A government review has recommended new levies to ensure the proper decommissioning of offshore oil and gas facilities, after the owner of the Northern Endeavour went into liquidation.
A government review has recommended new levies to ensure the proper decommissioning of offshore oil and gas facilities, after the owner of the Northern Endeavour went into liquidation.
Minister for Resources Keith Pitt today released the review into the collapse of Northern Oil and Gas Australia (NOGA).
Mr Pitt also announced that Woodside Petroleum, which sold the Northern Endeavour to NOGA in 2016 for a nominal sum, would be helping the government assess its options.
“I’m very pleased to announce that Woodside Energy is providing expert advice on what will be required to decommission and remediate the facility and fields, if the government proceeds with that option,” Mr Pitt said.
“As a previous owner of the Northern Endeavour, Woodside is well placed to provide timely, detailed advice.”
In the interim, GR Engineering subsidiary Upstream Production Solutions is operating the Northern Endeavour facility and associated subsea facilities and wells in ‘lighthouse mode’.
“No petroleum production is occurring and critical maintenance necessary to maintain a safe working environment is being undertaken,” Mr Pitt added.
Industry veteran Steve Walker, who conducted the review, said the government should consider a trailing liability, whereby a titleholder would be continually liable for the decommissioning and removal of its offshore assets, even after selling its interests in a title on to a different titleholder.
“Further consideration should be given on whether such changes could be retrospective or only for new title changes, and whether the ability to claim PRRT credits for any decommissioning work in such circumstances is clear,” his review concluded.
It also recommended legislative changes to enable the regulators (NOPTA and the Joint Authorities) to require titleholders to provide financial surety for their decommissioning liabilities, should NOPTA have concerns that the titleholder will not be in a position to meet such costs.
“Such sureties should be in a form that would be available to the Government in the case of the titleholder going into liquidation,” the review said.
Mr Walker’s review noted that Australia’s offshore petroleum regime has a number of checks and balances to ensure that titleholders decommission their assets at the end of field life and restore the environment.
“The events at the Northern Endeavour has shown, though, that the current situation is vulnerable,” his review concluded.
“None of the regulatory controls anticipates the circumstances of a titleholder liquidation.
“This is a serious concern, as such events could be repeated as Australia’s offshore industry matures and late-life assets are likely to be passed from established major oil companies to smaller, less-substantial titleholders.
“My discussions indicated the adoption of “trailing liability”, whereby a titleholder would be continually liable for the decommissioning and removal of its offshore assets even after selling its interests in a title, was receiving growing acceptance.
“It is a concept which could provide a final backstop for decommissioning liability and has been used in different jurisdictions.
“Trailing liability is only a backstop, though. In my opinion it is essential that current titleholders continue to have prime liability for decommissioning.”
Privately-owned NOGA went into administration in September last year and liquidation in February this year.
The Northern Endeavour floating production storage and offtake (FPSO) vessel is permanently moored between the Laminaria and Corallina oil fields in Commonwealth waters in the Timor Sea.
