Industry levy deal seals ship clean-up
The $325m clean-up of the ageing Northern Endeavour oil vessel will go ahead. The government has legislated a levy that will have the oil and gas industry pay for it.
The $325m clean-up of the ageing Northern Endeavour oil vessel has been given the green light after the federal government legislated a levy that will have the oil and gas industry pick up the bill.
Resources Minister Keith Pitt on Friday said the government had signed a multihundred-million-dollar contract with oil and gas contractor Petrofac for the first stage of Northern Endeavour’s decommissioning.
The industry will cover the cost through a temporary levy.
The Northern Endeavour, a 274m-long vessel which sits the Timor Sea about 550km north of Darwin, was owned and operated by Woodside Petroleum for years before it was sold to privately owned minnow Northern Oil and Gas Australia in 2016.
The company collapsed into liquidation just four years later, prompting fears that taxpayers would need to step in to cover the cost of the decommissioning.
In a statement, Mr Pitt said the decommissioning was a “unique and unprecedented responsibility for the Commonwealth”.
“We are working closely with industry and regulators to progress decommissioning as safely, efficiently, quickly and cost-effectively as possible,” he said.
The contract covers the first stage of the decommissioning, in which the production, storage and offloading vessel will be disconnected from the subsea equipment and the wells suspended.
The Northern Endeavour saga prompted scrutiny of the clean-up plans in place throughout the Australian oil and gas sector as numerous assets around the country begin to near the end of their productive lives.
The levy has been a source of contention within the industry, with a number of players privately believing the costs of the Northern Endeavour clean-up should fall to Woodside.
Andrew McConville, the head the Australian Petroleum Production and Exploration Association, previously labelled the levy as a “blunt instrument”, while Santos chief executive Kevin Gallagher said that while he understood why taxpayers should not be asked to pay for the decommissioning, he did not understand the logic of paying for the clean-up of someone else’s asset.
On Friday, APPEA issued a statement accepting the passing of the levy legislation.
“The industry accepts and is committed to its responsibilities protecting the environment and decommissioning is an area we take seriously. Indeed, we are required to plan for decommissioning in approval processes,” the group said. “We will work to ensure that the levy is in place for the purpose of recovering funds for decommissioning the Northern Endeavour project.”
The government also faces legal action from a commodities player owed money from the demise of an offshore oil platform as the industry braces for a significant rise in the costs of a clean-up bill for the Timor Sea project.
Castleton Commodities, the secured creditor of two companies that owned the floating platform, has launched legal action against the Commonwealth, Northern Oil & Gas Australia and Timor Sea Oil & Gas Australia in the NSW Supreme Court.
The Timor fields were once owned by Woodside, but were sold to NOGA. The new owners promptly went under, which raised fears clean-up costs could eventually cost the taxpayer millions of dollars.