Push to rein in ‘ghost’ oil ships
The collapse of an oil ship in the Timor Sea, exposing taxpayers to a $200m clean-up bill, has sparked an industry wide project to navigate Australia’s giant decommissioning bill.
The collapse of the company behind the Northern Endeavour oil ship in the Timor Sea, exposing taxpayers to a $200m clean-up bill, has sparked an industry wide project to navigate Australia‘s giant decommissioning bill with $25bn of work needing to start in the next decade.
Energy giants including Woodside Petroleum, Santos, BHP, ExxonMobil, Chevron and Santos have created a new group, Centre of Decommissioning Australia, aimed at cutting costs as the bill for ageing offshore oil and gas facilities mounts.
Some $52bn of decommissioning work on Australia’s offshore oil and gas infrastructure needs to be completed with over half to be started within the next ten years, a new study commissioned by National Energy Resources Australia has found.
Western Australia’s prolific North Carnarvon basin accounts for nearly half of the nation’s wells and 60 per cent of subsea structures while Victoria’s Gippsland Basin has over a third of fixed facilities offshore that will need to be dismantled. Australia has over 1000 wells that need to be decommissioned, some 8000km of oil and gas pipelines and offshore infrastructure.
Some 50,000 wells need to be decommissioned in the Asia Pacific region at a cost of about $US100bn, highlighting the high cost of Australia’s $52bn bill given it has a fraction of the wells and infrastructure to deal with.
The issue of decommissioning has been sparked by concerns over the Northern Endeavour in the Timor Sea which was ordered to halt production in July 2019 after finding structural defects with the potential to cause multiple fatalities.
Gas producer Woodside previously owned the Northern Endeavour project before selling the facility to NOGA in July 2015. NOGA subsequently fell into liquidation, raising concern about who pays for abandoned facilities if companies go bust.
Fallout from the Northern Endeavour had played a part in galvanising the industry, NERA said.
“I think trigger is an apt description. Certainly since the Northern Endeavour we’ve seen increased focus from governments in terms of the regulatory reform process,” NERA’s general manager for decommissioning Andrew Taylor told The Australian.
“I think it’s also sharpened focus for industry.”
Australian producers could save $2bn in transport costs if decommissioned oil and gas infrastructure can be disposed of in Australia rather than shipped offshore, NERA said, potentially opening up new opportunities in regional areas.
“We’re looking at the north west and the south east of Australia for either establishing new facilities or upgrading existing facilities,” Mr Taylor said.
The question of whether big companies like Woodside should sell late life assets to smaller firms also remains a discussion point for industry.
“There are various business models developed overseas where late life operators have been successful, whether that’s a smaller operator comes in and manages production in late life and then the original operator does the decommissioning. That’s one model which reduces risk,” Mr Taylor said. “I think our general view on this is yes there have been issues and they have been managed by reforms, but we should look to ensure business models have least risk possible.”
Leading service and research organisations including Baker Hughes, Atteris, Linch-Pin, AGR, Curtin University and Xodus Group are also part of the Centre of Decommissioning Australia group.