Solution
Robert answered on
Dec 23 2021
Summary
The report aims to ca
y out a research on an event in the recent past of Australia, which is a
human-caused environmental disaster, and further, goes on to discuss the manner in which
the company involved compromised its legitimacy and thus, led to the disaster. The event
chosen is the Montara Oil Spill which occu
ed in the year 2009, off the NW coast of
Australia. It is intended to discuss the event in light of the aspects of PAT or positive
accounting theory, System-oriented theory and other Social and Environmental issues. Also,
a discussion is presented on the probable and actual effects of an event of this magnitude on
its close environment and the related flora and fauna. Further, the immediate action taken by
the company along with the recovery operations and change initiatives proposed to be
adopted by it to prevent such occu
ence in future and for continuing its survival and
existence in the industry are other important aspects of the report. It lays special emphasis on
the financial reporting implications of such an event, the adoption of good corporate
governance and safety culture, as means for fulfilling the corporate social responsibility
mission of the company.
Introduction
The case and the event being examined relates to PTTEP Australasia which is one of the
largest public listed companies of Thailand and ca
ies out more than 40 projects relating to
petroleum exploration and production around the world. PTTEP Australasia (Ashmore
Cartier) Pty Ltd, which is a subsidiary of the PTTEP, is engaged in the full life cycle of oil
and gas across exploration, development and production with $2 billion assets and 21
exploration permits in Australia. The event concerns a major oil spill at the Montara
Wellhead mobile drilling unit which was located 140 miles offshore from the NW Australian
Coast in the Timor Sea. It was 5.30 a.m. WA time in the morning of Friday, 21 August 2009
that it occu
ed. There was an unrestrained and unrestricted release of hydroca
ons from one
of the platform wells and as a result, oil escaped on to the surface of water. This caused
gaseous and vaporous hydroca
ons to leak into the atmosphere. It was found that more than
five hundred ba
els of crude oil were leaking daily from the Montara well into the Indian
Ocean off Western Australia for more than a period of two months, until finally it was
plugged by the company.
Inquiries into the case revealed that out of the four oil wells being drilled at the time, one was
missing a pressure containment cap. It was reported as being in place but it was subsequently
found out that it was not installed on the said well, and thus causing it to burst, and causing
one of the worst environmental catastrophes in Australia. It was also subsequently found out
that the company did not submit an Oil Spill Contingency Plan, which is a prerequisite
condition to it being given the environmental approval. This was clearly in
each of
compliance with DEWHA (Department of Environment, Water, Heritage and the Arts)
equirements as it was submitted after the drilling of five wells on the Montara platform
sometime in January, 2009.
As an immediate response to the incident, the Australian Maritime Safety Authority utilised
aircraft and personnel to ca
y out dispersing operations which continued from August 2009
till 1 November, 2009. Dispersant spraying operations proved to be very effective in
supporting the natural process of degradation and reducing the risk of oil impacts on reefs
and shorelines. Further, recovery operations were also ca
ied out for a period of around three
months and which resulted in the recovery of about fifty per cent of oil from the total oil-
water mixture recovered.
Points of Discussion
An event like the Montara Oil Spill has far-reaching consequences in terms of the social and
environmental aspects. The environmental obligations of a company are becoming
increasingly important to the stakeholders. Any company which fails to incorporate these
obligations as part of its Corporate Governance, will ultimately fail to achieve sustainable
growth and value creation. The System-oriented theories of Stakeholder theory, Legitimacy
theory, and Institutional theory lay down the guidelines for social behaviour by firms, the
corporate disclosures required to legitimise corporate actions, and the ambit of stakeholders
whose interests need to be considered by a company to meet its social and environmental
obligations and justify its existence. It is also required that aspects of positive accounting
theory be adopted to take care of the various economic consequences of an event of this
magnitude, as well as organize themselves efficiently and effectively in a manner so as to
maximise their chances for survival post the event. It is based on the realization that changing
events and circumstances call for managers to have flexibility in choosing and adopting
differing accounting policies which result in minimization of associated costs; and yet at the
same time help in achieving the interests of the management.
Social & Environmental Aspects
It was estimated by the Australian Maritime Safety Authority that the slick had spread 170
kilo meters from the coast of Western Australia. Due to the enormity of the spill it was
anticipated that the effects could be catastrophic in terms of the toxic effects on the marine
environment, on birds, on fish, coral, and marine algae. Within a month of the spill,
fishermen could observe sick and dying marine life, and also considerable absence of birds in
the imminent area of the spill. A further 17 adult dead birds found on the islands of Ashmore
Reef appeared to have died of unknown causes, with at least four having large amounts of oil
esidue on parts of their body. However, the only way to determine the effects of the incident
on the region‟s environment and bio-diversity is through systematic, long-term monitoring
efforts.
The environmental obligations of a company are becoming increasingly important to the
various stakeholders involved, and an event like the Montara
ings these issues to the
forefront of public attention. The company tried to minimize and limit the environmental
impacts of the incident of oil spill through undertaking activities like oil evaporation, natural
degradation, dispersant spraying, and skimming. There was an estimated leak of 400 ba
els
per day, as estimated by the PTTEP. However, other inquiring agencies such as the
Australian Department of Resources, Energy and Tourism, and various other expert agencies
claimed that the leak was worse than this, and was as high as up to 2000 ba
els per day.
After four continuous failed attempts, the operating company finally succeeded in its fifth
attempt ca
ied out on 3
d
November 2009, when it was able to stop the oil leak by pumping
almost thirty four hundred ba
els of mud into a relief well. All the initial response activities
were ca
ied out in a fully professional manner and the company accepted the full
esponsibility for all the related costs of the response operations and clean-up plans.
Subsequently in October 2009, to take care of long term environmental impacts of the spill,
PTTEP got into an agreement with the Australian Government so as to develop a
comprehensive environmental monitoring program. The program is a joint effort of the
company as well as the Department for Sustainability Environment, Water, Populations and
Communities (DSEWPaC). It is the most extensive program ever undertaken in Australia,
which started in November 2009 and continues till date, and includes a number of
independent scientific studies being ca
ied out by leading marine research institutions, such
as the Australian Institute of Marine Science (AIMS) and Commonwealth Scientific and
Industrial Research Organisation (CSIRO). As per the terms of the a
angement with the
federal government, it was categorical that PTTEP provide the funds for the studies and
esearch for a minimum period of two years. It was also agreed...