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Interview

Stuart Smith – CEO, NOPSEMA, Australia

Stuart Smith describes his key priorities as CEO of NOPSEMA, how to improve safety and environmental management, and the pitfalls that companies face when submitting new plans. NOPSEMA is the National Offshore Petroleum Safety and Environmental Management Authority, an independent statutory agency regulating the health and safety, structural integrity, and environmental management of all offshore petroleum operations in Commonwealth (federally regulated) waters of Australia.

To begin, Stuart, can you describe the pivotal role that NOPSEMA has in creating a safer and more environmentally responsible Australia?

In Australia, areas beyond 3 nautical miles of the shoreline of a state or territory fall under Commonwealth (federal) jurisdiction, with the area immediately adjacent to the shoreline being within the jurisdiction of the relevant state or territory. The vast majority of Australia’s conventional oil and gas resources lie within the Commonwealth’s jurisdiction in offshore waters.

NOPSEMA’s predecessor, the National Offshore Petroleum Safety Authority (NOPSA), was formed in 2005 to regulate occupational health and safety for offshore oil and gas operations within Commonwealth jurisdiction. NOPSEMA was established in 2012 when the organization’s scope was expanded to include regulation of well integrity and environmental management. The regulatory functions of NOPSEMA were previously undertaken by the relevant state or territory within the offshore area adjacent to their state or territory. There is the ability for the states to confer regulatory powers within their waters onto NOPSEMA to mitigate any potential uncertainty, inconsistency, and additional costs to industry. The idea is to ultimately have a single national regulator throughout Australia’s offshore waters.

NOPSEMA is an independent statutory authority administering an objective-based regulatory regime that places the onus on the operators to identify the best ways to manage the safety risks they create. NOPSEMA then evaluates the course of action proposed by an operator – in the form of a safety case or well operations management plan – and grants approval if the arrangements minimize the associated risks to a level that is as low as reasonably practicable (ALARP). This ALARP concept is central to the objective- (or performance-) based regulatory model under which NOPSEMA operates.  The ALARP concept is also applied by NOPSEMA to evaluation of environment plans that are found to be acceptable.

NOPSEMA attracts and retains people with the high level of expertise required to understand the operations in detail, undertake assessments, and conduct compliance monitoring inspections. Consequently, a substantial portion of our staff comes from industry and the salaries and packages we offer are higher than you would normally expect in a government agency. The experience and expertise of NOPSEMA’s staff is essential to be able to challenge the companies we regulate to ensure that all reasonable steps are taken to manage risks appropriately, and to ask questions such as ‘are you doing enough?’

What are the most salient topics currently at the top of your agenda as CEO?

I started in this role in October 2014. Fortunately, during my first year in the role, we had two independent reviews.  One was a statutory operational review assessing our performance by an independent panel and another evaluated our management of additional environmental management functions we received under a separate piece of legislation, the Environment Protection and Biodiversity Conservation Act 1999. Having two independent reviews of the agency was ideal because it effectively acted as due diligence, yielding a comprehensive snapshot of NOPSEMA’s progression since its establishment in 2012. In essence, the reviews concluded that NOPSEMA had been an effective, professional agency with a positive impact on safety and environmental outcomes, but needed to dedicate more resources towards stakeholder engagement and develop a stronger community understanding of the regulatory regime and the role NOPSEMA plays in supporting it.

We’ve been implementing changes that address the review findings. For example, we recently installed the option on our website for any interested stakeholder to receive automatic notifications about environmental proposals associated with any oil and gas activities in a particular region. The alert allows these stakeholders to contact us or the company engaging in the activity with any potential concerns or inquiries. This type of initiative is consistent with the next stage of our environmental oversight by ensuring that the right level of information about proposed activities is available so stakeholders, including members of the public, can engage with companies proposing to undertake oil and gas activities in a timely and meaningful way.

On the safety side, our priorities are centered on improving safety outcomes in the industry amid falling commodity prices. We’ve had industry on notice about this issue for over 12 months, making it a focus of our inspections. Companies have been telling us that they have avoided cutting safety positions when it comes to workforce reduction. While this may be the case, there is still a heightened risk when a company is trimming down its payroll, as employees are naturally distracted in the wake of reduced job security. With companies under pressure to implement cost-cutting arrangements we are also seeing more requests for the use of temporary measures as permanent ones. These requests can be reasonable, but they typically require further evaluation.

At what point in a company’s project timeline does NOPSEMA start getting involved, and how long does that involvement extend for?

When a company is seeking a title under the licensing framework, NOPSEMA does not get involved. We’re essentially absent from the entire economic regulatory aspect because there’s a potential conflict of interest between promoting the development of oil and gas resources and the regulation of health, safety, and environmental management of oil and gas activities. There is a clear and intentional split in the regulatory framework between these two objectives. As I mentioned previously, we have a number of key regulatory approvals that fall within our remit. For example, if a well is going to be drilled, the companies involved in the activity must have a safety case, an environment plan for the drilling activity, and well operations management plan for the structural integrity of the well.

NOPSEMA does have an increasing role to play in the early stage of large scale projects as a result of regulatory amendments in 2014. On the environment side, companies proposing new oil and gas developments submit an offshore project proposal to NOPSEMA. NOPSEMA’s assessment of a proposal provides an approval process where the environmental impacts and risks of multiple activities conducted over the life of a project can be considered holistically. It also provides for a public comment process on the proposal. An accepted proposal is not an approval of the individual activities within the project, each offshore petroleum activity within a project must also have an accepted environment plan to begin.

In addition to operational approvals, another key component of how NOPSEMA regulates is compliance monitoring through inspections which ensure companies have implemented adequate processes and systems to manage the risks associated with the activity in accordance with their approval and the regulatory framework.  If there are breaches, we have broad ranging enforcement tools, which we can apply where there is a need to do so.

With respect to approval timelines, what would you consider to be the most common pitfalls that companies make when submitting new proposals?

A common mistake involves a company taking an approved safety case or environment plan from another operation that has already been approved and attempting to just add additional information for a new project. This approach often leads to an overly complex document that includes an abundance of unnecessary information – imposing a large burden on both the company and NOPSEMA. On the safety side, complexity can lead to safety gaps or confusion, and in turn, increased risk of injury or accidents. On the environmental side, where approvals are often site-specific, one plan might be adequate in one environment but completely inappropriate for another. This cookie-cutter approach can lead companies to expend more time and energy than if a company had carefully and thoughtfully initiated the process with a blank slate, while incorporating any lessons learned from previous plans.

How is NOPSEMA then working with industry to streamline the process and mitigate wasted efforts?

We’ve directed our efforts to educating companies when it comes to the approvals process. In the past, NOPSEMA was quite distant from industry and didn’t provide much guidance in terms of improving their respective plans. Now, we’ve taken a more interactive approach. We don’t specifically instruct them on what to put in the plan, but we will provide more detailed feedback to identify issues, development points and experience from across industry.

Equally, we’re hosting more workshops with key industry stakeholders on an on-going basis – especially in the wake of incidents. For example, one of the facilities in the north west of the country broke several of its moorings during a cyclone. After conducting our investigation, we convened a workshop with the relevant industry operators to discuss our findings and collectively generate solutions and further guidance moving forward. The outcomes were then presented to the broader industry by NOPSEMA at an industry conference. This was a more collaborative approach than we had traditionally applied. With this new approach, industry participants are more likely to take ownership over the agreed action steps and to maintain compliance.

How would you benchmark the success of NOPSEMA’s performance thus far?

The two reviews we had in 2015 confirm that there’s been substantial improvement in industry’s performance since NOPSEMA was created. The reviews found that NOPSEMA takes a firmer stance on the application of some of the regulations than had previously been the case. The approach some companies had used to address certain issues prior to NOPSEMA being formed was not acceptable by our standards. For instance, companies are now called to account for their obligation to consult with affected stakeholders, so they must provide evidence of the consultation they have undertaken, all the issues raised, and how they plan to address them. If all of these requirements are not properly met, then NOPSEMA will not give an approval.

Although apprehensive at first, the industry has come to acknowledge the sector-wide value in higher compliance standards for safety and environmental performance – especially in more specific areas such as oil spill response capability. NOPSEMA has also had to learn and develop over time so the past few years have been a journey for many organizations.

These improved outcomes since NOPSEMA was established have facilitated greater community confidence in offshore oil and gas. If the community has more confidence, there is greater acceptance of offshore oil and gas activity – which is particularly important in places which may become new provinces for exploration and production. There’s very keen interest from the community in some new areas released for offshore activity, although not everyone is supportive. A few environmental NGOs have expressed their fair share of concerns. In considering the development of these projects, it’s important that the community is confident in a regulatory process that holds companies properly to account and grants approvals when the environmental and safety measures are appropriate and sound.

From a personal leadership standpoint, what type of expectations did you have coming into the position as the head of a national regulator? And how have they matched up with the realities?

The strengths and weaknesses of NOPSEMA were more or less in line with what I had expected and this view was reinforced by the findings from the reviews I’ve mentioned. The move back into a federal government agency from a state government agency has been smooth but I’ve noticed a distinct difference between working for a government department versus a statutory authority. As head of a government department, I would frequently interact with government ministers to seek their views and update them on relevant issues, dealings with companies, or approvals. When working for a statutory authority, ministers do not have the same involvement as it’s our job to administer the regulations independently.

NOPSEMA is also quite fortunate to enjoy broad political support in Australia. I regularly speak to current government ministers, opposition shadow ministers and other members of parliament. This interaction applies to both sides of politics at both the federal and state level but the focus is on the overall regulatory regime, rather than specific approvals. Consequently, my role is independent from political influence, enabling me to take a strong role leading the objective-based regulatory regime for offshore oil and gas in Australia.

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