(Sharecast News) - Jadestone Energy updated the market on operations at the offshore Australia Montara field on Monday, after oil was released to sea during a transfer operation.
The AIM-traded firm said that during "routine production and crude oil cargo operations" on 17 June, crude oil was being transferred between two tanks onboard the Montara Venture floating production, storage and offloading (FPSO) vessel.
During the transfer, oil was observed on the surface of the sea adjacent to the FPSO.
Transfer operations were ceased immediately, and production from the Montara fields was shut in as a precautionary measure.
The release of oil to sea was quickly halted by pumping water into the tank, indicating a leak somewhere at the tank base.
A subsequent inspection confirmed a small 30-millimetre diameter hole in the bottom of the tank.
Having now controlled the release of oil, Jadestone said the next step would be to apply a temporary repair in order to remove the remaining oil from the tank.
Following that, the tank would be accessed and cleaned in order to complete an inspection and permanent repair.
That would be the same work plan already applied to all of the other main crude oil storage tanks, as part of the five-yearly inspection and repair programme underway since Jadestone assumed operatorship of the Montara assets.
The volume of released oil was estimated at three-to-five cubic metres, which was monitored and had fully dispersed by the morning of 19 June.
It said the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) was notified of the incident immediately, and would initiate an onsite inspection of the Montara facilities on 21 June.
Jadestone said its preliminary estimate was that it will take about four weeks to complete the tank inspection, and make sufficient repairs to restart production at Montara, with appropriate isolation of the crude oil tank.
After that, following consultation with key stakeholders, a "full remediation programme" would take place.
Jadestone said its early estimates of the cost of securing the leak site and permanent repair of the crude oil tank totalled $2m to $3m.
That, it said, was "consistent" with the overall spending on the tank inspection and repair work so far, which totalled $11m over the last three years.
On the basis that full production from the Montara fields could be restarted as expected, Jadestone said it anticipated full-year 2022 production would be around the "lower end" of the previously-announced guidance range of 15,500 to 18,500 barrels of oil equivalent per day.
"Whilst we deeply regret this event, immediate and decisive action by the Jadestone team limited the quantity of oil released and made the facility safe," said president and chief executive officer Paul Blakeley.
"The integrity of our facilities is at the heart of our strategy and this oil tank was due for inspection within the next few weeks as part of our five-yearly maintenance cycle, which would have been the final key step in the significant inspection and repair plan that has been underway on the Montara Venture since we assumed operatorship in 2019.
"Over this period, we have worked extensively and spent significant sums to restore the vessel and associated infrastructure to the condition required in order to deliver a long, safe and productive field life."
Blakeley said safety and sustainability were "core values" for the firm, adding that the company would now work closely with NOPSEMA and other stakeholders to "develop and execute" a plan to "safely and permanently repair" the hole in the crude oil tank.
"There are many precedents for this type of activity, both within the Asia-Pacific region and globally, and we will deploy the necessary expertise to provide confidence in the solution we implement.
"It's particularly frustrating for this event to occur so close to the planned inspection and repair activity, but our investment in the facilities to date is bearing fruit, with facility uptime now over 90% and with further improvements in the planning stage."
At 0931 BST, shares in Jadestone Energy were down 16.84% at 79p.
Reporting by Josh White at Sharecast.com.
Jadestone Energy (JSE)