Fitness for Purpose Report- October 2008

BEACH PETROLEUM

Fitness For Purpose Report

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Table of Contents
1. Introduction ...........................................................................................................................3
1.1. Scope......................................................................................................................................................3
1.2. Report Requirements ......................................................................................................................... 3
1.3. Methodology..................................................................................................................................... 3
2. Executive Summary ..............................................................................................................4
3. Roles and Responsibilities ....................................................................................................5
4. Facility / Utilities Description and Condition ...........................................................................6
4.1. Facility Description ........................................................................................................................... 6
4.2. Nature of Operations ......................................................................................................................... 6
4.3. Equipment Condition and Integrity Management ............................................................................... 6
4.3.1. Fixed Equipment ...................................................................................................7
4.3.2. Current Fixed Equipment Condition.......................................................................7
4.3.3. Rotating Equipment...............................................................................................8
4.3.4. Current Rotating Equipment Condition ..................................................................8
4.3.5. Instrument / Electrical Equipment ..........................................................................8
4.3.6. Current Instrument / Electrical Equipment Condition .............................................8
4.4. Risk Evaluation and Management ..................................................................................................... 9
4.4.1. Hazard Identification .............................................................................................9
4.4.2. Risk Reduction Measures .....................................................................................9
4.4.3. Environmental and Public Risks ............................................................................9
5. Beach Petroleum HSE Integrated Management System .....................................................11
5.1. Implementing / Auditing ................................................................................................................. 11
5.2. Monitoring ...................................................................................................................................... 12
5.3. Reviewing....................................................................................................................................... 13
5.4. Planning.......................................................................................................................................... 13
5.5. Emergency Response ...................................................................................................................... 13
6. Effectiveness of Management Systems ...............................................................................15
6.1. Commitment and Leadership ........................................................................................................... 16
6.2. Policies ........................................................................................................................................... 16
6.3. Organisation, Resources and Documentation ................................................................................... 17
6.3.1. Organisational Responsibilities ....................................................................................................... 17
6.3.2. Training and Competence ...................................................................................17
6.3.3. Sub-contractor Management ...............................................................................18
6.3.4. Communication ...................................................................................................18
6.3.5. Documents and Standards ..................................................................................18
7. Key areas of Focus .............................................................................................................19
8. Ongoing Fitness for Purpose ...............................................................................................20
9. Attachments ........................................................................................................................21

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1. Introduction
In accordance with section 30 – Fitness for purpose assessments of the Petroleum
Regulations (SA) 2000, Beach Petroleum Ltd. has conducted an assessment of its
facilities located in the South Australian sector of the Cooper Basin. This report
summarises the findings of this assessment and is current for the month of October 2008.
1.1. Scope
This assessment covers the following South Australian facilities:
Aldinga Production Facility (PPL 210)
Callawonga Production Facility(PPL 220)
Callawonga - Tantanna Flowline (AFL 98)
Christies/Silver Sands Production Facility (PPL204)
Kiana Production Facility (PPL 212)
Parsons Production Facility (PPL 224)
Parsons - Callawonga Flowline(AFL 146)
Sellicks Production Facility (PPL 203)
Tantanna Unloading Terminal (AFL 182)
Lycium Yard (AFL 82)
All associated utility systems
It does not cover the completed and suspended wells, Middleton & Udacha
Included as Attachment 1 is a map with the facilities marked.
1.2. Report Requirements
This report will demonstrate the measures in place to establish and manage the risks
imposed by the facilities on the environment, public health and safety. Beach has used
internal and external resources to assess its operating facilities.

In addition it will specifically assess the following:

Physical condition of each facility
Effectiveness of management systems for the operation and maintenance of each
facility
Potential for the environment to affect the safe and effective operation of each
facility
Potential for serious incidents to occur at each facility
Adequacy and reliability of utilities required in order to enable the effective
operation of each facility so far as is relevant.

1.3. Methodology
The approach to this assessment has been to document the list of facilities Beach
operates, the risks involved with these facilities and discuss the systems Beach has in
place to manage these risks.

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2. Executive Summary
Beach Petroleum has been operating oilfield facilities since 30 th of June 2002 when it took
over as operator of the Kenmore and Bodalla oilfields in Queensland. As a rapidly
expanding company it has been recognised that the development of management
systems on a company-wide basis to govern and support its operations are integral to an
effective and efficient operation.

In response to this, the 2006/2007 period has seen a major upgrade to, and
implementation of, a HSE management system to govern employee and 3 rd party
activities on Beach production sites. A key component of this system was the introduction
of a web based induction system which assisted Beach in achieving an LTI free 2006 and
an honourable mention at the APPEA safety awards

The 2006/2007 period has also seen deliberate effort aimed at developing a
comprehensive risk based integrity management system for equipment at all Beach
operated production sites. Risk Based Inspection (RBI) assessments (defining risk levels
and key corrosion mechanisms) undertaken for all sites and major items of equipment
has provided the basis for the development of appropriate inspection procedures and
schedules for all fixed equipment. Work is continuing in this area to further develop
maintenance and integrity management for current and future operations at all locations.

Public well-being and the safety of all employees and contractors, in conjunction with the
Environmental management system, is of paramount importance to Beach. The Beach
Statement of Environmental Objective (SEO) and Environmental Impact Report (EIR)
address all risks and potential hazards associated with its production operations. With
appropriate measures put in place, risks can be reduced to levels that are considered
acceptable.

Beach has a simple and effective emergency response system in place which is
supported by periodic emergency desktop exercises.

Beach production sites have been deemed fit for purpose and the ongoing development
of the HSE and Integrity Management systems are intended to ensure that fitness for
purpose is maintained for current and future operations. This is supported by Beach
designing and constructing facilities to the appropriate standards and specifications.

The current effectiveness of Beach management systems is deemed appropriate to

manage the risks associated with our facilities. Ongoing development and improvement of
these systems will aim to raise their effectiveness to enable Beach to achieve low
supervision status, as defined in the Petroleum regulations.

Whilst these results are pleasing, Beach continues to strive for best industry practice
through continual review and improvement of its systems.

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3. Roles and Responsibilities

Operational Safety and Environmental management of the operation is the responsibility
of all Beach personnel and a contractual obligation for any contractors involved with the
operation.
Overall responsibility for the operations including the approval of this document rests with
the Production Manager. Operations and maintenance personnel are permanent
employees. Field positions work on a roster basis and are supported from time to time
through the use of contract service providers. This document is applicable to all
personnel including contractors.
The organisation and responsibilities for personnel overseeing the operation are outlined
below.

Role Responsibility Reports to Location

Production Overall responsibility for Chief operating Adelaide Office
Manager Beach’s Production Operation Officer
activities.
Incident notification to
Authorities.

OHS Responsible for development Chief operating Adelaide Office

Coordinator and implementation of company Officer
EHS management system.
Production Creation or review of this Production Adelaide Office
Operations document. Manager
Coordinator
Production Responsible for overall Production Production Site
Supervisor operation and implementation of Superintendent
site EHS. (who reports to
Reports on Daily production Prod
operations. Operations
Onsite management of any Coordinator)
temporary contractors.
Safety and Environmental
incident reporting.
Production Directly responsible for the Production Production Site
Operator operation of the pipeline, Supervisor
shipping, injection and pigging
operations.
Senior Facility Creation or review of this Production Adelaide Office
Engineer document. Operations
Integrity management. Coordinator

Responsibilities for periodic review and revision of key documentation are as follows:

HS&E procedures and OHS Coordinator assisted by Production

plans Superintendent/Supervisors

Technical procedures and Production Operations Coordinator assisted by Production

plans Superintendent / Production Supervisor

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4. Facility / Utilities Description and Condition

4.1. Facility Description

All facilities (except Sellicks) at Beach Petroleum in South Australia are less than 5
years old and comprise wellheads, artificial lift (beam pump and jet pump),
flowlines, pipelines, primary dewatering, secondary dewatering, hydrocarbon
storage, crude loadout, water disposal equipment and interconnecting piping.
These facilities are predominantly low pressure (with the exception of jet pump
discharge facilities) and are designed and installed in accordance with the relevant
Australian and international standards. All oil facilities are equipped to handle
oil/water only and any entrained gas (very low levels) is vented to atmosphere.
Major facilities have been designed or had input from experienced individuals with
many years of Cooper Basin experience. Where relevant, external engineering
consultancy resources have been engaged.

4.2. Nature of Operations

A permanent camp is located at the Sellicks facility.

The camp provides permanent accommodation for a supervisor, three operators
and temporary accommodation for contractors.
Most facilities in SA are unmanned but operator attended during daylight hours.
Crude oil is trucked to Tantanna where it is delivered into the Santos-operated
pipeline to Moomba. Alternatively crude can be trucked directly to Moomba.
A 47km GRE pipeline (commissioned in August '08) delivers production from
Callawonga, and Christies into Tantanna and replace the previous trucking
operations. A further pipeline from Parsons to Callawonga is currently being
progressed.
In general, facilities are located in close proximity to each other and are manually
operated through regular operator attendance. The exception are Kiana and
Aldinga which are monitored by remote Skynet communications. All facilities have
safety systems (high tank level, etc) that will shut down production automatically in
the event of a process excursion. There is one exception: Aldinga which has a
manual shutdown due to the very low volume production rate.
Utilities are provided by pneumatic systems (compressed air or nitrogen bottles),
water and electric power via a generator at larger facilities or solar powered with
battery backup at more remote locations. All facilities have appropriate fire fighting
and safety equipment.

4.3. Equipment Condition and Integrity Management

Beach Petroleum is developing an integrity Management System to manage risks

associated with existing plant equipment.

The approach to managing equipment condition is as follows:

Equipment at Beach-operated locations has been sub-divided into Fixed (pressure
vessels, piping, tanks etc), rotating (pumps, engines etc) and instrument/Electrical
equipment.

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Due to the current low level of complexity at Beach facilities, a fit-for purpose
approach to integrity management and equipment monitoring has been adopted.
This can easily be adapted or expanded to allow for the growing scope of
operations.
Initially focussed on fixed equipment, but able to be adapted for all equipment
types.
Equipment tracking system developed to more effectively identify individual
equipment.
Condition monitoring tool developed (fixed equipment only at this stage) to track
inspection reports and monitor condition over time.
Utilities are to be included in the interim and future integrity program.
4.3.1. Fixed Equipment

In the past equipment has been inspected as per Australian Standards as required
throughout the operations.
Beach is now adopting a Risk-based inspection (RBI) assessment (to API
RP580/AS 3788). This risk assessment focuses on identifying the mechanisms
which will result in a loss of containment for all operating locations and equipment
types. A risk level is defined for each item of equipment that encompasses location
and equipment specific factors. This risk level will then drive the required
inspection interval.

The primary aims of the RBI assessment are:

Understand risk for individual items of equipment and location specific factors
at each of Beach’s facilities.
Management of risk by defining inspection frequency and type appropriate to
each case through the results of the assessment.
Reduce inspection costs, particularly with respect to flowlines and process
piping.
Meet safety and environmental management requirements as defined in the
relevant state legislation.
Rank equipment by risk to prioritise mitigation alternatives and repair actions.
Incorporate lessons learnt into future work.

Key Outcomes of the RBI approach are:

Clearly defined inspection procedures (both for Beach and external inspections
provider.)
Optimised inspection schedule to suit equipment and operating conditions.
Clearly defined approach to the management of maintenance and integrity of
all fixed equipment.
Implementation of a formal layer of inspections, repair and damage mitigation
actions.
4.3.2. Current Fixed Equipment Condition

The outcomes of the RBI Assessment, review of past inspection reports, inspection
certificates and numerous site visits have yielded the following conclusions:

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Fixed equipment is in a fit-for purpose condition as verified by external

inspection providers’ inspection certificates, visual inspection by Beach
employees and successful service records.
An integrity management system to govern inspections, maintenance and
equipment monitoring is being implemented.
Attachment 2 is a high level summary of the current facility equipment condition. It
identifies the key risks which are typically high pressure and loss of containment.

4.3.3. Rotating Equipment

Maintenance and inspection of rotating equipment is currently driven by field-based

staff, with some engineering support as required, and tracked via a maintenance
schedule.

4.3.4. Current Rotating Equipment Condition

Operations are considered low risk at present and are adequately addressed by
field-driven scheduled maintenance and inspection. Equipment is deemed to be in
a fit-for purpose condition.

4.3.5. Instrument / Electrical Equipment

Maintenance and inspection of electrical and instrumentation equipment is

currently conducted by field-based staff with external support as required. The
current approach is as follows:

Undertaken as required by trade-qualified Beach electricians or external

contractors to determine compliance.
Beach facilities are now defined by a uniform hazardous area classification
for every facility.
Current work performed to date:
o Identification of equipment to be included in a maintenance and
inspection program
o Hazardous area extents defined.

4.3.6. Current Instrument / Electrical Equipment Condition

The I/E installations have been recently inspected and any deficiencies
corrected.
Further work includes:
o Undertaking periodic assessments of hazardous area compliance and
implement any action outcomes
o Determine scope and frequency of inspections, maintenance and
testing using external experts if required
o Implement inspections and monitoring tools using similar approach as
per work undertaken for fixed equipment.

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4.4. Risk Evaluation and Management

4.4.1. Hazard Identification

Beach has a Hazard Identification and Risk Management procedure in place which
covers all areas of the company’s operations.
Hazard identification and risk assessments are conducted at the design and
development stage of new processes, facilities and equipment.
Continuous and ongoing hazard identification and risk assessment is required at
existing operations/facilities to maintain and improve HSE performance. These
areas and tools will be discussed in detail in section 4 of the document.
Hazard registers are in place for key areas of the operations. These include:
1. Environmental
2. Production Operations
3. Facility Design and Construction
Beach’s Risk Matrix is aligned with industry best practice and includes a 5 x 5
matrix of Consequences against Likelihood. This is utilised at all times where risks
are to be assessed except when an Australian standard specifies otherwise (eg.
AS 2885 specifies its own matrix which is not to dissimilar to the Beach matrix).

4.4.2. Risk Reduction Measures

When hazards have been identified and assessed (whether in design or during
routine operations), control measures must be applied to manage the risk to a level
that is as low as reasonably practicable (ALARP).
The following hierarchy is used as when determining controls for risks from the
most effective to the least:
Elimination (i.e. most desirable control method);
Substitution;
Engineering Controls (i.e. isolation, design modification, guarding);
Administrative Controls (i.e. safe work practices, training);
Personal Protective Equipment (i.e. least desirable control method)

From the matrix, where ‘High’ or ‘Moderate’ risks cannot be reduced to an

acceptable level, management are informed immediately. In the majority of cases
most risks are either eliminated or assessed as ‘Low’ across existing operations.

4.4.3. Environmental and Public Risks

Beach is committed to continually improving its environmental performance and

aims to achieve standards of environmental management which are beyond
compliance with relevant regulations to ensure that all of its activities are carried
out in the most environmentally responsible manner practicable.

Facilities on Environment:
Refer Item 30. (2) (b) of the Regulations.

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Beach Petroleum's Health Safety and Environment System (HSE System)

incorporates the management of environmental matters from Board level through
to individual site operations and is the key tool for managing environmental
responsibilities, issues and risks by:

Establishing an Environmental Policy;

Identifying environmental risks, legal and other requirements relevant to
Beach' operations;
Setting appropriate environmental objectives and targets;
Establishing a structure to facilitate planning, monitoring, corrective action,
to achieve objectives and targets.

Beach has provided PIRSA with separate documentation addressing:

Environmental Impact Report (Section 97 of the Act and Item 10 of the

Regulations)
Statement of Environmental Objectives (Sections 99 and 100 of the Act and
Items 12 and 13 of the Regulations).

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5. Beach Petroleum HSE Integrated Management System

As a means of demonstrating the integral connection of the Beach HSE Management
System and Facilities operations and maintenance, a simplistic Management System
Flowchart has been provided to show the links between the various components of the
system. The flowchart is included as Attachment 3.

It is evident from the flowchart that the key elements which form the backbone of the
system are the policies, procedures (manuals), risk assessments, personnel inductions,
hazard reporting and feedback loops.

5.1. Implementing / Auditing

The Beach Health Safety and Environment (HSE) Management System has been
extensively reviewed over the last 2 years. Beach has continued to utilise external
specialised services where required.

Recently the following key developments have taken place:

Site visits by International Safety and Risk Management (ISRM) consultants with
Beach HSE personnel to audit the HSE system and deliver HSE specific guidance.

In the 2008 audit there were two ‘High’ ranked items which have now been
completed, these are:

o To nominate a senior position responsible for company wide HSE activities.

Beach has undertaken to employ a person as HSE Co-ordinator in addition to
the current HSE resources. This position has been filled and the individual
will commence with Beach in the 4th quarter of 2008.
o To establish an action item register for the Adelaide office in line with field
sites. (Completed)

Regular extended site visits by Beach H&S Officer to provide on-site guidance and
assistance.

The implementation of an electronic JSA register to ensure quick access to previous

JSA’s and allow for the review of existing JSA’s for tasks that are of a similar nature.

Various design modifications have been implemented to further reduce the risk of
hazards associated with access and egress in and around the facilities.

The implementation of safety training packs to assist staff in the review of HSE
procedures.

The development of the Beach intranet has allowed for greater access of the HSE
system to all staff. The intranet site contains the HSE policies and standards, various
HSE alerts, HSE reports, login screen for the Beach web-based induction system
and various links to the relevant HSE regulations.

In September 2007 an independent audit of all Beach facilities in SA and QLD was
conducted by AIG Global Marine and Energy. The purpose was to further document the

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technical risks associated with beach facilities for risk underwriters. Six key
recommendations have been actioned.

Key outcomes of the auditing and monitoring processes of the last 4 years have been:

The introduction of an Integrity Management system and its ongoing implementation

and development
Industry recognised web based induction system
A 30% increase in the number of formal work procedures
Establishment and development of a competency based management plan for
personnel
More widely used risk assessment process in all facets of the business
Establishment of a flowline and pipeline management procedure. This area of Beach
operations is considered one of the highest risks to the environment. HSE-PRO 37
(flowline and pipeline management procedure) and POP 61 (Water sampling and
treatment for SRB's) are now instrumental in assessing and monitoring these
systems.

5.2. Monitoring
Senior management are consulted and kept informed of HSE matters by the various
methods:
HSE management meetings
HSE submissions to the Beach Petroleum Board
Engineering and Operational meetings.

The tools used to monitor the HSE system are:

Weekly operations reports and meetings between field and office.
Fortnightly safety meetings,
Weekly Management feedback to the Safety Meetings
Action Item Register (AIR)
Incident Reporting and Investigation
Various plant inspection forms
Monthly Operations meetings between all supervisors/superintendents.

These tools have been integral in monitoring the HSE system. The most valuable tool
used by all staff has been the Action Item Register. The AIR is the central conduit for
tracking hazards, non-compliance items, management system change requirements,
audit non-conformance and other operational actions that require attention. It has
allowed all users and management to monitor/track all issues and holds the relevant
parties accountable for any inaction(s).

Not only is the AIR operating as an integral part of the site operations, an AIR has
recently been created for the Adelaide office site.

A greater field presence by the HSE officer and office operations staff has ensured the
HSE system continues to be implemented and used accordingly.

All distributed copies of the Beach HSE system are now controlled remotely by Beach
head office and are synchronised with the master HSE directory daily to ensure all copies

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are current. This is done using the Unix based r-sync tool. Then we ensure that
operational sites have direct access to the latest version of operating/maintenance
procedures.

Any drawings that are to be utilised on site, are only available from the electronic stored
masters in the Adelaide office. Once issued they are considered 'non-controlled'. All new
projects are issued or checked against those in the electronic database.

Beach is continuing to develop a centralised Integrity Management System for its field
based assets to help increase the efficiency and effectiveness of its maintenance and
operating procedures and systems. This will then enable effective and prudent
compliance.

5.3. Reviewing
The review process continues on all levels of documentation. The following are the key
outcomes of those reviews:

The HSE manual has been undergoing continuous review; through the operations
and head office meetings and utilising the review packs. This has seen the
development of an HSE system that is ‘owned’ by all areas of the company with
individuals empowered to initiate changes that directly benefit their well being and
that of the company.

With the arrival of new field staff, the Production Operations Manual (POM) has been
reviewed to ensure that it provides adequate guidance to all new employees. As a
result of the review the POM has been updated. Production Operating Procedures
(POP’s) are regularly reviewed on site and discussed at the regular production
management meetings between head office and operations staff. Once again site
personnel are empowered to make changes that directly affect their environment and
work conditions. There has been a steady addition of procedures in the last 3 years to
help facilitate more prudent site operations.

Emergency Response drills have enabled the improvement of procedure whether it

be personnel or tool based. It provides familiarisation to the process for personnel
that will aid them if in an unfortunate event occurs.

5.4. Planning
As a result of the processes mentioned above, a comprehensive HSE plan has been
developed for 2008/09 which includes key objectives for all levels of the operation to
measure HSE performance.

5.5. Emergency Response

Emergency response plans are in place for our operations and emergency response
exercises are conducted regularly to review the appropriateness and functionally of the
Beach Emergency Response Plan (ERP).

Some Examples of the ER exercises are:

2006 Qld (Kenmore) – Personnel falling from height and oil spill

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2006 SA (Sellicks) - Personnel falling from height and fire with associated injuries.
2007 SA (Adelaide) – Pipeline rupture/truck accident in the Cooper Basin while an
2007 SA (Sellicks) – Pipeline rupture/leak

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6. Effectiveness of Management Systems

The Beach Petroleum EHSMS has a 3 level structure as seen below.

Beach
Charter
Culture

Corporate, Beach Level 1

BHP Billiton
Company Wide Corporate
HSEC Policy
HSE Policies
HSE
BHPStandards
Billiton
HSEC
QualityManagement
ManagementStandards
System
Corporate
-wideAnnual
HSECHSE Plan
Procedures
Emergencyand Guidelines
Management Plan

-
Induction Manual
Emergency Response Plan
HSE Management Manual Level 2
Discipline Specific
Completions and Work over Operations Manual
Drilling Lease Preparation Manual
Operations Manuals (Seismic, Drilling and Production)

Location Specific Annual HSE Plan

Location Specific Location Specific Details in Generic Manuals Level 3

This structure captures and fosters the operational requirements needed to successfully
manage the production facilities from the design stage through to operation. Technical
areas are integrated with the safety, environmental and native title management.
Included in the structure are the Beach HSE standards which align with the following
discussion.

The effectiveness of the Beach EHSM system has been assessed against the PIRSA Self
Assessment Tool. The current scores will provide the baseline for assessment again in 12
months time and annually thereafter. The first assessment is included as Attachment 4.
The assessment followed a recent company wide (included all sites) audit by ISRM of the
EHSM system. The audit was comprehensive addressing EHSMS components including
all 3 levels of the system.

Beach is very aware that an overloaded ‘paper’ driven system will not be received well by
most personnel and the system then becomes an ‘Achilles heel’ rather than an asset.
This is then often a challenge to ensure the engagement of all staff and contractors. The
Beach system has the underlying objective of incorporating only the documentation
necessary to ensure the EHSMS is efficient, functional and effective. Staff and
contractors find it non-onerous to utilise the system and hence it is used. It also provides
an effective tool for mitigating risks, managing actions and emergencies.

Based on the self assessment, areas of improvement or areas that require further
development are:
Objectives – establish a more visible set of EHS objectives.
Inspections – increase the frequency of Adelaide office inspections.
Sub Contractors – contractors working in and on the Adelaide office are less
scrutinised than contractors at our operational sites. The Adelaide office contractors

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should be treated no different to those on site. Contractors working on current (July

08) building renovations have been audited on HSE areas.

Note: From the self assessment, ‘areas for improvement’ have been incorporated into
the Beach HSE plan for 2008/09.

6.1. Commitment and Leadership

Beach Petroleum is committed to:
the health and safety of employees, contractors and the public through sound management
practices
conducting operations in an environmentally responsible manner
establishing and maintaining positive relations with the indigenous community,
but, “SAFETY WILL TAKE PRECEDENCE IN ALL OPERATIONS”.

Key objectives (see ‘6.3.1 Organisational Responsibilities’ below) are being achieved by:
Developing relevant HSE procedures and systems;
Developing health, safety and environmental targets in consultation with employees
to promote, measure and continually improve HSE performance;
Communicating, consulting and encouraging participation with employees and
relevant parties (including landholders and Native Title claimants);
Ensuring that incidents, hazards, near misses, concerns and complaints are reported
adequately, investigated and steps taken to prevent recurrence;
By actively seeking to recognise and promote opportunities in and through our industry
(and wherever reasonably possible, in Beach Petroleum’s activities) for indigenous
people to enjoy improved living standards, maintenance of their culture and traditions and
economic independence through training, employment and enterprise.
6.2. Policies
Beach Petroleum Ltd (Beach Petroleum or Company) Health, Safety, Environment (HSE)
and Indigenous Relations and Native Title (NT) policy statements form the second tier of
the Beach Petroleum HSE Management System structure (illustrated above).
The policy statements provide a statement of overall intent and commitment to HSE and
NT issues.
The Beach Managing Director is responsible for endorsing the policy documents and
ensures that reviews are conducted at appropriate intervals.
Application of these policies resides with Beach Petroleum management and with all
employees sharing responsibility for its implementation. Employees are also empowered
to participate actively in the development of the systems that support the Policies. As they
are simple and succinct, all employees are conversant with them and readily raise any
issues or improvements.

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6.3. Organisation, Resources and Documentation

6.3.1. Organisational Responsibilities

Beach Petroleum conducts its activities in such a manner as to ensure:
A healthy and safe workplace for all employees, contractors and
subcontractors at all sites;
The protection of members of the public possibly affected by its operations;
Compliance with all applicable Government Acts, regulations and
standards;
Avoidance of the pollution of land, water and air by conformance with
regulatory guidelines and industry standards applicable to all areas of
operation.
Identification of sites of cultural, archaeological, historical and natural
significance, which could be impacted by the company’s operations and
minimise their disturbance; That all employees and contractors are
aware of their environmental and cultural heritage responsibilities;
That incidents, near misses, concerns and complaints are reported
adequately, investigated and appropriate procedures implemented;
That all operational sites have a waste management plan and that waste
generated by operations is disposed of in a safe and environmentally
efficient manner and in conformance with relevant environmental
legislation;
The distribution of appropriate guidelines, regulations and publications;
Protection of native flora and fauna in all areas of operation;
Development and compliance with codes of practice required by regulating
authorities which minimise environmental impacts from all field operations.
Acknowledgement and respect of the indigenous community, continuous
communication and provision of opportunities within Beach or associated
operations.
6.3.2. Training and Competence

In 2007/2008 a competency based training guideline was developed for all site
personnel. Even though Beach had experienced personnel on site, this guideline
was identified as necessary following an increase in site operations and new
personnel joining the company. At each operator grade level to Supervisory levels,
a list of base competencies is required. Each individual is assessed against those
requirements and deficiencies identified so that appropriate training can be
initiated.
The training guideline is directly related to the POP’s and HSE procedures and
also includes other areas such as first aid, 4WD, ticketed training to operate
various machinery, etc.
This system is in its infancy and will continue to be improved utilising feedback
from Beach personnel.

For engineering and design personnel, Beach has always employed the services
of highly experienced people, whether it be internally or through external
consultancy. Utilising this approach Beach continues to ensure that its facilities
have been designed and built to reflect learning’s from past experience (especially
in the Basin) and meet current standards and legislative requirements.

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6.3.3. Sub-contractor Management

Beach treats contractors as it would its own employees and endeavours to

establish good working relationships with contractors that have the same HSE
management objectives. A procedure (HSE-PRO 07) is in place for management
of contractors including pre-qualification requirements that must satisfy Beach
management of their suitability.
A contracts approval register is maintained and adjusted if required following
performance reviews or contract completion.
All contractor undergo appropriate inductions before any work commences. This is
aided in some cases by key contractors being permanently based in or near to the
Sellicks camp eg. Ascots provide crude haulage expertise and equipment. They
currently have 2 drivers boarding in the Sellicks camp. They can then be part of the
daily interface (toolbox meetings, scheduling, etc.) between, not only the
production operators, but production supervisors and other contractors.

6.3.4. Communication
Communication at all company levels is considered critical in ensuring a safe,
efficient and effective operation. With a relatively small group this is easier to
manage than for larger organisations.
A communication and consultation procedure (HSE-PRO 08) is in place and has
the intention of ensuring a mechanism exists to communicate and involve Beach
employees and other relevant parties in safety, health, environmental and native
title issues. This includes toolbox, safety and service quality meetings, inductions,
consultation, displays, alerts and bulletins.
Site communication amongst Beach and contract personnel is relatively straight
forward. Due to the relatively small size of operation and infrastructure, information
can be disseminated daily more efficiently and effectively.

6.3.5. Documents and Standards

Beach’s internal specifications and standards (including HSE) are appropriate for
its existing facilities and are checked and administered by professionally qualified
staff internally and third parties externally. Most are based on proven systems and
standards employed for many years in the Cooper basin.
As discussed in section 4 above, Operating and HSE procedures are the core
components of an effective management system that to date has not seen a
serious incident or non-compliance in South Australia operations.

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7. Key areas of Focus

Beach recognises that there a number of areas where either, procedures, standards,
documentation or records are inadequate. Identified below are these key areas and
associated action/time period for which they will be addressed.

Design and Construction Manual - Although Beach designs and constructs its facilities to
industry and Australian standards, it was identified in early 2008 that a formal set of
procedures be put in place to ensure consistent and fit for purpose facilities. In the past
only one or two personnel have been working on beach facilities. This number is
expanding and warrants a clear guideline for all parties to follow.
The Design and Construction Manual was created to incorporate relevant guidelines,
specifications and Standards. Continual development and formalisation of procedures is
ongoing. The manual currently has 5 procedures addressing Production facilities design
through to Hazardous area compliance. It is anticipated that 5 more will be drafted and
approved throughout the remainder of 2008.

Integrity Management system - In 2006 Beach identified and committed to a fixed

equipment integrity management system as discussed earlier in the document. A detailed
procedure has been drafted and is undergoing review. It is expected to be approved in
early 4th quarter of 2008 and will capture the work to date and the full implementation.
The next phase to be addressed is the implementation of a formal Instrument and
Electrical maintenance and inspection programme. The pre-planning work is scheduled to
be completed by the end of 2008 with inspections in 2009.

Maintenance Scheduling tool - formalisation and further development of an electronic site

based tool for providing more efficient and effective maintenance. Often under the current
manual system equipment can be 'over serviced' resulting in wasted costs and poor
utilisation of resources. A tool that outputs daily or weekly requirements utilising
manufacturer or experienced based intervals is much more effective. It also then has full
electronic records that can be easily monitored or analysed.
A new electronic tool has been developed and is currently being trialled in the Qld
operation before being rolled out to SA. This is expected to take place in the 4th quarter
of 2008.

Competency Based Training - A system has been developed and partially rolled out. It
needs to be completed for all site personnel. Employees are currently having their
competencies and training needs assessed. Although there are no serious shortfalls so
far, Beach are committed to completing the task (by end of the 4th quarter 2008) ensuring
that the system is formalised and utilised appropriately.

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8. Ongoing Fitness for Purpose

The preceding discussions and data all aid in ensuring Beach has an effective operation
with facilities that are ‘Fit for Purpose’, have high levels of integrity and minimise impacts
to the public and the environment.

The integrity management system has (as of September 2008) yet to be implemented
and has been given a high priority for implementation. Inspection of all fixed pressure
equipment is planned to commence in November 2008 incorporating the results of the
RBI assessment. This will be incorporated into the company-wide approach to inspection,
maintenance and testing of all equipment (fixed, rotating and instrument/electrical) still
under development.

In the interim, a condition monitoring tool is in place to monitor the condition of fixed
equipment and track action items from these inspections until a company-wide system
can be implemented.

The system to be implemented is planned to address the requirements of the fitness for
purpose assessment as well as the relevant local legislation and standards. HSE
management systems will continue to be reviewed and amended as operations expand to
address these requirements.

As part of the ongoing fitness for purpose, Beach will continue to assess the HSE system
by using tools such as the PIRSA self assessment tool.

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9. Attachments
Attachment 1 - South Australian Facility map
Attachment 2 - Beach Facility Condition summary
Attachment 3 - Beach Management System Flowchart
Attachment 4 - Beach Self Assessment

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Attachment 1

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Attachment 2

Facility Wells Production Type Artificial Lift Fluids Comments

Sellicks has experienced CO2 corrosion-related failures in the past primarily between the Sellicks #1 wellhead and VCU skids ('change of direction' areas -bends, tees)
before separation. Flowrates are quite close to erosional velocity, pipework encourages turbulence and no gas venting is available prior to dewatering. Mercury content
suggests little chance of LME-related failure. Scale has been observed in dewatering piping and downhole jet pump. Facility has recently had its jet pump replaced with
a Reda pump and additional dewatering tank. Power fluid now sourced from the dewatering tanks rather than direct from well. This allows gas to vent prior to reinjection
addressing the CO2 issues.

Sellicks 3 oil JP (3) oil/water/gas Piping and flowlines are predominantly well supported, bunds installed. A leak at the pressures and flows experienced could prove fatal, and leaks are more likely than
catastrophic failure.

Flows and pressures are quite high, a catastrophic failure could result in significant damage and injury. Previous failures result from a combination of the following: high
CO2 levels, high flow velocity, high turbulence, high water content. This is of most concern around the high pressure power fluids line connections.

Monitoring systems appear adequate for requirements, however their failure could result in the failure of pressure equipment.
Flows and pressures are quite high, a catastrophic failure would result in significant damage and injury. Significant failures would likely result from vibration and
Callawonga 4 oil JP (3) BP (1) oil/water/gas mechanical fatigue coupled with other corrosion mechanisms of high pressure lines.
Fluid chemistry results show that CO2, H2S and mercury related corrosion are negligible.

Piping and flowlines are predominantly well supported, bunds installed, pressures experienced suggest a failure will result in am leak rather than catastrophic failure.
Christies 5 oil JP (4) BP (1) oil/water/gas
Flows and pressures are quite high, a catastrophic failure would result in significant damage and injury. Significant failures would likely result from vibration and
mechanical fatigue of high pressure lines. Fluid chemistry results show that CO2, H2S and mercury related corrosion are negligible.

No level control on tank fitted, PSV's and vents should prevent overpressure in equipment, however flow needs to be controlled via regular truck loadout. Tank ullage is
approximately 50+ days. Operators visit every 14 days or so. Facility experiences relatively insignificant pressures, temperatures and flows. A failure will most likely
Aldinga 1 oil BP oil/water/gas result in a leak rather than catastrophic failure. Monitoring systems do not exist. Possibility exists for excessive pressure due to minimal operator supervision, however
damage and consequences from this are minor as pump has high pressure shutdown. Lack of instrumentation and electrics results in low risk in the hazardous areas.
The tank is bunded so it is likely that an overflow will be adequately contained. Safety and relief systems have operated satisfactorily to date.

Crude is very light and initially contained a significant amount of entrained gas. High CO2 content in reservoir fluid suggests that corrosion may occur in piping prior to
separation. No corrosion has been observed to date as power fluid is sourced from the dewatering tank at low pressure where gases can vent. Operating conditions and
Kiana 1 oil JP oil/water/gas
low mercury/sulphur levels suggest a low risk of other forms of corrosion. Water scale has been detected in the downhole jet pump at minimal levels. Piping and
flowlines are well supported and bunds installed. A leak may result in catastrophic failure or serious injury to employees and the public.

Flowline is generally in good condition. Facility experiences relatively insignificant pressures, temperatures and flows. A failure will most likely result in a leak rather than
Silver Sands 1 oil BP oil/water/gas
catastrophic failure. Local beam pump shutdown should prevent overpressure situations.

Parsons 2 oil Free flow oil/water/gas Pour point depression required during winter. Clay fines being produced to tanks and interceptor pond. Facilities are in as new condition.

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Attachment 3

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Fitness for Purpose Report- October 2008

Attachment 4

PIRSA SELF ASSESSMENT TOOL - JULY 2008

HEAD
FIELD OFFICE
SITES SITE CURRENT
RESULTS RESULTS TARGET
1. Commitment and Leadership
1.1 Commitment 1 3 3 3
1.2 Leadership 2 3 3 3
2. Policies & Objectives
2.1 Policies 3 3 3 3
2.1 Objectives 4 1 1 3
3. Organisation, Resources &
Documentation
3.1 Organisation Responsibilities 5 3 3 3
3.2 Training & Competence 6 2 2 3
3.3 Sub Contractor management 7 2 1 3
3.4 Communication 8 3 3 3
3.5 Documents & Standards 9 3 3 4
4. Risk Evaluation & Management
4.1 Identification of Hazards & Effects 10 3 2 3
4.2 Risk Evaluation 11 3 3 3
4.3 Recording of Hazards & Effects 12 3 3 3
4.4 Risk Reduction Measures 13 3 3 3
5. Planning
5.1 HSE Planning 14 2 2 3
5.2 Asset Integrity 15 3 3 4
5.3 Procedures & Work Procedures 16 3 3 4
5.4 Management of Change 17 2 2 3
5.5 Emergency Responses 18 4 3 4
6. Implementation, Recording & Monitoring
6.1 Inspections 19 2 1 3
6.2 Records 20 3 2 3
6.3 Performance Monitoring 21 - 2 3
6.4 Non Compliance & Corrective Action 22 - 1 3
6.5 Incident Reporting & Followup 23 3 3 3
7. Audit and Review
7.1 Audits 24 - 3 3
7.2 Reviews 25 - 2 3

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