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Ladies and gentlemen,
I’m very pleased to be back in Darwin and the Territory.
Darwin has historically been a major tourism centre but in more recent times it is good to see it benefit from industrial diversification – in the gas industry in particular.
Australia is emerging as a major regional LNG producer for the Asia Pacific region.
Australia has just 1.7 per cent of world gas reserves, but almost 20 per cent of OECD gas reserves.
And while Australia’s production is about 1.5 per cent of global gas production or similar to our share of reserves, our exports make up 9 per cent of the global seaborne trade.
By contrast, OECD production makes up about 37 per cent of global gas production, vastly more than its share of reserves.
This makes Australia strategically very important in the global gas market along with other factors including its proximity to key Asia Pacific markets, its unrivalled reputation as a reliable supplier over more than 25 years, and its attractiveness as a safe haven for investment.
Australia exported nearly 15.5 million tonnes of LNG in 2008-09 worth just over $10 billion – almost double the value of LNG exports just two years earlier.
By 2029-30, LNG exports are projected to increase to 109 million tonnes, or about 700 per cent.
A new LNG export hub is proposed at Onslow with another hub proposed for the Kimberley.
And Karratha will expand as the Pluto project starts production early next year.
In the Kimberley, there are still important Indigenous and environmental approval processes to be worked through.
In my opinion there is ample time for all Indigenous matters to be properly considered, including time for an Indigenous Land Use Agreement to be negotiated with the goodwill of all the parties.
This would be the best outcome, it is the preferred option of all parties, and one that I encourage them to work constructively towards.
The Operator – Woodside – and the Western Australian Government remain committed to delivering about $1.5 billion worth of social and economic benefits to local Indigenous communities.
Here in Darwin, I offer my congratulations to INPEX on the progress they are making with the Ichthys development, and to the Larakia People for seizing the opportunities that are, and will continue to flow from it. The involvement of Total in this project is welcome.
I also congratulate ConocoPhillips and its partners for the work they have done to increase the capacity of their Darwin project.
This large project was very successful in terms of both onshore and offshore elements.
I’m also pleased to see the industry pursuing alternative development models such as floating LNG.
This technology is expected to increase the options for developing many of our smaller and more isolated gas resources and it is good to see Shell’s Prelude project – a world first – progressing well.
Montara
The great benefits of these new developments in the offshore industry have, however, been tempered with concern in recent times following the incidents at both Montara and Macondo.
Across the offshore petroleum industry it is undoubtedly the question of safety – for both people and the environment – that remains top of mind for operators, regulators and governments alike.
Last month I had the opportunity to address APPEA’s National Oil and Gas Safety Conference.
Coming out of that conference it was clear to me the absolute commitment of all stakeholders to improve the safety of offshore operations – for both workers and the environment – and prevent such incidents occurring again.
The industry is committed to a culture of continuous improvement and I welcome this as it is an essential component of the industry’s future licence to operate in the eyes of the community.
It is a commitment shared by Government. In this term of Federal Parliament my priority will be pushing through the necessary legislative reforms to make the regulatory environment in Australia the best and safest in the world.
The Montara Commission of Inquiry’s final report will play an important role in this reform process.
Detailed Government consideration of the report is continuing and I anticipate being in a position to release the report publicly before the end of this year.
In the course of my address to the APPEA conference in Perth I flagged two pressing issues coming out of the Montara Commission of Inquiry process and the initial steps I had taken with respect to each.
These issues went to PTTEP Australasia’s operations at the Montara oil field and the regulatory activities of the Commonwealth’s delegated Designated Authority, the Northern Territory Department of Resources.
On the first issue I can advise that my Department has engaged industry experts to review the action plan PTTEP Australasia has presented to me through its parent company.
These individuals have proven capability in corporate governance management arrangements and the upstream oil and gas industry.
The purpose of this review is to give me confidence that the changes being proposed and implemented regarding well management systems and processes are in accordance with industry best practice.
I also want assurance that there are appropriate policies and procedures in place within the organisation to ensure the full and effective implementation of the action plan.
On the regulatory issues, I instigated meetings with both the Chief Minister and my ministerial counterpart in the Territory, Kon Vatskalis, to discuss an agreed plan of action.
The key areas of action are being implemented by the Northern Territory Department of Resources, in cooperation with my Department.
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 and Victoria;
- Clarification of approvals and compliance responsibilities;
- Review of delegation processes and procedures; and
- Closer liaison with my department and Geoscience Australia.
The Territory’s Department of Resources has initiated a formal engagement with the Western Australian Designated Authority, the Department of Mines and Petroleum, to co-assess all approvals relating to the NT principal offshore area and the Territory of Ashmore-Cartier Islands offshore area.
My Department has also initiated a framework to work with all Designated Authorities on a consistent approach to the regulation of Australia's offshore petroleum industry in the areas of well operations, environment and integrity.
This is a key step in providing the Australian community with confidence that our framework has the right checks and balances to ensure the safe operation of the offshore industry.
Finally, we need to ensure the delegate of the Designated Authority is appropriately skilled and informed, including adequate resourcing of the Department of Resources regulatory functions.
I welcome the Territory’s recruitment drive to find people with appropriate technical skills in offshore oil and gas exploration and development to address the immediate need – with a longer term strategy to be identified.
I will also continue to ensure the Territory gets the support it needs as it further develops its regulatory capacity, through direct access to the technical expertise available in Geoscience Australia.
The Northern Territory Government has at the same time been undertaking a comprehensive review of the integrity of the remaining Montara wells.
I am advised that the integrity testing program has been completed and that work is now underway to remove the West Atlas from the Montara field.
Another lesson from these incidents is that clear and defined responsibilities, command structures and lines of communication are vital for effective and timely responses.
We are implementing these lessons.
Industry actions
I commend the petroleum industry for undertaking actions aimed at improving its safety, compliance and incident response management over the past twelve months – and I expect this work to continue.
Following the Montara and Macondo incidents, the industry has performed its own safety checks and reviews.
These cover well plans, drilling processes, blow-out contingency plans, testing frequencies and training regimes for personnel.
A key element of this work is clarifying company operational practices and methods of communication onshore and offshore to prevent miscommunication.
Woodside has recently shared with Government its practices for Drilling and Oil Spill Response efforts.
Shell, Chevron, ConocoPhillips and ExxonMobil have also publicly announced plans for a combined rapid response system for deepwater well blowouts.
That’s in addition to their individual improvements.
I encourage industry to work together to keep improving the standard of offshore petroleum operations both in Australia and around the world.
I also strongly support APPEA’s initiative in leading the industry through safety programs and best practice standards and I urge industry to continue building the capacity of the Australian Marine Oil Spill Centre and to explore how industry can best expedite the deployment of equipment and personnel.
Industry must be front and centre in the development of new international standards around the competencies and training of personnel in safety-critical roles.
National offshore safety regulatory reform
As you know, I’m committed to the strongest model for regulating safety, integrity and the environment.
I will move to establish a single national regulator for offshore petroleum, mineral and greenhouse gas storage activities by January 2012.
They build on the recommendations of the Productivity Commission Review of the Regulatory Burden on the Upstream Petroleum Sector last year.
Currently the National Offshore Petroleum Safety Authority (NOPSA) is responsible for occupational health and safety issues for the industry.
Given the fundamental relationship between the integrity of facilities and the safety of people and operations, NOPSA should take on responsibility for the structural integrity of pipelines, wells and well-related equipment including the environmental aspects of petroleum development.
By expanding NOPSA’s role, one central agency will look out for the safety of our offshore workers and the environment from exploration to decommissioning. That means it will be responsible for approvals and regulation of safety and environment as well as integrity of facilities and day to day operations.
Furthermore I intend to establish a new statutory authority to advise on title decisions and administration, and major questions of resource management and development. These matters will continue to be subject to joint decisions of the Commonwealth and the relevant State or Territory.
It is my intention to work closely with my federal and state ministerial colleagues to deliver a single, robust and efficient national offshore regulator.
Response to the NOPSA Report and OPSRI
Finally, we’ve reviewed the submissions on the Government's draft response to the recommendations and findings of three other reports.
They are:
- The 2009 Offshore Petroleum Safety Regulatory Inquiry – Marine Issues
- The 2009 Offshore Petroleum Safety Regulatory Inquiry – Best Practice and the Effectiveness of NOPSA
- And the 2008 Review of NOPSA Operational Activities.
Stakeholders generally supported the direction of the Government’s draft response, recognising that processes are underway to address major concerns.
And I thank stakeholders, including the Maritime Union of Australia, the State Designated Authorities, NOPSA and other government agencies for their contributions.
The three reports had 34 recommendations and 16 findings.
There were consistent themes including the need for clarity on the framework and coverage of the legislation and regulations, and the administrative and operating policies and practices of NOPSA.
Today, I’m pleased to release the Government’s final response to these reports.
I support the majority of recommendations and findings and note that the Government has already commenced work on implementation. This reflects my commitment to improving the health and safety regime of Australia’s offshore industry.
A copy of the Government’s final response is available on my Department’s website.
Co-operation underpins every measure we take.
Working together, we can reduce the number and severity of safety lapses and hydrocarbon releases.
The industry’s own health and safety representatives are vital to this effort.
They put the vision into practice.
They ensure workers return home safely.
Their core values must be the industry’s core values.
Conclusion
Ladies and gentlemen, I’m committed to making our offshore petroleum industry the best and safest in the world.
The safety of people, the integrity of facilities and the protection of the environment must always be top of mind.
Jobs and prosperity for the next generation of Australians depend on it.
Thank you.