Montara oil spill: site's new operator rejects suggestion it couldn't afford second clean-up

Ben Butler
Photograph: Annabelle Sandes/AFP/Getty Images

The new operator of the site of Australia’s worst ever oil spill has dismissed concerns it might not have the financial capacity to clean up should disaster strike again.

Ten years ago on Wednesday an estimated 40 million litres of oil leaked from a faulty rig in the Montara field, in the Timor Sea, and for 10 weeks spread over tens of thousands of square kilometres of ocean.

In federal court proceedings, Indonesian seaweed farmers claimed the spill devastated their crops, costing them as much as $200m.

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At the time, Montara was owned by an Australian subsidiary of Thai national petroleum company PTTEP.

However, last year PTTEP agreed to sell the field to junior oil player Jadestone Energy for US$195m.

Jadestone has never made a profit but the company’s chief executive, Paul Blakeley, told the Guardian it was fully insured to cover the cost of cleaning up a major spill, which can run into the hundreds of millions of dollars.

“The Montara asset is in good hands and we’ve got exciting plans for it,” he said.

Jadestone and PTTEP jointly decided to close the field in September last year, he said.

In November, the National Offshore Petroleum Safety and Environmental Management Authority (Nopsema) ordered it not be reopened “until the company demonstrates to Nopsema’s satisfaction that all safety critical equipment and systems required to support production operations at the facility are without risk to the health and safety of workers”.

In June, Jadestone said its employees assumed “key operational leadership positions” at the field, and costs were cut by US$20m a year.

Earlier this month, Nopsema approved a new safety plan submitted by Jadestone, allowing production to restart.

“We inherited an asset with a number of regulatory enforcement actions listed on their [Nopsema’s] website,” Blakeley said. “All of those had to be dealt with and have been dealt with.”

He said that in addition to the insurance, Jadestone had also demonstrated the “operational capability” to safely run the oil field.

“As part of the Montara acquisition we’ve taken technical representatives from the underwriters offshore to demonstrate how we’ve improved,” he said.

However, Wilderness Society South Australia director Peter Owen said he was concerned about cost-cutting because it was “a major cause of the Montara disaster”.

“Jadestone’s London Stock Exchange listing says it has not turned a profit and there’s a question of whether it could afford a major oil spill accident,” he said.

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An inquiry into the Montara disaster found PTTEP’s standards were not adequate and that “the company’s personnel on the rig demonstrated a manifestly inadequate understanding of their contents and knowledge of what they required”.

The company’s “senior personnel on the rig and onshore were also deficient in their decision‐making and judgments in relation to a number of important matters”, commissioner David Borthwick said.

Borthwick found PTTEP also “seriously misled” the regulator and said its licence should be reviewed.

However, PTTEP was fined just $500,000 and was allowed to resume production.

Jadestone, which is listed on the London AIM market, has not made a full-year profit since 2014, running up accumulated losses of more than US$309m.

However, it turned a profit in the quarter to the end of March of US$8.3m, which it said was “the first ever quarter of substantive positive after-tax profit for the company”.