Report Concludes PTTEP, Regulator at Fault for Montara Spill

PTTEP Australasia (PTTEP AA), a subsidiary of Thailand-based operator PTT Exploration and Production (PTTEP), and the Northern Territory Designated Authority are both at fault for the Montara oil spill, the largest spill to occur offshore Australia in over 20 years, the Australian government concluded in its Report of the Montara Commission of Inquiry and a draft Government response released Nov. 24.

The Inquiry was set up to investigate the likely causes of the uncontrolled release of oil and gas from the Montara Wellhead Platform in the Timor Sea on Aug. 21, 2009 and make recommendations to the Government on how to prevent future incidents. The inquiry found that the blowout was likely caused by defective installation of a cemented shoe in the casing of the H1 well in March 2009, which was intended to serve as a primary barrier against a blowout.

The pumping of displacement fluid beneath the float collar, which resulted in over-displacement from the casing shoe track and the area outside the casing shoe, also contributed to the blowout by weakening the cemented shoe's integrity as a barrier. PTTEP workers and Atlas workers both onshore and offshore failed to recognize that a wet shoe had been created from cementing operations and to test the cemented casing shoe. Deficiencies in PTTEP's management system for communications and failure to assess risk also were noted as contributing factors.

A test would likely have confirmed the unreliability of the cemented casing shoe as a barrier, allowing for remedial action that would have prevented the blowout. Other factors that may have contributed to the blowout include using an incorrect volume of tail cement in cementing operations. PTTEP also failed to install a casing pressure containing anti-corrosion caps (PCCC) on the 13-3/8 casing string on the H1 well and removed a 9-5/8 inch PCCC and failure to reinstall another PCCC on the 9-5/8 casing string in August 2009. These actions left the well without a secondary barrier against a blowout.

According to the report, the designated authority, the Northern Territory Department of Resources, should not have approved the Phase 1B drilling program for the Montara field in July 2009, and also adopted a "minimalist approach" to its regulatory responsibilities. The way the regulatory conducted its responsibilities gave little chance of discovering PTTEP AA's poor practices. "In this case, the regulatory dog did not bark," the report said.

The Report contains 100 findings and 105 recommendations, which have implications for governments, regulators, and the offshore petroleum industry. The Government proposes accepting 92, noting 10, and not accepting three of the Report's recommendations.
Outlining the Government's draft response, Minister for Resources and Energy Martin Ferguson noted that it provides a comprehensive plan to tackle head on the tough policy challenges posed by the Montara incident.

"The fact is that we were lucky with Montara – no lives were lost, there were no serious injuries and the quick, coordinated response from governments, regulators and industry meant that the impact on the marine environment was minimal," Minister Ferguson said.
"We can't just turn our backs on this industry – it is too important to Australia's economic and energy security. What we can do – working together – is make Australia's offshore safety regime the best and safest in the world."

Ferguson said the report recognizes that while there is room for some improvements, the nation's regulatory regime is effective. "At the heart of this matter is the failure of the operator and the failure of the regulator to adhere to this regime. If either - or preferably both – PTTEP AA or the Northern Territory Designated Authority had done their jobs properly and complied with requirements, the Montara Blowout would never have happened.

The minister said the government would next consult with industry and other stakeholders to form the Government's final response. "A key aspect of this will be the Government's intention to move toward a single national offshore regulator – consistent with the Report's recommendations."

The Government will also move to legislate the polluter pays principle and the requirements for environmental monitoring, further strengthening environmental safeguards.

"I am confident that by working methodically and diligently through the implementation of the remaining recommendations we will achieve a result that benefits all and maintains the industry's social license to operate."

In a statement released today, PTTEP said its subsidiary PTTEP AA has been working on an Action Plan over the past 12 months to prove PPTEP AA's capability to be an operator in Australia. The key elements of the Action Plan covers the improvement of the SSHE management system; development of a drilling and a competency management system; and the interfaces between PTTEP Headquarter in Bangkok and PTTEP AA in Perth.

Some elements of this Action Plan have been accomplished or are in progress. PTTEP noted that the clarification of well integrity barriers of the Montara Wells has already been certified by the Australian authorities, and the review of PTTEP AA Drilling organization to improve efficiency and safety is almost complete.

Anon Sirisaengtaksin, President and CEO of PTTEP said, "PTTEP is confident that PTTEP AA will continue its development of Montara since we have developed the Action Plan and implemented it for 12 months. We regularly updated its progress to the Australian Government. We therefore reaffirm our confidence that this extensive implementation can regain the Australian Government trust in PTTEP AA capability as a prudent Operator with International best practice. We also commit to continue our investment in Australia in long term."


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