By Peter Milne
Oil and gas companies should reveal more detail of their liabilities to clean up offshore facilities to protect investors and taxpayers, a Senate committee heard on Monday.
Wilderness Society campaigner Jess Lerch said the case of the Northern Endeavour, whose owner went into liquidation in early 2020, was the “tip of the iceberg”.
The federal government has spent $148 million looking after the Northern Endeavour oil vessel since its owner went into liquidation in early 2020.Credit: Boiling Cold
The bill to plug wells and remove oil and gas equipment from Australian waters will total about $US40.5 billion ($55 billion) by 2050, according to a federal government-funded report released in March 2021.
Australian taxpayers inherited a small part of that liability in early 2020 when the owner of the Northern Endeavour oil vessel in the Timor Sea 550 kilometres north-west of Darwin went into liquidation.
The cost to keep the vessel safe and prepare it for decommissioning totalled $148 million to the end of August, the Department of Industry, Science, Energy and Resources told the Senate Economics Legislation Committee reviewing legislation for an industry levy to pay for the Northern Endeavour clean up.
The possible total cost to fully decommission the oil field has been reported as high as $1 billion
Ms Lerch called for companies to more fully disclose their plans to close down facilities as the cost was material to investors, a risk to taxpayers, and greater certainty of upcoming workload would allow Australian companies to invest to capture work in the growing field.
Decommissioning liabilities featured heavily in discussion of Woodside’s proposed purchase of BHP’s oil and gas assets announced in August. Woodside will inherit a $US3.9 billion ($5.3 billion) liability from BHP if the purchase is completed in 2022, with a large portion from a 50 per cent interest in ageing oil and gas fields in the Bass Strait.
Wilderness Society policy manager Tim Beshara said such decommissioning liabilities on balance sheets were a complex calculation of interests in many assets with different production lives, assumptions about how much equipment must be removed and future costs, and a discount rate to bring it all to a single present value.
Mr Beshara said if demand reduction driven by the energy transition brought the closure of oil and gas fields forward, or if the regulator demanded more equipment be removed, the liability could change dramatically.
“All that internal accounting that they’re doing needs to be made transparent,” Mr Beshara said.
Andrew McConville, chief executive of oil and gas lobby group APPEA, said his members continually updated their decommissioning plans and cost estimates and information given to regulators and releases to the market for listed companies provided the necessary transparency.
The Senate committee was reviewing legislation for a production based-levy to pay for the Northern Endeavour that APPEA estimated would raise about $380 million a year.
Mr McConville said APPEA agreed that decommissioning costs should not fall to taxpayers but wanted the production-based levy to be limited to four years and not be expanded to cover any future company failures.