When Jadestone Energy (LON:JSE) completed its US$195 million acquisition of the Montara oil project from PPT Exploration & Production (BKK:PTTEP) in September 2018 it was taking a risk with a floating production storage and offloading (FPSO) unit that had a troubled history. Given a recent oil spill at the field in the Timor Sea, and subsequent shutdown of the Montara Venture FPSO, that gamble has come home to roost.
A tanker, Freeway, was converted into an FPSO by Singapore-based Tanker Pacific, in 2009 at Jurong Shipyard, for the Montara development. However, numerous delays, including an oil leak at Montara, that led to a major fire on the West Atlas jack-up drilling rig in 2009 and Australia’s worst oil spill, meant first oil was not produced until 2013.
Aside from the 2009 oil spill, the FPSO itself was plagued with problems, which delayed initial commissioning activities.
In 2008, Thailand’s PTTEP took control of Montara after acquiring Coogee Resources. Coogee had commissioned Tanker Pacific, a newcomer to the FPSO market, to deliver an FPSO for Montara. As a newcomer, the Singapore company offered relatively cheap pricing to win business. And the Montara Venture FPSO was its second conversion project after winning a deal to provide its first FPSO to the Maari oilfield development in New Zealand.
“Both of the FPSOs have been a disaster,” said an industry executive that was involved in the Montara project before Jadestone took over.
“The Tanker Pacific FPSOs had massive initial commissioning problems, they took much longer to get up and running. Plus, huge operating problems. During PTTEP’s time, I remember hearing about all the patches, and transfers from this storage tank to that storage tank. Water was moving here. Oil was moving there,” the source told Energy Voice.
“Certainly, one of the reasons that motivated PTTEP to sell the Montara project was because they believed it needed a new FPSO, which would have totally screwed the economics. So, they flipped it to Jadestone, who have done a classic small independent funded in London business model and tried to keep it alive. Now we are here, with oil leaking out of a hole in the tank. I’m not surprised at all,” added the source.
Moreover, “it couldn’t be worse timing for Jadestone with beautiful oil prices and they have lost their FPSO, possibly forever.”
Jadestone reported that they have stopped the recent oil leak observed on 17 June by plugging a hole in one of the storage tanks, however it seems Australian offshore safety regulator NOPSEMA suspects there could be more holes. The structural integrity of the FPSO is at risk of failure, NOPSEMA warned last week.
“I know there are a lot more holes because there were holes years ago under PTTEP. Not necessarily in the outer skin, but certainly between the tanks there were a lot of holes. I’m sure they were only operating a certain number of storage tanks in the vessel back then. I would suspect in recent years that they have struggled to maintain 100% tank operating capacity, just because so many things were happening years ago,” noted the industry source.
Jadestone said that after it had controlled the oil spill, its next step was to apply a temporary repair to remove the remaining oil from the leaky tank.
“Following this, the tank will be accessed and cleaned to complete an inspection and permanent repair. This is the same work plan which has already been applied to all the other main crude oil storage tanks, as part of the five yearly inspection and repair programme which has been underway since Jadestone assumed operatorship of the Montara assets, and which is a normal and accepted process approved by regulators and Class inspectors globally,” Jadestone said in a statement.
Still, the industry executive that had worked at Montara said that “it was a horrible FPSO from day one under PTTEP. They had all sorts of problems, finding water in a tank that was not supposed to have water etc. The Australian engineers did not understand it and the Thai engineers found some of the root causes and the Aussie’s would not listen to them. There were a lot of challenges even back then, even critical safety tools were questionable.”
“With PTTEP deciding a replacement FPSO was needed the economics went to poo. Nevertheless, Jadestone took the risks when they acquired Montara and unfortunately it has come back to bite them in the butt,” added the source.
Another industry executive that initially considered acquiring the Montara project from PTTEP told Energy Voice that “I think it is safe to say that companies other than Jadestone, who looked at Montara, steered away from the deal as the FPSO was old and, possibly, under-maintained by PTTEP.”
“PTTEP would take no responsibility, so all the risk went with the buyer,” added the source.
Memories of Australia’s Worst Oil Spill
News of the recent oil spill at Montara on 17 June 2022 invoked memories of one of the region’s worst environmental disasters. The historic oil spill in the Timor Sea started on August 21, 2009, off the northern coast of Western Australia, that lasted 74 days, until a relief well was drilled that stopped the leak. PTTEP operated the Montara field in Australian waters at the time of the accident. About 400 barrels of oil per day spilled into the sea for 74 days.