1 exxonmobil australia

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RESPONSE TO THEDRAFT GOVERNMENT RESPONSE TO THE

REPORT OF THE MONTARA COMMISSION OF INQUIRY

FEBRUARY 2011

SUBMISSION BY EXXONMOBIL AUSTRALIA PTY LTD



CONTACT DETAILS

Gemma AllmanIssues Management & Government Relations

ExxonMobil Australia Group of CompaniesGPO Box 400Melbourne VIC 3001+61 3 9270 3333

ExxonMobil Australia Pty Ltd is a subsidiary of Exxon Mobil Corporation. ExxonMobilAustralia Pty Ltd has a number of subsidiaries with assets and operations in Australiamany with names that include ExxonMobil, Exxon, Esso and Mobil. For convenienceand simplicity in this submission those terms and the terms corporation, company,our, we and its are sometimes used as abbreviated references to a specificsubsidiary or groups of subsidiaries in the ExxonMobil Australia group of companies.

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About ExxonMobil Australia

ExxonMobil Australia Pty Ltd and its subsidiaries (ExxonMobil) have had a significantrole in the development of Australia’s oil and gas resources and have a businesshistory in this country stretching back over 110 years.

ExxonMobil is one of Australia’s largest oil and gas producers. Our activities coverexploration and production of oil and gas, petroleum refining and supply of fuels(including natural gas), lubricants, bitumen and chemical products.

ExxonMobil is a substantial investor in the Australian economy and a majorcontributor to the wealth of the nation. Annually ExxonMobil pays around A$800million in taxes to local, State and Federal Governments. Our cumulative investmentin Australia exceeds A$16 billion and we provide direct employment for around 1700people and indirect employment for many thousands more.

Exxon Mobil Corporation

Globally, Exxon Mobil Corporation — the parent company of ExxonMobil Australia —is the world's largest publicly traded international oil and gas company, providingenergy that helps underpin growing economies and improve living standards aroundthe world. An industry leader in almost every aspect of the energy and petrochemicalbusiness, we operate facilities or market products in most of the world’s countriesand explore for oil and natural gas on six continents.

We hold an industry-leading inventory of global oil and gas resources. We are theworld’s largest refiner and marketer of petroleum products. And our chemicalcompany ranks among the world’s largest. But we are also a technology company,applying science and innovation to find better, safer and cleaner ways to deliver the

energy the world needs.

Impact of Recent Events

Australia’s oil and gas natural resources are the foundation of the nation’s economyand standard of living, and it is essential that we strive to ensure the safe productionof these resources.

This country — as well as the global energy industry — will benefit from a fullunderstanding of the causes of the Montara incident and the subsequent DeepwaterHorizon incident in the Gulf of Mexico. It is important that Commission's findings andthe Government’s response to the recommendations help to advance this goal, which

is to ensure that all the nation's energy facilities are operated at the higheststandards of safety.

Many would say, especially now, that energy companies must make safety a "toppriority" — but a commitment to safety must run much deeper than simply being a“priority.” A company's priorities can — and do — evolve over time depending onbusiness conditions and other factors. A commitment to safety therefore should notbe a priority, but a value — a value that underpins and shapes decision-making allthe time, at every level.

Every company desires safe operations — but the challenge is to translate this desireinto action. The answer is not found only in written rules, standards and procedures.

While these are important and necessary, they alone are not enough.

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The answer is ultimately found in a company's culture — the unwritten standards andnorms that shape mindsets, attitudes and behaviours. Companies must develop aculture in which the value of safety is embedded in every level of the workforce,reinforced at every turn and upheld above all other considerations.

ExxonMobil’s Safety Management Approach

The 1989 Valdez accident was one of the lowest points in ExxonMobil's 125-yearhistory. But it was also a turning point. In the aftermath, ExxonMobil launched a full-scale, top-to-bottom review of our operations, and implemented far-reaching actionsthat today guide every operating decision we make on a daily basis.

That is not to say that, prior to Valdez, we did not take safety seriously. ExxonMobilhad been in business for more than 100 years, and we had always taken steps tomaintain safe operations as risks changed and energy technologies evolved. Wewere proud of our safety record. We believed, as our safety credo at the time stated,that all accidents and injuries are preventable. Like many companies, we worked to

meet or exceed industry safety standards, trained our employees in safetyprocedures, and tracked certain metrics that measured our success. But we did nothave a comprehensive, systematic view of this aspect of our business that we havetoday.

It was the beginning of a long journey for our company. This is a journey that wehave not completed. We know that we cannot rest or waver from the goal of drivingaccidents and incidents to zero. And we’re not there.

But we have made significant progress. And, as we have learned, for this progress tobe achieved, its impetus had to come from within the company. We could not havegovernment impose a safety culture on us, or hire someone to do it for us. Experts

and consultants do provide a valuable service, but for an organisation to change itsculture, change must come from the inside-out, not the outside-in. You cannot buy aculture of safety off the shelf — you have to craft it yourself.

We began by creating a framework that puts our safety commitment into action.Today, that framework is called the Operations Integrity Management System, orOIMS for short.

OIMS is a rigorous 11-point set of elements designed to identify hazards andmanage risks. Its framework covers safety; management leadership andaccountability; design, construction and maintenance of facilities; emergencypreparedness; management of change (MOC) processes; assessment of

performance; and, of course, thorough inquiries into accidents and incidents.

OIMS guides the activities of each of ExxonMobil’s more than 80,000 employees, aswell as our third-party contractors, around the world. Over time, it has becomeembedded into everyday work processes at all levels.

Through OIMS, ExxonMobil monitors, benchmarks and measures aspects of oursafety performance. Its structure and standards are shared and communicated theworld over. One of the greatest benefits of OIMS is that it has enabled ExxonMobil —a large organisation that operates across diverse cultures and geographies — to beof one mind when it comes to safety and risk management.

Importantly, the contractors that we work with are embedded within our OIMSprocesses as well. We expect our contractors to be as knowledgeable and

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conversant with our OIMS processes as our own employees. Not every company hasthis expectation, but we have found that when everyone in the workplace speaks thesame language of safety — employees and contractors alike — everyone can workcollaboratively, safely and effectively.

You may have heard the phrase: "If you can't measure it, you can't manage it." Andit’s true. And that is why ExxonMobil measures and analyses its safety performance.We record not just our injuries, but we record our near misses and our close calls.Our goal is not just to analyse safety incidents after they happen, but to identify risksand risky behaviours before they lead to a safety incident. The more elements of riskto be managed in an activity, the more frequently we test, measure and analyse thesafety approach in that activity.

More broadly, OIMS requires us to assess the health of the overall safety approachin our operating environments on a regular basis. Importantly, these assessmentsare performed not only by trained safety personnel, but by cross-functional, cross-regional teams drawn from all over our global organisation. In this way, employees

are responsible for each other's safety. Additionally, the knowledge employees gainby participating in these assessments is taken back to their jobs, and spreadthroughout the organisation.

Leadership

OIMS by itself is only one part of the equation. Even the best safety systems are notfully effective unless they exist as part of a broader culture of safety within the peopleof the organisation.

The same skills that it takes to lead a business are required to achieve strong safetyresults – attention to detail, an ability to understand and motivate our workforce, a

focus on continuous improvement and an understanding of the objectives that drivethe organisation forward.

While ExxonMobil and other energy companies use a lot of equipment — everythingfrom steel pipe to supercomputers — it is people who bring this equipment to life.And people's behaviour is heavily influenced by their culture.

By instilling the value of safety in our employees from the first day of hire,ExxonMobil strives to create a working environment in which safe behaviours areinternalised; they’re reinforced; and they’re rewarded.

The culture of safety starts with leadership — because leadership drives behaviour

and behaviour drives culture. Leaders influence culture by setting expectations,building structure, teaching others, and demonstrating stewardship.

And that is why the first element of OIMS is "Management Leadership andAccountability." ExxonMobil managers are expected to lead the OIMS process bydemonstrating a visible commitment to safety and operations integrity. In addition,safety leadership is a significant part of how a manager's overall performance isevaluated. But management alone cannot — and should not — drive the entireculture. For a culture of safety to flourish, it must be embedded throughout theorganisation.

Therefore, safety leadership at ExxonMobil comes not just from supervisors and

managers, but from employees and contractors, and through channels both formaland informal.

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Achieving a Sustainable Culture of Safety

Pride in our safety systems does not mean we can relax our commitment. The exactopposite is true. To get where we need to be on safety, continuous improvement isessential.

In an industry such as ours — which operates 24 hours a day, around the world —the need to manage risk never ends. Even the best safety framework should beviewed as a work in progress.

Developing a culture of safety therefore is not an event, but a journey. ForExxonMobil, that journey began more than 20 years ago, when we put our globalsafety framework in place.

Once that framework became embedded in our organisation, we saw the culture startto change and the results became evident in improved performance. In turn, thisallowed us to move from implementing the system to improving it.

That's when ExxonMobil's culture was really transformed. Over the years, people atall levels within the Company came to understand that our safety systems are put inplace for them, that they are about protecting them and their co-workers and thepublic, and not about catching people doing the wrong thing.

Part of that transformation is recognising that every employee's job involves somedegree of risk management — even those employees who work in office settings.That is why OIMS extends even to administrative locations.

When an organisation reaches the point where everyone owns the system andbelieves in it, the culture of safety and operational integrity can be sustained — when

it enters the hearts and minds of the people of the organisation and becomes a verypart of who we are.

We often use the phrase at ExxonMobil, “Nobody Gets Hurt” to describe our safetyobjective. Some observers of our company question this; they say it can’t be done.Well, it can be done. We have operating units today that have gone years withouthurting anyone. Our challenge is to sustain that performance where it has beenachieved, and to replicate and grow that record of performance across theorganisation.

Risk/Change

Considering that many of ExxonMobil's energy projects can span decades, achievingthe goal of a self-supporting, sustainable safety culture means we must be flexibleand adaptable to changes in the operating environment.

As a result, MOC is a key component of our OIMS system. Our MOC processes aredesigned to ensure that with changes in our business or operations, we recognisethe changed conditions, we actively identify the new or changed risks, and we applyour disciplined processes for managing the risks and their potential consequences.

Risks are addressed and the change is managed - typically through eithertechnological solutions, or operating changes in response to the potential risk. Butmost importantly, it is clear who owns the MOC and the subsequent risk

management, and every employee and contractor is important to that process.

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These very deliberate, well-established processes, embedded in OIMS, haveenabled ExxonMobil to pursue challenging new resources and new developmentprojects with the confidence that we will do so safely and responsibly. Such anapproach is not only in the interests of employees and resource owners — but clearlyit is also in the interests of our shareholders.

Best Practices

Best practices are successfully demonstrated practices or technologies proven toprovide superior results. Because safety is not proprietary, ExxonMobil shares itssafety best practices within our company, our industry, and across other industries.

We seek to learn from others as well, examining incidents and near-misses outsideour organisation in order to continually improve our own performance. After the 2003Columbia space-shuttle explosion, ExxonMobil assembled a team of engineers,scientists and safety experts to study the technological and organisational factorsthat may have led to that disaster, and whether there were any lessons for

ExxonMobil's operations.

It is by constantly learning and analysing — by looking to best practices in otherorganisations, and by examining incidents and near-misses in our own organisation — that we continually improve our own performance.

ExxonMobil Drilling Experience

Based on the industry’s extensive experience, we know that when wells are properlydesigned for the range of risk anticipated, established procedures are followed,layers of redundancy are built in, equipment is properly inspected and maintained,

operators are trained, tests and drills are conducted, and when the focus remains onsafe operations and risk management, incidents like the Montara well blowout shouldnot occur.

Over the past 10 years, ExxonMobil drilled 7,778 wells worldwide of which 262 werein water depths of 750 metres or more. ExxonMobil’s world-class engineeringcoupled with effective application of advanced technologies has enabled thecompany to drill and complete world-record wells in a variety of countries, includingAustralia, over the past five years.

Over the past decade ExxonMobil has pursued resources in deepwater areasincluding Angola, Australia, Nigeria, the U.S. Gulf of Mexico, the North Sea, Brazil,

Indonesia, Philippines and Libya. The company has a diverse, industry-leadingportfolio of deepwater opportunities around the world, covering 49 million net acres.We have interests in 24 currently producing deepwater developments, with manycomprising multiple individual fields produced from subsea and surface productionfacilities. In 2009, their combined net production was approximately 460,000 oil-equivalent barrels per day.

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ExxonMobil Drilling Approach

ExxonMobil drilling operations require rigorous application of OIMS. The OIMSframework shapes drilling design methodology and operating approach, including thefollowing key areas:

Well and Equipment Design - We have documented standards for critical equipmentand well design. Our well planning process is utilised consistently for design including,but not limited to, casing and tubing, cementing, blowout prevention equipment, andother critical equipment and services. Proprietary technology and tools are utilised toreduce risk and enhance our well designs in areas such as casing and tubing design,pressure prediction, and flow modelling.

Inspections and Tests – Critical equipment is inspected before use to ensure it meetsboth the manufacturer’s specifications and ExxonMobil design standards. Equipmentis tested either pre-startup or periodically to verify proper functionality and integrity.

Drills and Training - Personnel training is designed to keep responsible partiesproficient in carrying out their duties. We expect workers on a rig to know their rolesand responsibilities and operations must be in compliance with ExxonMobil’sexpectations and standards. This knowledge is assessed through regular drills andexercises.

Operating Procedures – Regardless of location or specific well conditions, our wellsare subject to detailed review of the design and execution plan. Prior to the start of anew operation, an Operations Safety Plan is developed to document expectations,roles, responsibilities and processes to manage safety at the rig site. Onceoperations are underway, significant variations to established procedures, variationsin defined critical design parameters, or changes in execution procedures require a

careful risk assessment and management review. In many cases a documentedManagement of Change (MOC) approval is also required.

ExxonMobil Drilling Practices

Drilling OIMS is underpinned by References and Standards, Operations Manuals,and a Safety Management Program (SMP) that are used to guide engineering andoperational execution. Detailed operating procedures incorporate well-specific plans,worldwide best practices, and contingency plans. The following specific areas areaddressed in detail by the Montara Commission and therefore warrant additionalexplanation.

Barriers

Industry has demonstrated that uncontrolled flow is avoided through the use of asystem of multiple barriers. Consistent with recommendations included in theCommission’s report, ExxonMobil requires a minimum of two physical barriers (e.g.,cement, plugs, packers, valves, BOPs, etc) in each potential flow path. ExxonMobildesigns the total reliability of a system of barriers commensurate with risk. Changesin plans, unexpected well conditions, or inability to verify barrier integrity requireschange management processes.

Some operations, such as removing a surface BOP stack to set the casing slips,must be carried out with only one barrier to potential flow. ExxonMobil utilizes

formalized risk management and management of change processes to assess and

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mitigate risks for operations involving one barrier. Documentation of the process andmitigation steps are included in the approved drilling program.

The highest reliability level of an individual barrier is obtained if its integrity can betested to anticipated loads. ExxonMobil requires each physical barrier to be pressuretested when possible, preferably in the direction of flow. The pressure test amountshould be greater than the maximum expected well pressure at this barrier. Ifpressure testing is not possible, the integrity of the barrier is verified throughdiagnostics and/or analysis of the operation by which the barrier was installed.Pass/Fail criteria are established in advance.

Barrier installation, verification, and acceptance criteria are documented in workplans. Procedures detailing barrier removal, consistent with the above barrierphilosophy, are also documented in work plans.

Licensee / Contractor Interface

The licensee (operator) is responsible for providing sound well designs and workplans that ensure well integrity. Contractors (rig operator or other contractors) areresponsible for executing agreed upon work plans and meeting predeterminedsuccess criteria. Deviations from the plan or problems which result in a failure tomeet these criteria require an approved MOC.

OIMS requires that personnel involved in our operations, contractors included, knowtheir roles and responsibilities. We assess this knowledge through regular drills andexercises.

ExxonMobil supports open communication among all parties with respect tomanagement of barriers, well control, and overall well integrity. ExxonMobil's

expectation regarding safety (including well control) is that every person on the righas the obligation to stop unsafe acts / operations and avoid going forward withcritical operations without alignment. Processes and practices should encouragerig/contractors to bring forward concerns and observations.

Contractors must be in compliance with ExxonMobil’s expectations and standards.To achieve this we have established specifications and criteria to ensure that third-party services are performed in a manner that is consistent with companyrequirements. We establish expectations for contractor safety and evaluatecontractor performance.

Well Control Training and Competency

ExxonMobil’s primary approach to well control is prevention. Based on the industry’sextensive experience, we know that when wells are properly designed for the rangeof risk anticipated, established procedures are followed, layers of redundancy arebuilt in, equipment is properly inspected and maintained, operators are trained, testsand drills are conducted, and when the focus remains on safe operations and riskmanagement, well control events can be avoided or managed safely.

ExxonMobil maintains comprehensive global standards pertaining to well controltheory and well control operational practices and equipment.

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Roles and responsibilities of the licensee and rig operator during a well control eventare agreed and documented prior to the commencement of operations. Well controlarrangements are detailed in the Well Operations Management Procedures (WOMP),drilling contractor operating procedures, and well specific drilling programs.

ExxonMobil developed and maintains an International Association of DrillingContractors (IADC) accredited well control school to ensure consistency of messageand approach. Our in-house training exceeds Industry standards in content,frequency, and hours. We require both operations and engineering personnel to befully trained and knowledgeable in well control fundamentals and procedures.

Drilling operations supervision is a core skill at ExxonMobil. New well site operationssupervisors undergo a five week in-house training program on Drilling OIMS and roleexpectations. This training continues through a structured program designed toensure competency.

To reinforce fundamental safety leadership principles, share technical learning, and

ensure alignment internally and with current industry best practices, rig sitesupervisors are attend ExxonMobil’s Operations Safety Leadership Seminars twiceeach year. ExxonMobil also holds focused week long annual meetings with drillingengineering and drilling management from all over the world to facilitate the sharingof global lessons learned, industry best practices, and discuss strategic direction / initiatives.

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Overview of Key Recommendations

Recommendations for Immediate Action

These actions relate to specific responses to the actions of PTTEP AA and the

Northern Territory Designated Authority. As such it is not appropriate for ExxonMobil to respond to these matters.

Other Key Recommendations

i. Single national offshore petroleum regulator

ExxonMobil fully supports an efficient regulatory system that has been developed onthe basis of the balanced needs of the communities within which it operates, and anefficient and competitive business environment. To achieve this we expect regulationwill be reasonable, equitable, consistently applied and properly enforced.Regulations should also be clearly expressed so as to ensure that industry

understands the requirements it is to meet, while giving the public confidence thatindustry is adhering to sound and responsible operating practices that are consistentwith Australia’s national interest.

We believe that since the inception of the National Offshore Petroleum SafetyAuthority (NOPSA) in 2005 that the offshore occupational health and safetyregulatory regime has continued to evolve with greater efficiencies and effectiveness.We have reviewed the independent reports concerning NOPSA and generallysupport the findings and recommendations in those reports. We support the NOPSAconcept in which a single regulator provides national coverage and the onus isplaced on each enterprise to develop and implement processes that meet regulatoryrequirements. We support the Government when it expresses its concern regardingany proposal that would result in a move towards a more prescriptive regulatoryregime.

In regard to environmental regulation we support proposals to create a regulatoryscheme that establishes a single environmental assessment process to beconsidered by a common decision-maker, with the scheme administered by a singleregulatory body. Such an arrangement should remove the inefficiency of havingeach State maintain separate processes and resources to undertake this work. Asingle environmental assessment and approval process would be more efficient forindustry and Government and potentially achieve a more comprehensiveenvironmental accreditation outcome. Like safety, environmental regulation would

benefit from adopting a concept in which a single regulator provides nationalcoverage and the onus is placed on each enterprise to develop and implementprocesses that meet regulatory requirements.

We believe the current NOPSA framework that is centred on objective basedregulation, encompassing appropriate risk assessment and management approaches,has yielded a more effective and efficient outcome for all parties. A similarframework for environmental regulation is likely to benefit both industry andgovernment. The combination of these functions into one overarching regulatorybody is also likely to yield additional benefits to industry and Government

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ii. Legislative Review and engagement between the regulator and industry

ExxonMobil notes the Government’s intent to review Commonwealth legislationapplicable to the offshore operations in the marine environment and to subsequentlyimplement legislative amendments to address the findings of the Commission ofInquiry and the Government’s Draft Response. ExxonMobil looks forward to workingdirectly with policy makers (to the extent that it is appropriate) as they undertake thislegislative review, as well as through APPEA, the peak national body representingthe interests of Australia’s upstream oil and gas exploration and production industry.

iii. Objective vs Prescriptive Legislation

A regulatory regime must strike a balance between being prescriptive and objectivebased. We believe that both are workable, but what is important is the operationmanagement system that underpins these efforts. As stated above, we believeregulation which is centred on objective based regulation and encompassesappropriate risk assessment and management approaches, has progressed results

and yielded more effective and efficient outcome for all parties in Australia.

iv. Environmental Response

We note the intent of Government to review Commonwealth legislation as it appliesto the offshore marine environment. ExxonMobil looks forward to working directlywith policy makers (to the extent that it is appropriate) as they undertake thislegislative review, as well as through our membership of APPEA.

v. Roles and responsibilities during the response effort

We note that Government has accepted that there is a greater need for clarification

of the roles and responsibilities for incident response to events such as thoseresulting from the Montara blowout. We agree that this issue, amongst othersincluding cost allocation, will be addressed by the review of Australia’s National Planto Combat Pollution of the Sea that is currently being conducted under the directionof the Australian Maritime Safety Authority (AMSA). ExxonMobil will contribute to thereview of the National Plan through our involvement with the Australian Marine OilSpill Centre (AMOSC), which was established by the petroleum industry 20 yearsago as part of the petroleum industry’s contribution to that Plan.

vi. Transparent communications strategy

ExxonMobil notes Government’s intention to implement a more transparent

communication strategy, which clearly outlines the process for incident managementand co-ordination, including the responsibility for informing the community.ExxonMobil looks forward to working directly with policy makers (to the extent that itis appropriate) as well as through our membership of APPEA, as the framework forthis strategy is developed.

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Response to Recommendations

1. The Minister should appoint a senior policy adviser to investigate andreport on the best means to implement the recommendations contained in

this Chapter.(Government Response: Accepted)

ExxonMobil concurs with the Government’s draft response to this recommendation.

2. WOMPs submitted by licensees to the regulator(s) should continue to bethe primary framework document for achieving well integrity.

(Government Response: Accepted)


3. WOMPs should be comprehensive and freestanding, rather than anoverarching document cross-referencing many other documents (althoughthe Inquiry also recommends a freestanding well control manual; thisshould be a guide to rig and onshore personnel on good oilfield practice).

(Government Response: Noted)

ExxonMobil agrees with the Government’s ‘note’ that it is accepted Industry practiceto maintain a drilling operations manual covering all aspects of drilling, completionand well control activities on the rig. The WOMP is intended as a summarydocument that references other key documents. ExxonMobil utilizes a centralizedmanagement structure and has extensive operating standards / practices based onglobal experiences / learning.

4. The concept of ‘good oilfield practice’ should be supplemented by therequirement to incorporate into WOMPs non-exhaustive minimumcompliance standards in relation to well control: for example, stipulationsas to when BOPs and/or well control systems must be in place and whenthey can be removed and minimum barrier requirements (a number of otherfactors that should be stipulated are outlined in other recommendationsbelow).



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5. Well construction and management plans should include provision(s) forreviewing the integrity of barriers at safety-critical times or milestones,such as (i) prior to suspension involving departure of the rig from theplatform; (ii) prior to re-entry of a well after suspension; (iii) prior to removalof any barrier.


Please reference the barrier discussion in the introductory comments of thisdocument.


6. Well construction and management plans, and drilling programs, shouldinclude provision for testing and verifying the integrity of all barriers assoon as practicable after installation.




7. Well construction and management plans should include provision for anindependent compliance review of well integrity (i) in the event of stipulatedtriggers; and (ii) at least once in the period between perceived achievementof well integrity and production. The independent compliance reviewshould be undertaken by an expert who is not involved in the day-to-day

drilling operations. Reviews should be completed in sufficient time toenable results to be implemented in a meaningful manner.


Please reference the ExxonMobil Drilling Approach discussion in the introductorycomments of this document.

ExxonMobil’s current practice is to require knowledgeable individuals to perform adetailed review of the design and execution plans to ensure well integrity. Whereapplicable, qualified independent third parties verify critical equipment integrity andsuitability. Once operations are underway, significant variations to establishedprocedures, variations in defined critical design parameters, or changes in execution

procedures require a careful risk assessment and management review.

ExxonMobil considers the independent compliance review of limited value.

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8. Wellbore gas bubbling should be regarded as a trigger for independentreview of well integrity. Industry and regulators should identify anddocument other triggers.

(Government Response: Not Accepted)

Well activities should be prioritized to maintain / restore well integrity and control. Anindependent review would compromise safety by delaying appropriate well controlresponse.

ExxonMobil agrees with the Government’s draft response to “not accept” thisrecommendation.

9. If a risk assessment or compliance review is triggered by the happening ofa predetermined event, specific consideration should be given to whether a‘hold point’ should be introduced such that work must cease until theproblem is resolved (and the subject of appropriate certification).


Please reference the Risk / Change discussion in the introductory comments of thisdocument.

Analogous to the ExxonMobil MOC process, hold points and reviews may be anappropriate risk control strategy providing that well activities are prioritized tomaintain / restore well integrity and control. In order for a certification process to bean effective means of resuming operations after a hold point, representatives fromthe certifying parties must be clearly identified and readily available while operationsare ongoing.

10. A separate, identifiable barrier manual should be agreed upon and used bylicensees, rig operators, and cementing contractors. These manuals shouldset out best industry practice in relation to achieving and maintaining wellintegrity. They should describe barrier types, barrier standards, generalprinciples of well integrity, testing and verification methods andtechnologies, standard operating procedures (including procedures for thecapture and communication of relevant information within and betweenrelevant stakeholder entities). Barrier manuals should address blowoutcontrol during drilling, completion, re-entry, tie-back of casing strings andso on. Barrier manuals should be the subject of expert external review, andshould be regularly updated.


Please reference the Barrier, Well Control, and Licensee / Contractor Interfacediscussions in the introductory comments of this document.

ExxonMobil supports open communication among all parties with respect tomanagement of barriers, well control, and overall well integrity. ExxonMobilmaintains clear, comprehensive standards pertaining to well control theory (in whichbarrier philosophy is addressed) and well control operational practices andequipment.

In the Government acceptance of this recommendation it is ‘noted’ that numerousindustry accepted procedures, standards and operating manuals apply.

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11. Memoranda of Agreement should be entered into between operators inrelation to provision of emergency assistance in the event of blowouts.


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that we have been closely involved in the drafting of the Australian industry’snew mutual aid agreement.

12. Pre-drilling assessments should include a risk assessment of the worst-case blowout scenario.


Providing that the worst-case blowout scenario is realistic within the context of theproposed well, ExxonMobil concurs with the Government’s draft response to thisrecommendation. Credible scenarios should consider such attributes as well type(surface or subsea), the presence of drillpipe or tubulars in the wellbore, and offset

production data.

13. Problems which arise in the course of installing barriers must be thesubject of consultation between licensees, rig operators, and contractors (ifused). A proper risk assessment should then be carried out and remedialsteps (including further testing/verification) should be agreed upon, anddocumented in writing before the performance of remedial work wheneverpracticable. Joint written certification as to resolution of the problemshould take place before resumption of drilling operations. Senior onshorerepresentatives of stakeholder entities should be involved in thatcertification process.


Please reference the Barrier and Licensee / Contractor Interface discussions in theintroductory comments of this document.

The well work plan defines barriers and acceptance criteria. The licensee isresponsible for providing sound well designs and work plans that ensure well integrity.Contractors are responsible for executing agreed upon work plans and meetingpredetermined success criteria. Deviations from the plan or problems which result ina failure to meet these criteria would require an approved MOC and a proceduredefining an alternate method to ensure well integrity through a system of barriers.

14. Licensees should be subject to an express obligation to inform regulatorsof problems which arise in the course of installing barriers, even if theyconsider that well integrity is not thereby compromised. The informationshould be provided by way of special report, rather than included in astandard reporting document (such as a DDR). The information providedshould include risk assessment details.

(Government Response: Accepted in part)


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15. As soon as a risk of barrier failure arises, no other activities should takeplace in the well other than those directed to removal of the risk.


The risk of a barrier failure occurs when predefined barrier acceptance criteria arenot met, when unplanned events occur during installation or testing of barriersrendering the barrier ineffective, or when actual well conditions exceed equipmentcapability.

ExxonMobil agrees that although mitigation actions should be immediately evaluated,well activities should be prioritized to maintain well integrity and control.

16. The use/type of barriers (including any change requests relating thereto)must be the subject of consultation between licensees and rig operatorsprior to installation. A proper risk assessment should be carried out, agreedupon, and documented in writing before installation. Joint written

certification as to the appropriateness of the use of particular barriersshould take place before installation. Senior onshore representatives ofstakeholder entities should be involved in that certification process.



17. The successful installation of every barrier should be the subject of writtenverification within and between licensees and rig operators; and should bethe subject of explicit reporting to the relevant regulator(s).



ExxonMobil concurs with the Government’s draft response to this recommendationnoting that it can be achieved via the current Daily Drilling Report (DDR) process.

18. Removal of a barrier must be the subject of consultation between licenseesand rig operators prior to removal. A proper risk assessment should be

carried out and agreed upon, and documented in writing before removal.Joint written certification as to the appropriateness of removal should takeplace before removal. Senior onshore representatives of stakeholderentities should be involved in that certification process.




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19. Licensees should be subject to an express obligation to inform regulatorsof the proposed removal of a barrier, even if they consider that wellintegrity is not thereby compromised. The information should be providedby way of special report, rather than included in a standard reportingdocument (such as a DDR). The information provided should include riskassessment details. Removal of a barrier should not take place withoutprior written approval of the relevant regulator(s).


ExxonMobil supports communication between the Regulator and Operator andagrees with the Government’s draft response stating that the daily drilling report issufficient to document barrier removal. However, we do not agree that value will beadded by requiring an additional and separate communication and response process.

20. If a dispute arises between a licensee and a rig operator in relation to a wellcontrol issue, and is not resolved between them, the matter must be raised

with the relevant regulator before discretionary operations proceed.(Government Response: Not accepted)

Please reference the Well Control discussion in the introductory comments of thisdocument.

ExxonMobil agrees with the Government’s draft response to “not accept” thisrecommendation. Operational safety would not allow for an approval process whenimmediate action may be needed. The obligation remains with the licensee, who isalso best placed to evaluate risks and resolve any problems.

21. Perceived time and cost savings relating to any matters impacting uponwell control should be subjected to rigorous safety assessment.


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that at present, the recommendation wording is nonspecific and a workingexample of how this may work in practice is not obvious. We agree that deviationsfrom industry/company standards with regard to well control should be appropriatelyassessed.

22. Wells drilled into hydrocarbon zones should be treated as live wells, with

the potential to blowout unless a documented risk assessment establishesotherwise.


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that this is the standard industry approach currently in place.

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23. Use of single strings of intermediate casing to penetrate hydrocarbonbearing zones should be carefully risk assessed. Multiple strings ofintermediate casing have the advantage of isolating lost circulation zonesand sealing off anomalous pressure zones. If intermediate casing is set in ahydrocarbon zone it should be treated as production casing.


ExxonMobil concurs with the Government’s draft response to this recommendation inprinciple, noting that this is the standard industry approach currently in place.Additionally, clarification of the final two sentences is required.

24. A minimum of two barriers should be in place at all times (including duringbatched operations) whenever it is reasonably practicable to do so.



ExxonMobil concurs with the Government’s draft response to this recommendation inprinciple. Clarification will be required following any changes made to the PSLA(2004).

25. Reliance upon one barrier against a blowout must not take place exceptwith the prior written approval of the relevant regulator and then only in atrue emergency situation (see below).



ExxonMobil supports the importance of effective communication between theRegulator and Operator regarding barriers. Single barrier situations are currentlyapproved by management and the Regulator in advance.

26. Regulatory approval to rely on only one barrier should not be given unless(i) a proper risk assessment is carried out; (ii) exceptional circumstancesexist; and (iii) risks involved are reduced to ‘as low as reasonably

practicable’. The default position must be that well integrity must beassured.




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27. Licensees and rig operators should install an additional barrier whenever (i)there is any real doubt as to the integrity of any barrier; (ii) whenever therisk of flow from a reservoir increases materially in the course ofoperations; and (iii) where the consequences of a blowout are grave (forexample, for reef systems or shorelines).




28. The industry standard of two barriers should be replaced with the conceptof ‘two or more barriers’ as a minimum standard. A minimum standardwhen operations proceed normally should never be regarded as a sufficient

standard in other circumstances. (Government Response: Accepted)


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that this approach is currently in place.

29. Industry, regulators, and training/research institutions should develop

standards that address best practices for cementing operations (includingliaising, as appropriate, with overseas regulators) with a view toovercoming problems which can effect the integrity of cemented casingshoes, annulus and cement plugs.



30. Tracking and analysis of cementing problems/failures should occur toassess industry trends, principal causes, remedial techniques and so on.


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that this can be achieved in the End of Well Report submitted to the Regulator.

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31. It is recommended that industry, regulators, and training/researchinstitutions liaise with one another with a view to developing bettertechniques for testing and verifying the integrity of cemented casing shoesas barriers (particularly in atypical situations such as where the casingshoe is located within a reservoir in a horizontal or high angle position atgreat depth).


ExxonMobil concurs with the Government’s draft response to this recommendationnoting that it is best achieved by working through a relevant international industryassociation to develop a relevant standard.

32. Cement integrity should be evaluated wherever practicable by way ofcement evaluation tests, rather than relying on pre-operational calculationsof cement and displacement fluid volumes.


While ExxonMobil supports the importance of effective cementing, cement evaluationlog results are qualitative, highly subject to interpretation, and not always conclusive.Cement evaluation logs are also not capable of evaluating cement in the shoe track.Only when execution data indicates a cement barrier was not properly installedshould a cement evaluation test be considered to verify cement integrity.

33. It should be standard industry practice to re-test a cemented casing shoe(that is, after WOC) whenever the plugs do not bump or the float valvesapparently fail. Standard industry practice should require consideration of

other tests in addition to a repeat pressure test.(Government Response: Accepted)

ExxonMobil concurs with the Government’s draft response to this recommendationnoting that this should be addressed in each company’s WOMP or cementingpractices manual.

34. Any indication of a compromised cemented shoe which cannot be resolvedwith a high measure of confidence should result in the installation ofadditional well control barrier(s).




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35. Volumes of cement used in connection with barrier installation should becalculated with the assistance of a pro-forma which records all relevantbaseline data, which should be verified by onshore personnel.


ExxonMobil concurs with the Government’s draft response to this recommendationnoting that this should be addressed in each company’s WOMP or CementingPractices Manual.

36. If performance of barrier installation is outsourced by a licensee, thecontractor (for example, the cementing company) should be engaged onterms which clearly require the provision of expert advisory services by thecontractor with respect to barrier integrity.


Please reference Licensee / Contractor Interface discussions in the introductorycomments of this document.

Contractors have the right and obligation to decline to perform any activities theydeem to be too high risk or outside their capability. Engagement of the third partycontractors for the selection and installation of barriers is a routine and expected partof the work plan development.

ExxonMobil concurs with the Government’s draft response to this recommendationnoting that this is currently the case at ExxonMobil.

37. Consideration should be given to ways to ensure that contractors who areinvolved in barrier installation (such as cementing companies) have a directinterest in the performance of works to a proper standard. In particular,consideration should be given to (i) preventing contractors from avoidingthe economic consequences of negligent installation of barriers; and/or (ii)imposing specific legislative standards of workmanship on contractors withrespect to well control (similar to those which presently apply to licensees).

(Government Response: Accepted in principle)


ExxonMobil believes that current contracting practices are sufficient to ensure the

correct assignment of liabilities. At present, contracts between licensee andcontractor include contractor liability in cases where it could be demonstrated that thecontractor was negligent. Standards of workmanship should be addressed incontractual arrangements, rather than legislative standards.

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38. Horizontal or high angle penetration of a reservoir should be avoidedwherever practicable until such time as the apparent problems associatedwith the cementing of a casing shoe in these situations are satisfactorilyovercome. If a casing string does penetrate a well horizontally or at a highangle, standard practice should be to install two secondary barriers inaddition to the cemented casing shoe.

(Government Response: Not accepted)

ExxonMobil agrees with the Government’s decision to ‘not accept’ thisrecommendation. High-angle wells are commonly drilled worldwide and cementingof these wells can be successful when properly engineered and designed (casingcentralization, fluid spacers, pump rates, cement slurry design, etc.).

39. The BOP and rig should not move from a well until barrier integrity hasbeen verified.




40. Barriers should not be installed or removed off-line. The derrick should belocated over a well at the time of removal and installation of any barrier.This will enable more decisive action to be taken in the event a problemarises.



ExxonMobil does not support the Government’s draft response to this broadrequirement that would eliminate any no-rig intervention activity that can besuccessfully completed with appropriate barriers. There are circumstances whileoperating or maintaining a well where the removal of a barrier becomes necessarywhile a rig is not present, or during drilling operations when the rig is not over the well.These operations are currently approved by management and the Regulator inadvance.

41. Secondary barriers (including PCCCs) should only be installed, tested, andremoved with a BOP in place unless a documented risk assessmentindicates that well control can be maintained at all times.


Please reference the Barrier discussions in the introductory comments of thisdocument.


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42. PCCCs should be installed in a timely manner (for example, to preventcorrosion in the MLS apparatus). Non-installation in order to park a BOP isnot acceptable.



43. Wells should be re-entered with a BOP in place unless a documented riskassessment indicates that well control can be maintained at all times.



44. Any equipment (including PCCCs) used as, or to install, a barrier should bemanufactured for that purpose and be generally recognised as fit for

purpose. If equipment is designed in-house by a licensee or rig operator itshould not be approved for use unless and until it is subjected to expertexternal analysis.



45. Manufacturers should be consulted about how to address non-routineoperational problems affecting their well control equipment.


ExxonMobil concurs with the Government’s draft response to this recommendationwhere the term ‘non-routine’ refers to circumstances not capable of being addressedby established procedures.

46. Drilling programs dealing with barrier installation should incorporaterelevant aspects of manufacturer’s instructions.



47. Any pro-formas used by licensees, rig operators and contractors forrecording information about installation of barriers should explicitlyprovide for ‘exception reporting’, that is, the form should include provisionfor recording any unforseen or untoward events which occur in the courseof installation.


ExxonMobil concurs with the Government’s draft response to this recommendationnoting that it is a standard requirement currently in place.

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48. Careful consideration must be given to equipment compatibility as part ofwell construction design.


ExxonMobil concurs with the Government’s draft response to this recommendationnoting that this is standard good oil field practice.

49. Batched drilling operations should only be undertaken after carefulassessment of the special risks which such operations give rise to; wellcontrol must be maintained during the course of batched drilling operations.



50. Where multiple wells are drilled, operations and occurrences at one wellmust be carefully assessed for any implications with respect to well controlat other wells.



51. The mere fact that the rig is over the platform should not be regarded bylicensees or regulators as sufficient justification for reliance on only onebarrier. The default position should be that producible wells are shut-inwhen a rig is moved on and off a platform, or when a drilling unit is moved

between wells on a platform.(Government Response: Accepted)

Please reference the Barrier discussions in the introductory comments of thisdocument.

ExxonMobil concurs with the Government’s draft response to this recommendation,noting that shutting in a well does not change the number of barriers in place.

52. Relevant personnel from licensees and rig operators should meet face toface to agree on, and document, well control issues/arrangements prior to

commencement of drilling operations. Well control should be regarded as aso-called SIMOP to signify its critical importance to both licensees and rigoperators, and to ensure that they each take responsibility for achievementand maintenance of well control.


Please reference the Well Control and Licensee / Contractor Interface discussions inthe introductory comments of this document.

Well control arrangements are detailed in the WOMP, drilling contractor operatingprocedures, and well specific drilling programs. Company and drilling contractorrepresentatives are required to adhere to these approved plans unless an MOC hasbeen processed.

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ExxonMobil concurs with the Government’s draft response to this recommendationnoting that the term SIMOP refers to multiple distinct tasks being undertakensimultaneously, which is not a concept that fits naturally in the context of thisrecommendation.

53. Prior to commencement of drilling operations, senior representatives of thelicensee and rig operator should exchange certificates to the effect thattheir respective key personnel and contractors have been informed inwriting of agreed well control arrangements.


Please reference the Well Control and Licensee / Contractor Interface discussions inthe introductory comments of this document.

Well control arrangements are detailed in the WOMP, drilling contractor operatingprocedures, and well specific drilling programs. Company and drilling contractor

representatives are required to adhere to these approved plans unless an MOC hasbeen processed; as such a certificate is not warranted.

54. Information relevant to well control must be captured and communicatedwithin and between licensees and rig operators (and relevant third partycontractors), in a manner which ensures it comes to the attention ofrelevant personnel. In particular, protocols should be developed to ensurethat changes in shift and hitch do not operate as communication barriers.


ExxonMobil concurs with the Government’s draft response to this recommendation

noting that the manner in which it is implemented will vary between organisations.

It is expected that ExxonMobil’s current safety management systems (OIMS) andDDR will satisfy this recommendation.

We would also recommend that Operator/Contractor have shift/hitch handovercommunication protocols for day to day operations, in addition to well control.

55. All communications between on-rig and onshore personnel relating to wellcontrol should be documented in a timely manner.



56. Logistics management of well control equipment should be conducted insuch a way as to operate as a check against deficient well control practices,for example, use of serial numbers to track availability, testing, anddeployment of well control equipment.


While ExxonMobil supports the discussion of the importance of logistics management,the logistics team is not the appropriate party to assess adequacy of wellmanagement or well design. In the Government acceptance of this recommendationit is ‘noted’ that operators already have well control and operating standards in place.

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57. Decision-making about well control issues should be professionalised.Industry participants must recognise that decision-makers oweindependent duties to the public, not just their employer or principal, inrelation to well control. Risk management in the context of well controlneeds to be understood as an ethical/professional duty. Self-regulationcontemplates self-regulation by the industry, not just by individuallicensees and operators.


Please reference the Well Control Training and Competency discussions in theintroductory comments of this document.

ExxonMobil concurs with the Government’s draft response to this recommendationnoting industry has well established safety management systems (such asExxonMobil’s OIMS), which include comprehensive requirements concerningcompetency training and regulatory compliance that address these issues.

58. Existing well control training programs should be reviewed by the industry,regulators and training providers, with a focus on well control accidentsthat have occurred (in Australia and overseas).



ExxonMobil concurs with the Government’s draft response to this recommendationnoting that APPEA and the International Association of Drilling Contractors (IADC)

have undertaken to consider a joint review of well control incidents data to extractlessons and share with industry participants. ExxonMobil is a member of both ofthese industry bodies and will participate in this program.

59. A specific focus on well control training should be mandatory for keypersonnel involved in well control operations (including both on-rigpersonnel and onshore personnel in supervisory capacities).



ExxonMobil concurs with the Government’s draft response to this recommendation,noting that existing Company standards address this issue already regardingtimeliness and scope of training.

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60. Licensees and rig operators (and third party contractors involved in wellcontrol operations) should specifically assess, and document, the natureand extent of knowledge/skills of relevant personnel in relation to wellcontrol (including familiarity of personnel with agency-specificrequirements and procedures). Training needs and opportunities should beidentified. This process should take place on engagement and atappropriate intervals.



61. Licensees, rig operators, and relevant third party contractors shoulddevelop well control competency standards for their key personnel.Wherever possible, the competencies of key personnel should be

benchmarked against their roles and responsibilities.(Government Response: Accepted)


62. Licensees, rig operators and relevant third party contractors shoulddevelop well control competency standards for key personnel in otherentities involved in well control operations.


ExxonMobil seeks clarification of what is meant by the term “other entities”. If this is areference to contractors and other service providers (as in Recommendation 61) thenthose personnel are addressed in well established safety management systems suchas ExxonMobil’s OIMS.

63. Achievement and maintenance of well control should be written into the jobresponsibilities of key personnel, at every level up to and including CEOs.That is, a functional line of accountability for well control must exist up to,and including, CEOs.


Please reference the Leadership discussions in the introductory comments of thisdocument.

ExxonMobil leadership at all levels is expected to lead the OIMS process bydemonstrating a visible commitment to safety and operations integrity. While seniormanagement have accountability and line of sight of critical risk controls, ExxonMobildisagrees that every level within the organization should have responsibility formaintenance of well control. To ensure appropriate well integrity and control,responsibility for well control is assigned appropriate levels in the organization.

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64. Supervision/oversight of well control operations (within licensees, rigoperators and by regulators) must occur without assuming adherence togood oilfield practice. The opposite assumption should prevail: namelyadherence to good oilfield practice may well be compromised by thepursuit of time and cost savings.


ExxonMobil concurs with the Government’s draft response to this recommendation.Our safety credo states that no business objective is so important that it cannot bedone safely.

65. Licensees and rig operators should be astute in ensuring that corporatesystems and culture encourage rather than discourage raising of wellcontrol issues. For instance, do performance bonuses or rewards actuallyencourage or discourage reporting of issues? Is there a system in place to

enable anonymous reporting of well control concerns? What whistleblowerprotections are in place?(Government Response: Accepted in principle)

ExxonMobil notes the Government’s draft response to this recommendation andrefers the reader to the material presented in the introduction to this reportconcerning ExxonMobil’s Safety Management Approach.

66. The Inquiry supports the objective (rather than prescriptive) approach toregulation now followed in Australia. However, the pendulum has swungtoo far away from prescriptive standards. In some areas relating to well

integrity there needs to be minimum standards.(Government Response: Accepted in part)

ExxonMobil concurs with the Government’s draft response to this recommendationand refers the reader to the material presented in this response to the keyrecommendations above, in particular the section on the single national offshorepetroleum regulator.

67. To better ensure that ‘risks’ are identified and managed in accordance withsound engineering principles and good oilfield practice, it is recommendedthat regulation 25(1)(a)(i) and (2)(a)(i) of the Management of Well Operations

Regulations, be reworded as follows: ‘A titleholder must not commence /continue a well activity if…a well integrity hazard exists in relation to thewell’.


ExxonMobil notes Government’s intent to amend the regulations; however we do notsupport the wording change in this recommendation as there is already a clearrequirement in the Act to take all reasonable steps to identify well integrity hazardsand control risks.

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68. The definition of ‘good oilfield practice’ in the OPGGS Act is unduly narrow.The current definition is incapable of application except where things ‘aregenerally accepted as good and safe’. The definition should be amendedsuch that ‘good oilfield practice includes…’.


ExxonMobil concurs with the Government’s draft response to this recommendationand looks forward to working directly with policy makers as well as through APPEA,in the consultation process associated with any proposed regulatory changes.

69. Written (rather than verbal) approval from the DA (or new regulator) shouldbe obtained before the commencement of well activities that lead to aphysical change of a wellbore, other than in a true emergency situation(requiring amendment to regulation 17 of the Management of WellOperations Regulations).


ExxonMobil supports the intent of the Government’s draft response to thisrecommendation, noting that verbal approval has been used to avoid operationaldowntime when the appropriate regulatory personnel are not available during out-ofhours operation. Such instances have generally been limited to approval for lesscritical activities following the satisfactory completion of appropriate reviews at anearlier time.

70. The OPGGS Act should be amended to allow for a power to suspend apetroleum production licence (in addition to the current power to cancel a

licence or suspend its conditions).(Government Response: Noted)


71. There should be a review to determine whether it is appropriate tointroduce a rigorous civil penalty regime and/or substantially increasesome or all of the penalties that can be imposed for breaches of legislativerequirements relating to well integrity and safety.


ExxonMobil notes the Government’s draft response to this recommendation andlooks forward to working directly with policy makers as well as through APPEA, in theconsultation process associated with any proposed regulatory changes.

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72. NOPSA’s prohibition powers should be extended such that a prohibitionnotice can be issued where a NOPSA Occupational Health and SafetyInspector believes, on reasonable grounds, that an activity is occurring ormay occur at a facility involving an immediate threat to the health or safetyof a person.



73. A single, independent regulatory body should be created, looking aftersafety as a primary objective, well integrity and environmental approvals.Industry policy and resource development and promotion activities shouldreside in government departments and not with the regulatory agency. The

regulatory agency should be empowered (if that is necessary) to passrelevant petroleum information to government departments to assist themto perform the policy roles.


ExxonMobil notes the Government’s draft response to this recommendation andrefers the reader to our key recommendations response earlier in this submission.

74. The proposal of the Productivity Commission’s Research Report (Review ofRegulatory Burden on the Upstream Petroleum (Oil and Gas) Sector, April2009) to establish a NOPR should be pursued at a minimum.



75. Responsibility for well integrity should be moved to NOPSA (as alsoproposed by the Productivity Commission).



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76. "In the meantime, the Minister should:

a. consider revoking the existing delegation to the Director of Energy,NT DoR providing the functions and powers of the DA under the OPGGSAct and Regulations specified in item 1 of the Schedule to thatinstrument (the Minister’s DA powers and functions) and transferringthis delegation to either NOPSA, RET, or a DA from another state;


b. enquire into whether the other DAs to whom he has delegated hisfunctions and powers relating to well integrity are adequately fulfillingtheir roles; and


c. consider amendments to the OPGGS Act to enable DAs to be givendirection as to the performance of their regulatory roles."


ExxonMobil notes the Government’s draft response to this recommendation.

77. The recommendations of the Inquiry in relation to suitable ways ofachieving well integrity contained in Chapter 3 be included in a guidancemanual that is issued for the assistance of industry and regulators.



78. In the future, and in the interests of ensuring that all possible well controloptions are comprehensively pursued to exhaustion, decisions as to wellcontrol response options should be the result of collaboration between theregulator and the operator rather than leaving one party to make unilateraljudgements as to the appropriateness of various well control operations.The regulator should provide transparent and contemporaneousexplanations to the public of all well control options under consideration atany particular time.


While ExxonMobil supports the interface discussion / consultation regarding barriers,

the primary responsibility for maintaining well control and well integrity, includinginstallation of tested barriers, lies with the Operator. ExxonMobil concurs with theGovernment’s draft response to this recommendation and we restate our belief thatregulation centred on objective based regulation, encompassing appropriate riskassessment and management approaches, has yielded a more effective and efficientoutcome for all parties be this in regard to normal operations or emergencyresponses.

ExxonMobil also looks forward to working directly with policy makers as well asthrough APPEA, in the development of a clearly defined, transparentcommunications strategy for incident response.

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79. The regulator, rather than the responsible Minister, should be given thepower to direct an operator to use a particular rig for the purpose of wellcontrol operations, if appropriate in the circumstances, and the powershould be used in the future if that rig is the best option available. Thiswould necessarily involve the operator fully compensating for the use ofthe rig and any other associated costs. The Inquiry suggests that thispower could be invoked and given effect as a condition of an operator’slicence.


ExxonMobil notes the Government’s draft response to this recommendation andrefers to Recommendation 78. We also note that ExxonMobil has been involved inthe industry’s development of a Mutual Aid Agreement (MAA) to facilitate thelending/sharing of resources/equipment in the event of a major offshore emergencysituation, but it does not in any way attempt to cover the matter of consequentiallosses.

80. The regulatory regime should also impose an obligation on an operator toascertain the availability, and provide details to the regulator, of anypotential relief well rigs, prior to the commencement of drilling operations(including prior to each phase of a drilling operation where applicable).


ExxonMobil notes the Government’s draft response to this recommendation. Atpresent ExxonMobil develops relief well contingency plans as part of a broader riskmitigation process that is considered and documented during well planning.

81. NOPSA develop a policy of engagement with operators so as to enableexperts (including safety experts) to canvas all available options for wellcontrol in the event of a blowout.



82. The Inquiry also supports Bills and Agostini’s recommendation: ‘…inrelation to safety case development and compliance overall, that NOPSArevise its approach to interacting with operators prior to the safety caseassessment process and subsequently direct more resources into its

advisory functions. We further recommend that NOPSA develop andimplement a formal plan for supporting and guiding each operator prior tosafety case acceptance, as well as for ongoing compliance with that safetycase, recognising the unique experience, capabilities and assessed risk ofthat operator. Each plan needs to include advice, education and liaisonmeetings with the operators. The plan needs to be continuously reviewedand reassessed based on the latest information, including the interactionwith the operator’.



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83. The regulator should pre-assess and review in a generic sense, and inconjunction with the offshore petroleum industry, available options for wellcontrol in the event of a blowout. Being ‘match fit’ in this sense will enablea quicker and more effective response in terms of safety assessment, andwill ensure that expectations of both operator and regulator are morereadily aligned.



84. In any future similar blowout or offshore emergency situation, the Ministerappoint (through either a NOPR or the relevant Department) a senior publicservant to establish and oversight a central coordinating body that willfacilitate interaction between regulators, industry, AMSA and theowner/operator. Primary responsibility for stopping a blowout shouldremain with the owner/operator but should be subject to direction from the

central coordinating body in consultation with stakeholders (including theowner/operator).(Government Response: Accepted)


85. The body established to undertake a central coordination and facilitationrole in the event of any future blowout in Commonwealth waters shouldundertake to make all relevant information publically available from one,authoritative and easy to access source.


ExxonMobil notes the Government’s draft response to this recommendation,and looks forward to working directly with policy makers as well as through APPEA,in the development of a clearly defined, transparent communications strategy forincident response.

86. The National Plan should be reviewed to clarify the arrangements to applyin Commonwealth waters regarding key roles and responsibilities,including in relation to the ESC, in the event of an oil spill. This should alsoaddress any necessary training required.


ExxonMobil concurs with the Government’s draft response to this recommendationand notes that Government has accepted that there is a need for clarification of theroles and responsibilities for incident response to events such as those resulting fromthe Montara blowout.

We agree that this issue, amongst others including cost allocation, should beaddressed by the review of Australia’s National Plan to Combat Pollution of the Seathat is currently being conducted under the direction of AMSA. ExxonMobil willcontribute to the review of the National Plan through its involvement with AMOSC,which was established by the petroleum industry 20 years ago as part of thepetroleum industry’s contribution to that Plan.

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87. DEWHA should participate in training programs and exercises relevant toan oil spill in the marine environment.



88. The National Plan should be revised to ensure that it fully comprehendsenvironmental matters and that it recognises the importance of the promptimplementation of Scientific Monitoring to facilitate the assessment of theenvironmental impacts of an incident.


ExxonMobil concurs with the Government’s draft response to this recommendation(refer to Recommendation 86) and looks forward to working directly with policymakers as well as through APPEA, in the consultation process associated with anyproposed regulatory changes.

89. Procedures for the approval of development projects should ensure thatconditions of approval are comprehensive and clearly set out theobligations of their proponents in relation to environmental matters(including expected monitoring and remediation obligations).


ExxonMobil concurs with the Government’s draft response to this recommendationand looks forward to working directly with policy makers as well as through APPEA inthe consultation process associated with any proposed regulatory changes.

90. DEWHA, in concert with AMSA and with expert input, should develop ‘offthe shelf’ monitoring programs that can be speedily implemented followingincidents in Commonwealth waters. In this context, the utility of the currentScientific Monitoring program should be peer reviewed to inform futurepolicy.


ExxonMobil concurs with the Government’s draft response to this recommendationand looks forward to working directly with policy makers as well as through APPEA,in the consultation process associated with the development of these programs.

91. The funding arrangements that support the National Plan should bereviewed to ensure that the costs associated with both preparedness andresponse capability are equitably shared between the shipping andoffshore petroleum industries.


ExxonMobil concurs with the Government’s draft response to this recommendation,noting that the Australian oil and gas industry currently provides ~1/6 of the NationalPlan’s funding through LNG and crude tanker movements in addition to the directfunding of AMOSC.

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92. The National Plan should specify that the cost of responding to an oil spill,or other damage to the offshore marine environment, will be totally met bythe owner/operator. This would be consistent with the Inquiry’srecommendation for legislative changes to the regulatory frameworkconcerning owner/operators meeting the cost of monitoring andremediation of environmental damage.


See response to 86 (above). ExxonMobil also looks forward to working directly withpolicy makers as well as through APPEA, in the consultation process associated withany proposed regulatory changes.

93. "The National Plan should be reviewed:

a. to ensure that it adequately addresses the risks associated withoffshore oil and gas exploration;


b. to revisit the underlying risk assessment undertaken to informcapacity and preparedness under the National Plan;


c. to ensure that response operations can be coordinated effectivelywith state and territory arrangements where a response requiresoperations across Commonwealth and state or territory borders; and


d. to explore the state of readiness of equipment and resources in the

context of the future expansion of the petroleum industry. This shouldbe undertaken by AMSA in consultation with AMOSC."


ExxonMobil concurs with the Government’s draft response to this recommendation(refer response to Recommendation 86 above).

94. "Procedures and accountabilities should be established to ensure, in theevent of a future incident, that:

a. there is adequate monitoring of the volume of oil spilt and the spread

of the oil (both surface and sub-surface dispersed oil); and(Government Response: Accepted)

b. information about the volume and spread of the oil is madeavailable to the public through regular updates."


ExxonMobil concurs with the Government’s draft response to this recommendationnoting that it is not technically feasible to accurately estimate the volume of oilreleased via an uncontrolled event such as the Montara blowout. We would alsorequest that in the interests of accuracy and transparency that any informationrelease should only occur once the operator has had the opportunity to review andcomment on the information.

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95. "The regulatory framework should provide that in respect of all activities inCommonwealth waters:

a. there are powers to require companies involved in an incidentcausing significant environmental damage to undertake actions toremediate the damage to a standard determined by the regulatoryauthorities;


b. the nature of the Scientific Monitoring and the remediation requiredshould be determined by environmental regulatory agencies rather thanthe companies involved;


c. the costs of all Scientific Monitoring and remediation should be fullyborne by the companies involved, whether the remediation isundertaken by the companies or another party to the standard

determined by the regulatory authorities; and(Government Response: Accepted)

d. penalties should be payable for pollution on a no fault basis.(Government Response: Accepted)

e. The EPBC Act should be amended to include the powers in a, b, c andd above. These powers should be applicable to both prospective andexisting operations in Commonwealth waters."


ExxonMobil notes the Government’s draft response to this recommendation and

looks forward to working directly with policy makers as well as through APPEA, in theconsultation process associated with any proposed regulatory changes.

96. The obligation of companies involved in an incident to meet the full costs ofmonitoring and remediation should be made a condition of approval ofproposals under the EPBC Act and OPGGS Act. Suitable arrangements(insurance or otherwise) need to be in place to ensure that companies havethis capacity.


ExxonMobil notes the Government’s draft response to this recommendation and

looks forward to working directly with policy makers as well as through APPEA, in theconsultation process associated with any proposed regulatory changes.

97. Environment plans and OSCPs should be made publicly available as acondition of approval of proposals under the OPGGS Act, and shouldclearly set out Scientific Monitoring requirements in the event of an oil spill.



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98. The Government should examine the scope for a single environment planto meet the regulatory requirements of both the OPGGS Act and the EPBCAct. This could possibly be achieved by way of bilateral agreements andaccreditation arrangements and/or legislative amendment.



99. OSCPs should be endorsed by AMSA prior to regulatory approval to ensurethat they align with the National Plan. Once field operations commence, thecapability of operators should be assessed against their plans, andexercises conducted to ensure the plans remain effective.



100. Arrangements should be developed to minimise duplication betweenthe EPBC Act and the OPGSS Act Environment Regulation.



101. The Minister should, as the JA for the offshore area of the Territory ofAshmore and Cartier Islands, undertake a review of PTTEPAA’s permitand licence to operate at the Montara Oilfeld.



102. For the purposes of that review, the Minister should issue a ‘showcause’ notice to PTTEPAA under s 276 of the OPGGS Act.



103. In carrying out a review of PTTEPAA’s permit and licence, the Minister

should have regard to this Report, particularly (i) the adverse findingsset out in this Chapter; and (ii) the extent to which PTTEPAA hasimplemented the Action Plan submitted to the Inquiry, or otherwiseaddressed the matters canvassed in this Report.



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104. The Minister consider legislative amendments to the OPGGS Act whichmake clear that (i) the Minister can direct a Titleholder to obtain anindependent report into the circumstances and likely causes of ablowout; and (ii) the Minister can direct that such a report be providedto him (and such direction overrides and legal professional privilegewhich otherwise attaches to the report).


ExxonMobil notes the Government’s draft response to this recommendation, andseeks clarification of what be deemed independent. We also look forward to workingdirectly with policy makers as well as through APPEA, in the consultation processassociated with any proposed regulatory changes.

105. In view of the numerous well integrity problems in all of the MontaraOilfield wells, the Minister should commission a detailed audit of all the

other offshore wells operated by PTTEPAA to determine whether theytoo may suffer from well integrity problems.(Government Response: Accepted)


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Conclusion

ExxonMobil is sometimes viewed as a cautious company; we‘re sometimes criticisedfor being too cautious. And yet, meeting the world's growing demand for energyinvolves a high degree of risk; our employees operate some of the world's most

complex technologies in some of the world's harshest environments.

How we continue to progress technologically while dealing with significant risk is thathuman progress does not mean avoiding risk; it means managing risk by identifying it,and taking steps to mitigate it. No company can lay claim to a one hundred percentsuccess rate in this endeavor. Yet that remains our clear goal.

In conclusion, there are three points that are worth repeating.

First, a culture of safety has to be born within the organisation. You cannot buyculture. You have to make it yourself.

Second, creating a strong, sustainable safety culture is a long process. If anorganisation is truly going to overhaul its approach to safety, it has to be committedfrom day one. But, you can’t start until you start — and you’re never going to finish.

And finally, as referenced earlier, there are eleven elements to OIMS, all of which arefundamental to safe and responsible operations at ExxonMobil. But the first and lastelements — the bookends of OIMS — are the most critical. These are “ManagementLeadership and Accountability”, and “Operations Integrity Assessment andImprovement”. Without leadership by example and without thoughtful, honest andobjective self-assessment, no system is sustainable.

Our nation, and our world, continues to face challenges. Meeting the world's growingdemand for energy — safely, and with minimal impact on the environment — is oneof our biggest.

The Commission of Inquiry, in examining the causes of the Montara incident, and theGovernment in responding to the Inquiry’s recommendations, are both helpingadvance our progress toward this goal.

ExxonMobil strongly supports both processes and remains committed to supportingthe cause of safety within our company and beyond.

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