalid, the position in respect of the
Greater Sunrise field would revert to the position under the Timor Sea
Treaty. Under the Timor Sea Treaty, Australia and East Timor agreed to
distribute production from the Greater Sunrise field on the basis that
20% of the reserves are attributed to the JPDA (which in turn would
entitle East Timor to a 90% share of those reserves under the Timor Sea
Treaty) and 80% are attributed to Australia.
36.
However, the invalidation of the CMATS would also extinguish the
moratorium in respect of maritime boundary claims referred to above.
This would entitle either country to initiate a dispute as to the
jurisdiction over the Greater Sunrise field.
12
37.
The decision to initiate the current arbitration proceedings is therefore
puzzling and may well be intended as a point of leverage to renegotiate
the tax sharing mechanism under the CMATS. To this end, there is a view
that the equal distribution of revenue agreed under the CMATS is unfair
to the Timor-Leste. The arbitration appears to be a high-risk strategy for
Timor-Leste since, if unsuccessful, the decision will be final and binding
on the parties. In that case, the revenue sharing mechanism and the
moratorium on maritime boundary claims will more than likely be the
regulatory backdrop against which the Greater Sunrise field is
developed.17
38.
It is difficult to see the real tactics behind the current action by TimorLeste. It may be as simple as concluding that the country has no other
avenue reasonably open to it and its back is against the wall. It is an
action available to Timor-Leste that will likely have no impact on TimorLeste/Australian relations.18
THE MONTARA OIL SPILL
39.
“On Friday 21 August 2009, during activity being undertaken by the
West Atlas jack-up drilling rig operated by Atlas Drilling, a hydrocarbon
release was observed from the H1-ST1 well through the Montara
Wellhead Platform at 0530 (WST). On 14 September 2009, work
commenced on drilling a relief well. On 1 November 2009, a fire broke
Clayton Utz 23 May 2013 paras. 30-36 above.
http://www.claytonutz.com.au/publications/edition/23_may_2013/20130523/
east_timor_commences_proceedings_in_respect_of_greater_sunrise_revenue_sha
ring_treaty_with_australia.page
18 Statement by Government of Timor-Leste regarding the pending arbitration 4
June 2013. http://easttimorlegal.blogspot.com.au/2013/06/statement-bygovernment-of-timor-leste.html
17
13
out on the West Atlas drilling rig and the Montara Wellhead Platform
after the West Triton, which was drilling a relief well, successfully
intercepted the leaking well on the fifth attempt. On 3 November 2009,
successful well-kill operations were undertaken, the fire was
extinguished and the oil leak was contained.”19
40.
In that 6-7 weeks estimates of oil leaked ranged between 300 and 3000
barrels per day, depending on whose interests were doing the
estimating.
41.
What really went wrong?
42.
From the Commission of Inquiry Report 3.4 and on (bold print mine):
“In November 2008, PTTEPAA sought and was granted approval by the NT
DoR to batch drill three development wells in the Montara oilfield, one of
those being the H1 Well. PTTEPAA later sought approval to batch drill two
additional wells. Accordingly, there were five wells at Montara ‐ H1, H2, H3,
H4, and GI.
Between January and April 2009, the West Atlas rig (owned and operated by
Atlas) was positioned over the Montara WHP, located in waters
approximately 77 metres deep, for the purpose of enabling Atlas to drill the
wells (as contractor) for PTTEPAA.
On 27 February 2009, while the derrick of the West Atlas rig was positioned
over the H1 Well, PTTEPAA applied to the NT DoR to change the course of the
H1 Well. The process of changing the course of a well is known as
sidetracking. The reason PTTEPAA sought to sidetrack the H1 Well was to
enable access to a cleaner section of the reservoir into which PTTEPAA had
already drilled a 121⁄4” hole.
On 2 March 2009, the NT DoR granted approval to PTTEPAA to sidetrack the
H1 Well. The H1 Well thereafter became known as the H1‐ST1 Well but, for
Final Government Response to the Report of the Montara Comm of Inquiry 2011
http://www.ret.gov.au/Department/Documents/MIR/FinalMontaraCommission
InquiryReport.pdf
19
14
convenience, will continue to be referred to in this Report as the H1 Well.
Between 2 and 7 March 2009, PTTEPAA continued to drill the H1 Well to a
measured depth of 3,796 metres, as measured from the rotary table on the
West Atlas rig. The total direct vertical depth of the H1 Well from the
rotary table was 2,654 metres.
On 6 and 12 March 2009, PTTEPAA sought approval from the NT DoR to
suspend the H1 Well, with the foot of the 95⁄8” casing in the reservoir, by
installing PCCCs on the 95⁄8” and 133⁄8” casing strings (instead of setting a
shallow‐set cement plug within the 95⁄8” casing string as originally
planned).
The NT DoR granted PTTEPAA approval to suspend the well in this manner.
On 7 March 2009, PTTEPAA pumped an amount of cement into the 95⁄8”
casing shoe (the shoe being located within the bottom‐most lengths of the
casing). At that point, the casing was located inside the reservoir at a point
three metres (10 feet) above the oil‐water contact, thereby providing a
pathway for hydrocarbons to enter the well through the casing shoe. The
cementing procedure was intended to set the casing shoe in the
wellbore, and thereby provide a primary barrier against a blowout.
Following pumping of the cement, pressure was held in the casing to
4,000psi. Upon release of the pressure, 16.5 barrels of fluid returned.
The return of this fluid indicated that there was a problem with the float
valves in the casing shoe. The 16.5 barrels of fluid were pumped back
down the casing, and the top of the casing was then closed‐in so as to
maintain pressure in the casing whilst the cement set.
Following so‐called wait on cement (WOC), and the absence of any
unwarranted further backflow of fluids, a 95⁄8” PCCC was installed on the H1
Well, followed by a so‐called trash cap. The derrick of the West Atlas rig was
then moved (or skidded) from the H1 Well over to the H4 Well.
On 21 April 2009, the West Atlas rig departed from the Montara WHP in
order to perform drilling operations in other fields. At that point, or perhaps
even earlier in March, the H1 Well was ‘suspended’. It was generally
believed that a PCCC had also been installed, as required, on the 133⁄8”
casing in the H1 Well, but it is now known that this did not in fact occur.
15
On 19 August 2009, the West Atlas rig returned to the Montara WHP to allow
PTTEPAA to (i) commence the tie‐back of the casing strings of each of the five
wells to the platform; and (ii) ‘complete’ the wells to the point of production.
At 4.30am on 20 August 2009, the derrick of the West Atlas rig moved over
the H1 Well. At 6am on the same day, the 20” trash cap was removed from
the H1 Well. It then became clear to personnel from PTTEPAA and Atlas
that there was no PCCC installed as required on the 133⁄8” casing of the
H1 Well.
As a consequence of the non‐installation of the 133⁄8” PCCC, the threads
at the top of the 133⁄8” casing – known as the mud line suspension
(MLS) threads – had rusted or corroded. In order to tie the 133⁄8” casing
back to the WHP on a long‐ term basis, PTTEPAA personnel on‐rig and
onshore decided that those threads should be cleaned.
At around 11.30am, the 95⁄8” PCCC was then removed from the H1 Well
in order to allow a tool to be run in to clean the MLS threads on the
inside of the 133⁄8” casing. The 95⁄8” PCCC was not thereafter
reinstalled.
At that time, it seems to have been generally considered that there were two
barriers within the H1 Well to prevent a blowout of fluids from the reservoir:
the cemented casing shoe; and a column of inhibited seawater within the
95⁄8” casing, which was thought to have had a so‐called ‘kill weight’ (being
sufficient weight to counter the pressure in the reservoir).
Significant work on the H1 Well was placed in temporary abeyance at that
point, pending the tie‐back of casings on other wells.
At around 5pm on 20 August 2009, the derrick of the West Atlas rig was
skidded to the GI Well, and work was carried out on that well between about
6.30pm and midnight on 20 August 2009.
At midnight on 20 August 2009, the derrick of the West Atlas rig was skidded
to the H4 Well.
At about 5.30am on 21 August 2009, workers on the WHP observed a
blowout of fluid coming from the H1 Well. The volume was estimated at
between 40 and 60 barrels. Gas alarms on the West Atlas rig were triggered
and emergency response procedures were activated.
16
The flow appeared to subside and the West Atlas rig’s OIM, Mr Trueman, gave
the all clear at around 5.55am.
At about 6am on 21 August 2009, a decision was made to skid the
derrick from the H4 Well back to the H1 Well in order to set a
mechanical pressure isolation device in the H1 Well to prevent further
flow.
At around 7.23am on 21 August 2009, the H1 Well ‘kicked’ again, this
time blowing a column of oil and gas to the underside of the rig floor.
Emergency response procedures were once again activated, and over
the next hour or so senior PTTEPAA and Atlas personnel on board the
rig and WHP decided to evacuate the 69 personnel.
All of those personnel were then safely evacuated from the rig and the
WHP.”
43.
In summary the causes of the blowout were:
First, the primary well control barrier failed because of inadequacies in
construction and the monitoring of construction described broadly as
‘initial cementing problems.’
Second, only one of two secondary well control barriers (pressure
containing anti-corrosion caps) was installed.
Third, there were inadequacies in the regime enabling effective
implementation, monitoring and enforcement of the operations.
The fourth attempt to stem the oil flow was the likely trigger for the fire
that rendered the rig ‘a wreck.’
44.
The general conclusion was that:
“Despite the deficiencies in the administration by the Northern Territory
Department of Resources (DoR) of its Designated Authority functions,
the Report concluded that the incident could have been avoided if
17
PTTEP AA had adhered to the well control practices approved by the
regulator and its own well construction standards.”20
45.
Of course the diagnosis of the event exposed the tragedy of bureaucratic
complacency.
46.
The Montara spill occurred in the context of a regulatory regime
described as a performance/objective based regime in which the
operator of an offshore facility is responsible for the safe and effective
operation of the petroleum facility. But it cannot be described as selfregulation by the industry unless the regulators fail to assess and
approve (or not approve) that the operator has reduced risks of an
incident to ‘as low as reasonably practible’ in order to conduct
operations. There was a difference in the way the regime was expressed
and the way it was applied.
47.
The following exchange at the commission of inquiry therefore becomes
important:
In respect of the quoted assessment by an officer of the NT DoR:
The assessment: “To this outside observer it was not a good day for the
Northern Territory Department of Resources. While it is premature to
speculate on the Commission’s conclusions and the follow up actions by
the Australian Government, today’s testimony has not helped the NT
cause. [Mr Marozzi’s] attitude seems to be that if it’s good enough for the
operator, it’s good enough for the regulator, and it’s not a good time to
be giving that impression. While, operator responsibility should be a
fundamental tenant [sic] of any regulatory regime the regulator needs to
verify the effectiveness of the management and operational systems.
This can be accomplished through some combination of audits,
20
Ibid
18
inspections, program and plan reviews, performance measures, and
other means. However, the regulator cannot be passive in any type of
regime ‐ performance‐based, prescriptive or hybrid.”
The following exchange occurred between Counsel assisting and the
Exec. Director of the Minerals and Energy Division of the DoR:
Q. Having sat through Mr Marozzi’s evidence [the assessment above] and
the other evidence that you have heard in the Inquiry, you would agree
with that assessment, wouldn’t you? A. Yes, I agree.
Q. That would be fairly sobering evidence, I take it, for you to hear, given
your role within the department? A. I am not trying to be smart. That’s
an understatement.
48.
The fact is that in the established regime, minimum standards in respect
of blowout preventing barriers were absent and the level of prescription
in the applied regime was quite inadequate, there being a default, but
undefined, standard of ‘good oilfield practice.’
49.
The Thai company that owned Montara, PTTEP (Thailand’s only publicly
traded oil-exploration company) paid $170m to Coogee Resources
Limited in February 2009 (6 months before the leak) - gaining 32 million
barrels of proven reserves (about $12.90 per barrel).
50.
The oil rig was owned by Seadrill Limited, a Norwegian company. It was
insured for $200m and it was leased at $255,000.00 per day. It became a
‘total wreck’ as a result of the catastrophe. It was a ‘jack-up’ rig, the type
most commonly used in shallow waters. The well was in waters 80
metres deep and some 690 km from Darwin.
51.
Production from the well commenced again in the week commencing 9
June 2013(4 years after the leak). Its production target is about 35500
barrels of oil per day.
19
52.
PTTEP is not a poor company. It has significant ties in the exploitation of
oil reserves in Burma and in Iran, although it has likely suffered because
of sanctions imposed on Iran. The impact from Montara was that it was
fined about $550000.00, it spent about $170m in clean up and its shares
suffered an immediate, but, not a long-term decline of about 5.5% on the
Bangkok exchange. The fact is that PTTEPAA’s corporate operating
procedures and operational risk procedures were either non-existent or
totally deficient. There were 51 findings by the commission of inquiry
allowing that broad conclusion to be reached. It might be suggested that
it did not know what it was doing, its personnel had no adequate
training and the company started to think about a disaster only when it
occurred.
53.
The problem in stemming the leak was that the steel-encased well had to
be intercepted about 2600 metres below the sea bed.
54.
A not dissimilar problem was experienced in the case of the BP spill in
the Gulf.
55.
The technical but ‘trial and error’ attempts to stem the flow by
intercepting the existing well extends the time over which impacts are
experienced by extraordinary periods. The well was finally intercepted
on 1 November 2009, 73 days after the blowout, after which there was
the fire and then, finally the completion of the plug and secure
operations on 13 January 2009.
LESSONS
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56.
The Commission made 51 findings in respect of the cause of the spill.
Any summary of the findings would be unsatisfactory. But, most of them
related to the deficiencies in PTTEPAA’s lack of expertise, lack of
forsight, absence of effective quality control and absence of adequate
risk management.
57.
Importantly, there was criticism of the absence of regulatory minimum
standards, the reliance being on ‘best oilfield practice.’
58.
The Commission report is comprehensive and detailed and it would be
hoped that it would become a benchmark worldwide for regimes to be
put in place both from the regulators and the operator’s side of the
equation to ensure that risk is minimised to negligible levels.
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