PTTEP May Lose Australia Permits After Montara Spill

PTT Exploration & Production Pcl (PTTEP) may lose the right to drill in Australia after a review of the company’s plans to prevent a repeat of its 2009 Montara oil spill off the northwest coast, the energy minister said.

The study of the Thai company’s operations is due by the end of the year, Martin Ferguson said in parliament today. Australia will assess all wells completed off its coast since 2005 and give the agency overseeing offshore petroleum drilling more power as part of its response, he said.

PTTEP’s spill and the April BP Plc (BP/) disaster in the U.S. Gulf of Mexico prompted calls for stronger controls worldwide of the oil and gas industry. While Ferguson criticized regulators and “widespread and systemic shortcomings” by PTTEP, he said curbing exploration would threaten Australia’s economy and the country’s energy security.

“They’ve got the opportunity to start from scratch and build a new system that is more integrated,” said Tina Hunter, an assistant professor at Bond University in Queensland and specialist in offshore oil regulation. “At the end of the day, companies want to deal with one government body. They need a regulatory framework that gives clear and consistent direction.”

Hunter said she would like the regulator to have even greater scope.

‘Poor Practices’

The Thai company fell 3.9 percent to 173 baht in Bangkok trading at 4:49 p.m., set for the steepest drop since April 8.

The Thai company is confident its operating permits won’t be revoked, Chief Executive Officer Anon Sirisaengtaksin said. The company’s Australasia unit said in a statement that the “deficiencies” detailed in the report are being addressed to ensure a spill doesn’t happen again.

The Montara leak could have been avoided, Ferguson said at a news conference after releasing a report on the spill. In this case, “the regulatory dog did not bark.”

The Northern Territory Department of Resources, one of the he bodies with oversight at Montara, was “not a diligent regulator,” Ferguson said. “Its minimalist approach to its regulatory responsibilities gave it little chance of discovering these poor practices” by PTTEP, he told lawmakers in Canberra.

The review of PTTEP’s approach to safety after the 2009 incident “will be a central part of my consideration as to whether to issue a ‘show cause’ notice which might lead to cancellation of PTTEP’s petroleum titles,” the minister said.

Seven Permits

Thailand’s biggest oil and gas explorer operates seven drilling permits off Australia and has five production licenses, he said.

Australia will expand the powers of the National Offshore Petroleum Safety Authority under a stronger regulatory system set to take effect in 2012, Ferguson said. A single agency should be responsible for safety, oil well operations and the environment, rather than allowing potential differences to develop among regulators, according to the minister.

While the reforms announced today are “a very good step,” an authority with greater powers doesn’t ensure regulation will improve, Jessica Meeuwig, a professor at the University of Western Australia, said by phone.

“Before we explore, we should have a basic understanding of the marine environment in those areas,” she said. “You need to balance that offshore oil and gas development with high levels of protection” and the establishment of marine sanctuaries.

Ferguson said halting drilling, “putting the nation’s energy security, jobs and the economy at risk does nothing toward” achieving the safety goals outlined today. The government earlier this year offered 31 exploration areas in waters off Australia, inviting companies to bid for permits.

No Blowouts

Explorers drilled 1,500 wells off Australia in the 25 years before the Montara spill without any blowouts, the Australian Petroleum Production & Exploration Association has said.

The cost of clean-up, drilling a relief well and repairs at Montara is about $319 million, Ferguson said today, citing the Thai company.

He received the results of the inquiry -- led by former Secretary of the Environment Department David Borthwick -- in June. The minister said he wanted to ensure making it public wouldn’t prejudice any investigations into possible criminal or civil offenses.

The Bangkok-based explorer estimated as much as 400 barrels of oil a day leaked into the Timor Sea between Aug. 21 and Nov. 3 last year, potentially totaling 30,000 barrels.

The Montara oil leak was caused by the failure of the well’s “control barrier,” the report released today shows. The inquiry found PTTEP’s Australasia unit “did not observe sensible oilfield practices,” Ferguson said.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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