Overview of Australia's offshore petroleum industry
The offshore petroleum industry is an important contributor to the Australian economy and national job creation. In 2016-17, the broader industry contributed $28.5 billion to the national accounts. In the same year, the number of people employed in the sector was 20 000.
The industry is also widely recognised as inherently highly hazardous due to its technical complexity, geographic remoteness and the volatile nature of its product stream.
From a historical perspective, the safety regulation of the industry globally was significantly influenced by the 1988 Piper Alpha disaster in the North Sea which resulted in 167 deaths and substantial financial impacts to the UK industry and Government. Over time, the regulatory response to Piper Alpha, as well as two major incidents in the Australian offshore petroleum industry, lead in 2012 to the establishment of National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
According to NOPSEMA, since its establishment, no fatality or major accident event has occurred and there has been a record low rate for offshore accidents achieved for a full year in 2016 with no serious injuries reported.
Nevertheless, it is important to recognise that an effective work health and safety (WHS) regime, which promotes continuous improvement of safety performance, is a vital contributor to the future success of the offshore petroleum industry.
The Australian Petroleum Production and Exploration Association (APPEA) advised that the oil and gas industry remained determined to continue to deliver improved safety performance, and noted the following areas where opportunities for improvement existed in the industry:
occupational health and safety performance continues to lag international benchmarks;
process safety performance across the industry and in Australia continues to show no discernible trend of continuous improvement; and
the Australian industry is transitioning from a capital investment phase to become the world's largest exporter of liquefied natural gas (LNG), requiring a shift of emphasis towards operations and maintenance activities.
The Department of Industry, Innovation and Science told the committee of the importance of strong collaboration between government (both policy-makers and regulators), industry and the workforce (including unions), as well as the need to foster a strong culture of safety in the workplace:
The health and safety of workers involved in offshore petroleum activities is of the utmost importance to government, industry and the community. Workplace safety relies on strong collaboration between government, industry, the regulator, the workforce and unions. The Australian resources sector is a world leader in health and safety performance and Australia’s offshore petroleum industry is one of the safest in the world. To ensure this continues to be the case, it is essential that both the Australian Government and industry remain committed to ensuring offshore workers are safe and free from harm, and fostering a strong workplace culture to prevent fatalities, injuries and diseases.
In a similar vein the NOPSEMA Chief Executive Officer also supported the proposition that an effective regulatory system requires input from the regulator, the industry and the workforce.
The APPEA Chief Executive Officer also expressed a similar sentiment:
Our starting point is that everyone involved in the offshore oil and gas industry has a personal responsibility for ensuring their safety and the safety of others. This duty of care applies equally to managers, employees, contractors and regulators. We believe that the best safety outcomes are achieved by fostering a collaborative culture which promotes problem‑solving and continuous improvement at every workplace.
The following sections outline the regulatory framework for the Australian offshore petroleum industry, the legislative underpinnings of the safety regime, and the safety case model.
Role of the National Offshore Petroleum Safety and Environmental Management Authority
NOPSEMA is an independent statutory authority established under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act). It is the national regulator for health and safety, well integrity and environmental management for offshore petroleum activity in Commonwealth waters, as well as in coastal waters where regulatory powers and functions have been conferred.
Commonwealth waters comprise those areas beyond three nautical miles from the territorial sea baseline. Currently Victoria is the only jurisdiction that has conferred its powers of offshore petroleum safety to NOPSEMA, although the conferral of powers is under consideration by other jurisdictions.
According to NOPSEMA, the agency takes an 'integrated, expertise based approach' to the regulation of WHS, well integrity and environmental management to ensure that risks are reduced to a level that is 'as low as is reasonably practicable' and ensures responsible and safe offshore petroleum activities. This approach does not extend to policy development, resource promotion, or the regulation of economic factors. Such responsibilities instead rest with other government agencies to avoid the potential for conflict of interest.
NOPSEMA's legislated WHS functions are set out in section 646 of the OPGGS Act and can be summarised as follows:
to promote the WHS of persons engaged in offshore petroleum operations or offshore greenhouse gas storage operations;
to develop the implement effective monitoring and enforcement strategies to secure compliance under the OPGGS Act and regulations;
to investigate accidents, occurrences and circumstances that affect WHS;
to advise on matters relating to offshore health and safety;
to make reports on investigations to the responsible Commonwealth minister and each responsible state/Northern Territory minister;
to provide information, assessments, analysis, reports, advice and recommendations on request to the responsible Commonwealth minister;
to cooperate with Commonwealth, state and Northern Territory agencies or authorities having functions relating to regulated operations.
Further details on the WHS regulatory framework are provided below.
In order to fulfil its legislation functions, NOPSEMA undertakes assessment, inspection, investigation, enforcement, promotion and advisory activities.
NOPSEMA informed the committee it delivers its WHS functions through five core, interlinked regulatory activities:
assessing how the operator of the facility proposes to manage the WHS risks of their activity and determines whether the safety case is acceptable;
inspecting the facility to determine whether the activity is being managed in accordance with the accepted safety cases and other legislation requirements;
investigating where an incident occurs or where a potential non‑compliance with the legislation is suspected;
taking enforcement action where it is required to rectify and prevent recurrence of non-compliance;
promoting WHS and providing advice to the industry on learnings from assessments, inspections, investigations and enforcements and promoting robust WHS management practices.
Chapter 4 of this report considers how effectively NOPSEMA executes its role.
Role of the Department of Industry, Innovation and Science
The Department of Industry, Innovation and Science (the department) is responsible for providing upstream offshore oil and gas-related policy advice to the Commonwealth Government. It undertakes key functions in regard to offshore oil and gas WHS matters, which include:
providing regulatory and policy oversight for the WHS of individuals involved in offshore petroleum activities, environmental management and offshore well integrity issues; and
leading the government's involvement and strategic response to a significant offshore petroleum incident.
Offshore petroleum WHS regulatory framework
Since 2006 the legislative framework for the offshore petroleum industry has been based on the OPGGS Act. The OPGGS Act and associated regulations provide for a WHS regulatory framework characterised as an 'objective-based regime', rather than a prescriptive regulatory regime. NOPSEMA submitted that such an approach allows for continuous improvement from both industry and regulator, and it is internationally accepted as being the most appropriate regulatory framework for major hazard industries.
According to NOPSEMA, an objective-based safety regime:
establishes a framework based on specific objectives and requires operators of facilities to demonstrate how they will achieve those objectives;
ensures that those who create risks are responsible for identifying and managing that risks, including the need to reduce WHS risks to a level that is 'as low as reasonably practicable';
is adaptable, flexible and scalable to the petroleum activities proposed to be undertaken;
provides the opportunity for the offshore petroleum industry to adopt advances in technology and apply WHS risk control measures that are best suited to the individual circumstances of the activity;
encourages adoption of best practice and continuous improvement in all aspects of the operator's WHS performance; and
is recognised as international regulatory best practice for major hazard industries such as offshore petroleum, onshore petroleum, petrochemical and nuclear industries.
The department outlined the benefits to employing an objective-based regime:
The outcome of an objective-based regime is that costs and implications to health, safety and the environment are considered as part of a company's investment decisions. In this regard, objective-based regulation encourages continuous improvement to achieve appropriate health and safety and environmental outcomes. It ensures flexibility in operational matters to meet the unique nature of different activities, and avoids a 'one size fits all' approach to regulation, allowing industry to determine the most effective and efficient way to operate.
The safety case
One of the key elements of NOPSEMA's regulatory regime is the preparation by the operator of a safety case. A safety case is a document produced by the duty holder to describe the facility, identify the hazards and risks, the risk controls and the safety management systems which provides for the continual identification and assessment of hazards and how risks will be minimised on an offshore facility.
As the department stated:
A safety case is a sophisticated, comprehensive, integrated risk management system which must identify the safety-critical aspects of the facility, both technical and managerial, and defines appropriate performance standards for the operation of the safety-critical aspects.
An offshore facility cannot be constructed, installed, operated, modified or decommissioned without a safety case in force for that stage in the life of the facility.
NOPSEMA advised that a safety case prepared by the operator of a facility must describe four key elements:
the activities expected occur at the facility;
the assessments carried out regarding any potential 'major accident events', including technical or other controls to reduce risk to a level that is as low as reasonably practicable;
the system for managing safety that is to be implemented by the operator.
Importantly, the department recognised the role that the workforce plays in the development of the safety case:
Genuine, quality worker involvement and consultation on health and safety issues is of key importance to achieving positive safety outcomes. Under the offshore OHS [occupational health and safety] regime, the involvement of members of the workforce is essential to the development of safety cases and operators must demonstrate effective consultation with and participation by the workforce in the preparation of safety cases.
Chapter 3 of this report examines the development and accessibility of safety cases for offshore facilities in more detail.
Compliance and enforcement measures
In 2011 the Commonwealth Government undertook a review of compliance and enforcement measures in the OPGGS Act and associated regulations. The review concluded that the enforcement mechanisms, sanctions and penalties available at that time needed to be more effective and meaningful deterrents against non-compliance. As a result, a broader range of graduated enforcement tools for NOPSEMA to use were introduced, commencing on 1 October 2014.
The NOPSEMA submission described the new compliance measures for the committee:
The resulting amendments to the OPGGS Act (introduced through the Offshore Petroleum and Greenhouse Gas Storage Amendment (Compliance Measures) Act 2013) included:
the introduction of a civil penalty regime
increases to the criminal penalty levels under the OPGGS Act, consistent with major hazard industry legislation penalties, including custodial penalties, for OHS offences under the OPGGS Act were harmonised with, or made greater (as appropriate) than the Commonwealth Work Health and Safety Act 2011, to reflect the greater consequences in a major hazard industry
NOPSEMA's inspectorate powers were redrafted to provide greater clarity and consistency between the various powers of each category of inspector and to remove unnecessary procedural requirements that impeded NOPSEMA's ability to effectively perform its enforcement functions.
Further enforcement measures were introduced through the Offshore Petroleum and Greenhouse Gas Storage Amendment (Compliance Measures No. 2) Act 2013) which included:
the introduction of alternative enforcement mechanisms (infringement notice, daily penalties for continuing offences and civil penalty provisions, injunctions and adverse publicity orders) into the offshore petroleum regulatory regime
requiring NOPSEMA to publish on its website improvement and prohibition notices issued by NOPSEMA's inspectors under schedule 3 of the OPGGS Act [which relates to OHS matters]
enabling matters relating to the service of documents under the OPGGS Act or legislative instruments to be provided for in regulations under the OPGGS Act. Specifically, this allowed for documents to be served by electronic means which we deemed to be particularly important in situations of potential emergency, where notices were issues under Schedule 3 of the OPGGS Act.
Chapter 4 of this report examines the efficacy with which NOPSEMA utilises the compliance and enforcement measures available to it.