Sudden Exposure - Mitigate your Financial Risk to Short and Long Term Environmental Impacts in Drilling Project Management David van Senden September 2015
Sudden Exposure -
Mitigate your Financial
Risk to Short and Long
Term Environmental
Impacts in Drilling
Project Management
David van Senden
September 2015
Outline
Introduction – Drilling and Production
Risks of Marine Oil Spills
• Ecosystem Values (Environmental and Socioeconomic)
• Potential consequences for proponents – i.e. polluter pays
NOPSEMA Financial Assurance (OPGGS amendment 2013)
• APPEA Method for estimating FA
Readiness Planning for Impact and Damage Assessment
• EP/OPEP Impact assessment: Baseline (pre-spill) vs rapid response
• Statistical confidence in attributing impacts (and damages) to an oil spill
Conclusions
• Drilling and Production Operations • Project Management • Engineering Services • Well Optimization • Planning and Approvals • Compliance Monitoring
Project Management
Approvals, Drilling & Production Services
> Drilling & Production service offerings include:
– Project management and outsourcing
– Global rig management services
– Well engineering and design
– Production management
– Environmental Investigations and Planning (EP, OPEP)
– Environmental Compliance Monitoring
– Financial Assurance Compliance
> Managed the drilling, workover, or completion of over 2,500
wells around the world
> Cardno manages between 5 and 15 third-party rigs around
the world at any given time
Ecological Risks of
Marine Oil Spills
• Ecosystem Value (Environmental
and Socioeconomic)
Marine Reserves, Bio
regions, Coastal Habitats
(RAMSAR)
Primary Industries
(Fisheries, etc)
Recreation and Aesthetics
Industrial
Cultural and Spiritual
Basis for EP/OPEP/OSMP
Figure 3 Example conceptual process model for oil spills. NOPSEMA N-04750-IP1349
Potential consequences for proponents – i.e. polluter pays
Exxon Valdez – Natural Resource Damages Settlement approx $1 Billion in
early 90’s dollars
Gulf Spill - Published estimates of $25-30 Billion in clean up, economic damages
and early restoration (does not include NRDA or Civil Penalties)
Small spill clean up 100,000 gallons can easily breach at 1 million a day, damage
assessment costs and natural resource claims can be in the $5-15 million range
Brazilian prosecutors submitted claims in civil lawsuits
against Chevron seeking $17.5 billion in damages for a
November 2011 oil spill. Final settlement agreement
includes about $130 million in compensatory actions for
the 3,600-barrel (~150000 gallons) spill northeast of Rio
de Janeiro.
NOPSEMA - Offshore Titleholders Financial Assurance
Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) and related
regulations amended 28 May 2013 to strengthen the polluter pays principles of the act,
clarify and broaden its financial assurance requirements.
Titleholder is required (1 Jan 2015) to maintain financial assurance sufficient to meet the
costs of the operational response measures (e.g. well control and containment) and
costs arising from addressing the environmental consequences (e.g. monitoring and
remediating the environment).
2013 amendments included provision for regulation requiring titleholders to demonstrate
financial assurance as a prior condition for the acceptance of an environment plan (EP)
by NOPSEMA.
APPEA developed a standard method (GHD, 2014) for use by titleholders to estimate the
level of financial assurance necessary to meet the requirements of the OPGGS Act.
GHD | Report for APPEA - Method to assist titleholders in estimating appropriate levels of financial assurance for pollution incidents arising from petroleum activities, 61/31048
The APPEA calculation method requires that:
• Reasonable worst case scenario identified during fate and transport modelling
be generally consistent with, or more extreme than, any incident that actually
occurs;
• Small number of incident parameters (type of hydrocarbon released, volume of
hydrocarbon released, and a measure of shoreline impact) can reasonably
predict the general magnitude of operational response costs associated with
hydrocarbon releases in marine waters of Australia;
• The type and level of effort required to respond to, clean up, and monitor a
release described in the NOPSEMA approved Environmental Plan is adequate
to achieve desired clean-up endpoints;
• The bottom up approach to costing well control, operational response, and
monitoring efforts for the 10 case studies generates reasonable estimates; and
• 10 case studies relied upon are reasonably representative of the universe of
petroleum activities other titleholders subject to the financial assurance
requirement may undertake.
Reasonableness of APPEA method
Oil Spill Response Readiness Planning
Impact assessment: Baseline (pre-spill) vs rapid sampling
Issue of scale
Spatial - 10m’s to 1000km’s
Temporal - hours to years
Baseline Data
Cost versus return (risk reduction)
Focus effort (if required) to high risk areas
Rapid response “baseline” information is collected at
control or reference sites asap during/after spill
Response time
Prioritisation of effort
Broad scale assessments (e.g. remote sensing)
OPEP and OSMP need to provide sufficient detail that
titleholders are ready with capacity to respond
Impact and Damage Assessment
Statistical confidence in attributing impacts (and damages)
Confounding effects due to range of habitat types and natural variability
Ability to resolve spill effects from natural variability – Remote sensing,
temporal information at reference sites
Statistical analysis as a tool to provide “unequivocal” apportionment for
litigation defence
Basis for legal argument about apportionment of liability and costs
3rd party damages (eg. tourism, fishing) currently not included in Financial
Assurance Estimate but titleholders are potentially liable after the event
Concluding Remarks
• Recent regulatory changes require greater commitment to event
readiness and Financial Assurance to cover costs of spill incident
cleanup, restoration (but not third party liability)
• Implementation of operational and response monitoring - requires
improved preparedness – e.g. environmental monitoring drills,
enhancement of impact resolution tools (audits by NOPSEMA)
• Future liability assessment will require robust statistical treatment for
impact assessment and implications on data quality
• Consequences and processes for apportionment of liability for spill
effects need to be better understood
• Including these issues in planning for exploration drilling programs
helps to mitigate risk