28 September, 2015
WHAT YOU NEED TO KNOW
- The Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment (Well Operations) Regulation 2015 (Cth) was made on 3 September 2015 and will commence on 1 January 2016.
- Once the amendments to the regulations come into force they will:
- require titleholders to develop a well operations management plan for the entire life of a well;
- vary a titleholder's reporting obligations for incidents and undertaking well activities; and
- enable time for the development and implementation of revisions to well levy arrangements.
WHAT YOU NEED TO DO
- Industry stakeholders should review the amended regulations and:
- develop systems to ensure compliance with the new reporting obligations as from 1 January 2016; and
- consider preparing a revision of their well operations management plans to comply with the amended regulations before the end of the transitional period on 1 January 2018.
- Industry stakeholders should also bear in mind the need to have an approved well operations management plan in place prior to 1 January 2016 in order for the transitional period to apply.
On 3 September 2015, the Federal Government made the Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment (Well Operations) Regulation 2015 (Cth) (Well Regulation Amendments). The Well Regulation Amendments, which will commence on 1 January 2016, come as part of the Federal Government's continued reforms of the offshore petroleum sector following the August 2009 blowout of the Montara well in the Timor Sea (Montara incident).
These reforms include the continued move away from a prescriptive regime and towards a regime of reducing risks to well integrity to a level that is "as low as reasonably possible" (ALARP).
Changes to the well operations management plan framework
The most significant changes made by the Well Regulation Amendments relate to the development and regulation of well operations management plans (WOMPs) under the Offshore Petroleum and Greenhouse Gas Storage (Resource Management and Administration) Regulations 2011 (Cth) (the Current Regulations).
Following the commencement of the Well Regulation Amendments, a WOMP will become the sole permissioning document for the well and well activities for the entire life of a well. Accordingly, the current well activity approval process will be replaced by a well activity notification scheme.
Matters to be included in a WOMP
As a WOMP is now intended to encompass the entire life of a well and not only standalone activities, the matters which must be included in a WOMP have also been significantly broadened.
From 1 January 2016, a WOMP will be required to address a range of issues including:
- a description and explanation of the design, construction, operation and management of the well and conduct of well activities, showing how risks to the integrity of the well will be reduced to ALARP;
- a description of the control measures that will be in place to ensure that risks to the integrity of the well will be reduced to ALARP throughout the life of the well (including periods when the well is not operational but has not been permanently abandoned);
- a description of the measures and arrangements that will be used to regain control of the well if there has been a loss of integrity; and
- a timetable for carrying out and completing the well activities to which the WOMP applies.
Significantly, a WOMP may apply to more than one well if the integrity of each well is subject to similar risks (such as where there are a number of wells located in close geographic proximity and are subject to the same subsoil conditions).
When will the Regulator accept a WOMP?
The Regulator for petroleum wells (the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA)) and (currently) the Minister for Industry and Science for greenhouse gas related matters) must accept a WOMP if reasonably satisfied that:
- the WOMP includes the matters proposed in the Well Regulation Amendments;
- the WOMP is appropriate to the nature and scale of the well and the well activities it applies to;
- if the WOMP applies to more than one well, that the risks to the integrity of each well are similar;
- the WOMP demonstrates how risks to the integrity of the well will be reduced to ALARP; and
- the performance outcomes, performance standards and measurement criteria included in the WOMP are appropriate.
What if the Regulator does not accept a WOMP?
Currently, the Regulator must reject the WOMP if it is not satisfied that the WOMP complies with the Current Regulations.
Following the commencement of the Well Regulation Amendments, the Regulator will be able to give titleholders the opportunity to modify and resubmit a non-compliant WOMP. If the Regulator is still of the
opinion that the WOMP does not comply with the Well Regulation Amendments, it may invite a further resubmission, refuse to accept the WOMP, or accept it in part or subject to conditions.
Request for further information
The Well Regulation Amendments also set out the basis on which the Regulator may make a written request for further information about any matter that is required to be included in a WOMP. We anticipate this process should facilitate greater flexibility in the assessment of WOMPs than under the Current Regulations.
Revision of WOMPs
Under the Well Regulation Amendments, the WOMP will be updated through a revision, rather than variation, process. This will require titleholders to consider the impact of a proposed change on the entire document before submitting the document for acceptance.
Additionally, a titleholder will be required to submit a proposed revision of the WOMP:
- before the start of any well activity to which the WOMP does not apply; or
- before making a significant change to the manner in which risks to the integrity of the well are reduced to ALARP; or
- as soon as practicable after the integrity of the well becomes subject to a significant new risk or significantly increased risk; or
- if NOPSEMA or the Commonwealth Minister gives the titleholder a direction that is inconsistent with the WOMP; or
- if the Regulator gives the titleholder a notice requiring it to do so (though the titleholder may object to such a notice and the Regulator must decide whether to accept or reject the objection within 30 days).
A proposed revision of a WOMP must also be submitted every five years after the WOMP is first accepted.
Transitional arrangements
Given the scale of the changes to be implemented, the Well Regulation Amendments include a two year transition period providing industry with time to develop and submit WOMPs that comply with the new requirements (New WOMP).
During this period, any WOMP that was in force before 1 January 2016 (Current WOMP) will apply as if it
was a New WOMP. However, titleholders will be required to:
- seek approval for well activities in line with the Current Regulations until the Current WOMP is revised; and
- notify the Regulator of any reportable incidents in line with the Well Regulation Amendments (which is discussed in more detail below).
Significantly, a WOMP that is submitted to the Regulator prior to 1 January 2016 that has not been accepted or rejected by 1 January 2016 must be dealt with by the Regulator under the Well Regulation Amendments.
Under the Current Regulations, the Regulator must accept or reject a WOMP within 30 days, with no provision for an extension of time. Accordingly, there is a risk that a WOMP submitted after 2 December 2015 in accordance with the Current Regulations (being 30 days before 1 January 2016) and not approved before 1 January 2016 may need to be revised and resubmitted to include the matters required under the Well Amendment Regulations in order to be approved.
Separately, however, a variation under the Current Regulations that has not been accepted by 1 January 2016 will still be dealt with under the Current Regulations once the Well Amendment Regulations commence.
Finally, titleholders to an existing well that has not been permanently abandoned, with no accepted WOMP in force or submitted to the Regulator, are required to submit a WOMP for that well by 1 January 2017 (ie only one year after the commencement of the Well Amendment Regulations, not two years).
Amendments to titleholder's reporting obligations
Another significant change made by the Well Amendment Regulations relates to the titleholder's obligation to report incidents and well activities.
Reportable incidents
Following the commence of the Well Amendment Regulations, a titleholder will be required to give the Regulator oral notice of a reportable incident as soon as practicable after the first occurrence of the reportable incident (or when the titleholder becomes aware of the reportable incident). The titleholder will also be required to give the Regulator a written report of the incident within three days of the
first occurrence of the reportable incident (or when the titleholder becomes aware of the reportable incident). A titleholder must keep a copy of this report for five years.
A "reportable incident" is:
- a loss of integrity of the well, including a well kick, resulting in a release of more than 1 kilogram of gas or 80 litres of liquid;
- a failure of hydrostatic pressure as a primary barrier, leading to a build-up of pressure or a positive flow check, and the operation of a blow- out prevention or diversion system;
- damage to, or the failure of, well-related equipment that has lead or could lead to a loss of integrity of the well; and
- any other unplanned occurrence that requires the titleholder to implement measures or arrangements to regain control of the well.
The lower threshold applicable to losses of integrity and well kicks rather than what applies under the Current Regulations reflects the Federal Government's view that a well kick is likely to indicate an issue, or potential issue, with the integrity of the well which could lead to a more serious incident if remedial action is not taken.
Well activities
Given that the WOMP will become the sole permissioning document for the well and well activities under the Well Regulation Amendments, titleholders will no longer be required to obtain further approvals to undertake individual well activities. However, a titleholder is required to notify the Regulator:
- at least 21 days (or a shorter period if agreed by the Regulator) prior to commencing a well activity involving:
- drilling formation;
- running tubular goods into a well or recovering tubular goods from a well;
- removing a Christmas tree, tubing spool, casing pool or casing head from a well;
- the installation of a Christmas tree saver for use with downhole operations or well testing; and
- at any time prior to commencing (including on the same day the activity is commenced) a well activity involving:
- perforation or tubing punching;
- the installation, removal or locking open of a downhole safety valve, storm choke valve, gas- lift valve or injection valve; and
- the installation of a Christmas tree saver for use during maintenance work on Christmas tree components,
provided that those activities do not fall within the scope of activities that must be notified at least 21 days in advance.
Changes to well levy arrangements
As a consequence of removing the requirement to obtain approval to undertake well activities, the Well Regulation Amendments also make minor amendments to the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Regulations 2004 (Cth) (Levies Regulation) to clarify that the well activity levy will continue to apply to applications for approval of well activities under the transitional provisions of the Well Regulation Amendments.
As the levies collected under the Levies Regulation are used to fund NOPSEMA's operations on a cost- recovery basis, the Federal Government has indicated that it intends to revise the levy arrangements to ensure NOPSEMA's full cost-recovery is maintained following the reduction in receipts of the well activity levy.
Next steps
Industry stakeholders should review the amended regulations and:
- develop systems to ensure compliance with the new reporting obligations from 1 January 2016; and
- consider preparing a revision of their well operations management plans to comply with the amended regulations before the end of the transitional period on 1 January 2018.
Industry stakeholders should also bear in mind that a well operations management plan submitted to the Regulator for approval after 2 December 2015 may need to be revised to comply with the amended regulations if it is not approved before 1 January 2016.
For further information, please contact:
Peter Vaughan, Partner, Ashurst
peter.vaughan@ashurst.com
