While welcoming today's news that ships which leak oil into Australian waters now face increased fines of $11 million, industrial asset management specialist Professor Gopinath Chattopadhyay says this is still inadequate and governments are unknowingly accepting risks of tremendous value because systems are not in place to quantify them.

Considering the potential consequences of a major oil tanker spill on the Great Barrier Reef, the asset management team at CQUniversity calculated that "appropriate risk management could be achieved by requiring ship owners to post a bond with the Australian Government of about $850 million for the period the ship is in the vicinity of the Queensland coast". 

Professor Gopinath Chattopadhyay

The new fines passed by the Gillard Government will increase the penalties for the discharge of oil or oil residues by ships in Australian waters from $1 million to $11 million. LINK here for details

CQUniversity researcher Professor Chattopadhyay and his team members say it should be a fundamental principle for protection of valuable natural assets such as the Great Barrier Reef that the risk should be carried by the party or parties who are imposing the risk.

"The amount of the bond could be adjusted to reflect the potential consequences of the possible events applicable to each ship," Professor Chattopadhyay says. 

"The owners then have a powerful incentive to use ships with minimal consequences of loss. Owners have the additional incentive to improve their operating practices to reduce the probability of an event occurring.  This should be reflected in the cost of insurance."

The risk specialist says the unique Great Barrier Reef and islands are iconic for Queensland and have tremendous ecological, recreational, and economic value for Queensland and Australia.

"With the continuing increase in shipping and the apparent decrease in shipping standards, these coastal areas are subject to continuing and increasing risk from damage from oil spills.

"Estimates have been made of the consequences of a major oil spill on the Queensland coast. The direct and immediate cost of a major event could easily exceed $1.1 billion. The risk from an oil spill under current operating practices could be reduced by appropriate design and additional use of prudent operating practices."

CQUniversity Australia is involved in quantitative risk assessment and risk management, and provides research and education to industry and the community in these fields.

Professor Chattopadhyay has just returned from Hobart where he attended meetings of the Asset Management Council and Engineering Society of Australia.

"One of the important areas was the 39 subject areas of ISO55000, which is in the process of  development, considering risk identification, analysis, assessment and mitigation as a major area of interest," he said.

Professor Chattopadhyay is Chair of the Asset Management Council's Gladstone Chapter and will be involved in this discussion forum in next couple of months.