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Premier Oil’s application for consent to carry out exploration drilling is denied

The Petroleum Safety Authority Norway (PSA) has turned down Premier Oil Norge AS’s (PONAS’) application for consent to drill wildcat well 9/1-1 in production licence 406 using the mobile drilling facility Mærsk Guardian.


The rejection was issued in pursuance of Section 58 of the Framework Regulations, and is based on an assessment of PONAS´ organisation according to the provisions of the Framework Regulations - Section 10 relating to organisation and competence and Section 13 relating to the duty to establish, follow up and further develop a management system, as well as the Management Regulations - Section 3 relating to management of health, environment and safety and Section 21 relating to follow-up.

The decision is based on the PSA’s supervision of PONAS, i.e. the processing of the application for consent, meetings with the company and audits performed.

Consent
By issuing a consent, the authorities confirm their confidence that the operator can carry out the activity within the regulatory framework, based on a binding application including e.g. a description of the applicant’s organisation, management system, competence and resources in order to safeguard prudent operations. In any event, decisions will be based on incomplete detailed knowledge about the operator’s organisation and management system, such confidence must thus be based on the information available to the authorities when the decision is made. The company is responsible for providing the necessary information to support a consent decision.

Application
The application from PONAS was submitted on 7 May 2010 and related to consent to drill wildcat well 9/1-1 in production licence 406 using the mobile facility Mærsk Guardian. The name of the prospect to be explored was Gardrofa.

Based on the application, the PSA conducted an audit of the company’s planning for the drilling operation on 25 May 2010. The objective of the audit was to check the company’s compliance with requirements related to management of health, environment and safety in the preparations for starting the drilling operation.

Nonconformity
The audit identified serious nonconformities related to the company’s deficient management in the planning phase, as well as deficient capacity and competence in the organisation. The nonconformities are particularly evident in the company’s original choice of well design, location and installation method, and preparations for handling its own third-line preparedness.

Management system
PONAS was prequalified as an operator on the Norwegian continental shelf in January 2007. As early as in the initial award of shares in production licences, operators are required to establish a management system to ensure compliance with Norwegian statutes and regulations, cf. Section 13 of the Framework Regulations relating to the duty to establish, follow up and further develop a management system. Thereafter, the regulations require follow-up to ensure that all elements of the management system are established and function as intended, cf. Section 21 of the Management Regulations relating to follow-up. The follow-up of the management system shall contribute to identifying technical, operational or organisational weaknesses, errors or deficiencies on the part of the company.

During large parts of the planning phase, PONAS has not had a completed and implemented management system based on Norwegian regulations, and has thus lacked an important tool for identifying and correcting deficiencies in the planning itself, and in the organisation responsible for this phase.

Organisation, capacity and competence
Section 10 of the Framework Regulations relating to organisation and competence requires operators to have an organisation in Norway which, on an independent basis, is capable of ensuring that the petroleum activities are carried out in accordance with the regulations.

On several occasions, including in a letter dated 18 July 2006, the PSA has explained what this requirement entails for smaller companies. In that connection, the PSA pointed out that, if consultants/contractors are used to carry out the activity, it is important that the operator pays particular attention to the preparations for and follow-up of the activities, and that the operator must have independent competence with the ability to e.g. qualify contractors, define their assignment, and to determine the quality of the products and services delivered.

The company also informed the Norwegian authorities in 2007 that it would reinforce its resources in the areas of HSE and drilling. The company has not followed up on this in the period up to submission of the application for consent.

It is an overarching requirement that operators have sufficient competence to make the necessary decisions to ensure that the activities as a whole take place in a prudent manner, cf. Section 3 of the Management Regulations relating to management of health, environment and safety, and Section 8 relating to basis and criteria for decision.

The regulations do not stipulate explicit requirements for how many people must possess competence within health, safety and environment in order for the company to be able to safeguard these overarching, basis requirements, however, it is clear that a company cannot be qualified to safeguard its duties under the regulations for health, safety and environment, neither as an operator nor a licensee, without having its own personnel who possess this type of competence. PONAS' organisation has not had this in connection with planning the activity.

The PSA has asked the other licensees for an account of their involvement in the planning of the drilling activity, and has provided feedback to them with detailed information about the roles and responsibilities of licensees.

Denied
During the course of the case processing period, PONAS has made a number of improvements to compensate for weaknesses that the PSA considers to be a result of deficient planning. These measures have included reinforcing its own organisation to better safeguard its responsibility for carrying out the planned exploration drilling.

In the PSA’s opinion, this does not sufficiently compensate for the obvious errors and deficiencies pointed out in connection with planning for the exploration drilling activity. On this basis, the PSA has decided that it cannot grant consent for exploration drilling pursuant to PONAS’ application.

 


Documents:
• Letter to PONAS with denial of the application for consent
• Audit report
Links:
• DNO letter regarding requirements for operators: http://ptil.no/getfile.php/z%20Konvertert/Helse%2C%20milj%C3%B8%20og%20sikkerhet/Tilsyn/Dokumenter/dnobrev.pdf
• Capacity and competence: http://ptil.no/hms-styring-og-ledelse/kapasitet-og-kompetanse-article3735-19.html
• Player assessment: http://ptil.no/aktoervurdering/category495.html
• Operator’s responsibility for emergency preparedness: http://ptil.no/nyheter/operatoerens-ansvar-for-beredskap-article6860-24.html
• Consents: http://ptil.no/samtykker/category29.html


 

Øyvind Midttun, Press contact
Email: oyvind.midttun@ptil.no | +47 51 87 34 77