The Importance of Offshore Regulation in Australia

The Importance of Offshore Regulation in Australia

By Stuart Smith – CEO, National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA)

In Australia, areas beyond three nautical miles of the shoreline of a state or territory fall under Commonwealth (federal) jurisdiction, which is also where the vast majority of Australia’s conventional oil and gas resources are located. The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) is the independent regulator for safety, well integrity and environmental management for oil and gas operations in Commonwealth waters. Offshore projects regulated by NOPSEMA include Esso’s operations in the Bass Strait, the Northwest Shelf Project operated by Woodside, and the Gorgon project operated by Chevron, together with an extensive range of other exploration and production operations, and large scale projects under development.

NOPSEMA recognises the economic importance of the oil and gas industry to Australia, but our independent risk based regulatory functions are entirely separate from the resource promotion and economic elements of the regime. This separation of responsibilities avoids the potential conflicts of interest that may otherwise arise. As an independent statutory authority, we are also free of political influence which enables us to consistently make merit-based regulatory decisions. This is supported by independent reviews undertaken during 2015 which found NOPSEMA to be a robust, rigorous and competent regulator.

NOPSEMA regulates under an objective-based regime which I consider is the best way to achieve strong safety and environmental outcomes. Objective-based regulation is an alternative model to prescriptive-based regulation and has been proven internationally to be particularly effective in managing high hazard and technically complex industries. It was introduced to the oil and gas industry following the Piper Alpha incident in the North Sea in 1988 which saw 167 people lose their lives.

While the current lower oil and gas prices have resulted in a reduction in activity levels, there remains a core body of regulatory effort required to maintain effective oversight of the offshore oil and gas industry. As with all stages of oil and gas operations, there is also a need to ensure that as projects move from the development phase into production that risks are managed appropriately. Across industry in the current climate, it is crucial that any job losses or cost cutting do not lead to a reduction in safety and environmental performance or outcomes. We have not found this to be the case in Australia which is a credit to the industry. Nevertheless, we are continuing to monitor this issue through our rigorous compliance monitoring program. The number of annual inspections has increased since NOPSEMA’s establishment in 2012. A total of 195 inspections were conducted across our safety, integrity and environmental management functions during 2015.

There is still more work that needs to be done by industry to ensure that consultation practices are providing the right information, to the right person, at the right time. During preparation of an environment plan, consultation must be undertaken with relevant persons who may be affected by an activity. Companies must demonstrate to NOPSEMA how these views have been, and will be, taken into account. Effective consultation is not only a regulatory requirement, but also an essential part of companies obtaining and maintaining their social licence to operate.

As a regulator, we also need to demonstrate to our stakeholders why we should have a social licence to regulate. This requires community confidence in our abilities as a regulator to be robust, fair, and consistent. We also need to be open to engaging directly with stakeholders and to continue to take steps to increase transparency surrounding our decisions and processes. This has been a focus of NOPSEMA in recent years and will continue throughout 2016 and beyond.
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About Stuart Smith

Stuart Smith was appointed CEO of the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) in September 2014. NOPSEMA is the independent oil and gas regulator responsible for safety, well integrity and environmental management in Commonwealth offshore waters.  Prior to this appointment, he spent 11 years with the Western Australian Public Service as Director General for the Department of Fisheries (2008-14) and Acting Director General and Deputy Director General for the Department of Industry and Resources (2003-2008). Stuart has also worked previously in the Australian Public Service (1989-2003) where he held industry development and regulatory roles in Canberra, Melbourne and Perth.

Diploma in Economics from the Australian National University.


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