Federal government seeking to make oil and gas sector pay for decommissioning costs
The mammoth task of decommissioning ageing infrastructure, including offshore platforms sunk in the Bass Strait, could help build a new $60bn local industry.
The federal government is looking for ways to tighten laws that would force oil and gas majors to pay for the clean-up of ageing infrastructure, according to resources minister Madeleine King, as it looks for ways to capitalise on the estimated $60bn cost of decommissioning the sector’s infrastructure.
The mammoth task of decommissioning Australia’s ageing oil and gas infrastructure over the coming decades could help build a new $60bn local industry, Ms King said, as well as establish a template for the future issues facing the renewable energy sector.
Ms King will release an issues paper on Wednesday on the massive task facing the country’s oil and gas sector, as planning begins for ways to demolish and clean up the offshore platforms sunk in the Bass Strait between Victoria and Tasmania in the late 1960s, and then those established off the North West Shelf in the 1980s.
The issues paper will call for industry and public submissions on not just the size of the task facing Australia’s oil and gas industry, but for the best ways for Australian companies to capitalise on the task and establish new homegrown expertise that can be exported to the rest of the world.
In a statement to parliament, to be delivered on Wednesday morning, Ms King said work to decommission infrastructure when projects finish production could be worth up to $60 billion over the next 30 to 50 years.
“Establishing a decommissioning industry in Australia will provide immense economic opportunities and create well-paid jobs in regional communities,” she said.
“The Australian government wants as much of the anticipated $60 billion in spending to remove old oil and gas infrastructure to be spent backing Australian ingenuity and jobs. We want to build an industry to service not just ageing offshore oil and gas assets in Australia, but also meet future demand for sustainably decommissioning offshore wind farms at the end of their productive life.”
Bass Strait operator Exxon has already warned that the full removal of its offshore rigs may not be possible, however.
The issues facing the sector were brought into sharp focus in 2019, when the former Woodside production platform Northern Endeavour – sold to a smaller company by the Australian major in 2015 – was shut down by regulators over safety concerns.
The company, Northern Oil and Gas Australia, collapsed in 2020, forcing the federal government to step in and take control of the decommissioning and clean up of the platform.
The risk that similar failures could wind up costing taxpayers billions prompted the then Morrison government to change the laws to restrict sales of ageing infrastructure, and return the cost of cleaning up any failed platforms to majors that had won the benefits of their production in better times.
The government also imposed an industry levy to cover the cost of Northern Endeavour’s closure in 2022, and accelerated planning for the rest of the sector – including a $4.5m item in this year’s federal budget to produce an industry road map for the future clean-up.
The imposition of the levy was opposed by Australia’s oil and gas industry, but Ms King said the government was now looking for ways to extend current laws to make sure taxpayers where not caught out by a similar failure in future.
“The Australian Government is now considering how we can strengthen the existing financial assurance regime for offshore oil and gas titleholders, to better insulate taxpayers against future decommissioning liabilities,” Ms King said.
“Over time, we want to improve the government’s ability to monitor and assess the financial mechanisms that the offshore resources industry has in place to pay for future decommissioning activity.”