SYDNEY (Dow Jones Newswires), Feb. 4, 2011
PTT Exploration & Production has satisfactorily responded to issues raised by Australian lawmakers following the Montara oil spill, and will not have its oil licenses revoked, Australia's Energy Minister Martin Ferguson said Friday.
The decision will come as a relief to the Thai company, which has said that its business would be significantly affected if it had to stop operating in the country--and that it has already incurred over US $300 million in costs related to the August 2009 incident.
"The company has cooperated fully throughout the review process and demonstrated significant changes to improve its leadership, governance and operating practices," Ferguson said in a statement.
The announcement spurred a jump in PTT E&P shares, which were up 6.6% at THB179 at the midday break, outpacing a 1.2% gain in Thailand's SET Index.
"This is a positive step, as we can restore the Australian government's confidence in our operating standard," PTT Exploration's Chief Executive Anon Sirisaengthaksin told Dow Jones Newswires. "It should also bolster our future investment prospects in Australia."
Canberra's decision to allow PTT Exploration to keep its license ensures that commercial operations at Montara will commence in the fourth quarter of this year as planned, he said.
An independent report into the incident released last year found "widespread and systemic" shortcomings in PTTEP's procedures were a direct cause of a loss of well control on the Montara platform, which also burst into flames.
Over two months, 20,000 barrels of crude were sent spewing into the Timor Sea off northeast Australia.
In response, Australia committed to a shake-up of its regulatory regime for offshore oil and gas drilling following what was one of its biggest oil spills, but stopped short of imposing onerous safety requirements on an industry that generates huge amounts of jobs and government revenue.
Consequently, many weren't expecting PTTEP to have its licenses revoked, as long as it responded to improved operational and safety measures set out last year by lawmakers.
The regulatory response to the incident and subsequent treatment of PTTEP hold significance as Australia is poised to become the world's second-biggest gas exporter after Qatar within a decade.
Following large onshore and offshore gas discoveries, companies like Chevron, Exxon Mobil and Shell are plowing billions of dollars into gas export projects, triggering an employment boom in the states of Western Australia and Queensland.
Ferguson said the Thai government-owned company didn't get off lightly, noting that it had picked up the full A$300 million cost of the incident and ongoing environmental costs.
A "rigorous 18-month monitoring program" to be imposed on the company by lawmakers means that PTTEP "is in essence on notice," he said.
The company in November said the incident had cost it US $320 million to date.
Indonesia is claiming billions in damages from PTTEP, which in December said it was still in talks with the Indonesian government to seek verifiable evidence proving any damage to its fishery and seaweed industries as a result of the incident.
"We and the Indonesian government have a better understanding now. But we're still in the process of verifying relevant facts before we can start talking about compensation for the claimed damages," Anon said.
PTT Exploration will soon sign an agreement with Germany's Linde Group and SBM Offshore for the latter two firms to study a front-end engineering design for a floating liquefied natural gas project off northwest Australia, he said.
The study is expected to be completed by the third quarter--and if the project is determined to be feasible, PTT's unit PTT FLNG will form a joint venture with Linde and SBM to develop the project.
PTT Exploration recently formed a joint venture with its parent PTT to operate in the Australian FLNG project at the Cash & Maple field.
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