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 SUSTAINABILITY 1

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.

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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 oil-

dependent 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.

2 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

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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

shelf extending more than 200 nautical miles from the baselines

from which the breadth of the territorial sea is measured.5

4http://www.un.org/Depts/los/convention_agreements/ convention_historical_perspective.htm http://www.un.org/Depts/los/convention_agreements/texts/unclos/unclos_e.pdf5 Serdy, Andrew Is There A 400 Mile Rule In UNCLOS Article 76(8)

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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

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

6 An historical time line can be seen at: http://www.gmat.unsw.edu.au/currentstudents/ug/projects/baltyn/timlin.pdf7 Baltyn, Martin Australia and the Timor Gap UNSW http://www.gmat.unsw.edu.au/currentstudents/ug/projects/baltyn/baltyn2.htm

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(ZOC).8

 

 

21. When the United Nations Transitional Administration in East Timor

(UNTAET) became the administering authority in 1999 it negotiated the

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

8 Produced by AUSLIG (Australian Surveying and Land Information Group)http://www.dist.gov.au/resources/timor-gap/

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exchange of diplomatic notes between Australian and Timor-Leste

Governments and was backdated to 20 May 2002 (the date the Timor-

Leste 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 Co-

operation 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

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

9 Below paras. 30-3610 Bialek, Dean The New Timor Sea Treaty http://www.etan.org/news/2002a/05gap.htm

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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:

“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.”

11 Bialek ibid.

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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

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

12 Bialek ibid.

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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

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

13 ETSA http://groups.yahoo.com/group/ETSA/message/1335

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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 Timor-

Leste 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

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

14 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/49-

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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

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.

53_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.

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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.

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

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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 Timor-

Leste. 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 Timor-

Leste/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

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

17 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_sharing_treaty_with_australia.page18 Statement by Government of Timor-Leste regarding the pending arbitration 4 June 2013. http://easttimorlegal.blogspot.com.au/2013/06/statement-by-government-of-timor-leste.html 19 Final Government Response to the Report of the Montara Comm of Inquiry 2011 http://www.ret.gov.au/Department/Documents/MIR/FinalMontaraCommissionInquiryReport.pdf

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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 ‐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 ‐

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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.

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

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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.

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

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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

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

20 Ibid

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operation of the petroleum facility. But it cannot be described as self-

regulation 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,

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.

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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.

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

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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

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

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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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