Chevron, which estimated it would pay more than 20% of the tax, said in a Senate brief that NOGA “demonstrably lacked the appropriate technical and financial capacity” and that Chevron and others were forced to subsidize “business failures” that benefited from it. of the Northern Endeavour.
To prevent further Northern Endeavour-type debacles, in December 2020, Resources Minister Keith Pitt tightened controls on the financial strength of buyers of offshore facilities and introduced follow-on liabilities that make sellers responsible for the dismantling if the new owners cannot pay.
Woodside’s sale was within the law at the time, but under the new regime he would have either been barred from selling the Northern Endeavor or forced to foot the bill when the buyer backed out.
The changes were a rare case of the fossil fuel industry failing with the coalition federal government and halted the rush by big oil and gas companies to exit aging Australian assets.
ExxonMobil put its half-share in its Bass Strait operation up for sale in 2019, but suspended the process a year later after Mr Pitt told it of the upcoming legislative changes. Italy’s ENI stopped trying to sell its assets soon after. Chevron’s stake in the giant North West Shelf project in WA has been bought since 2020 without success.
Companies that cannot sell outside Australia are also finding the continued deferral of decommissioning expenditure difficult.
In 2021, offshore regulator NOPSEMA began issuing instructions with fixed deadlines for securing wells and removing equipment. Going forward, all wells must be secured within three years of the end of production and another two years will be allowed to remove all equipment from the ocean.
BHP has been ordered to complete the cleanup of the Griffin field off WA which ceased production over a decade ago. ExxonMobil is to plug 180 wells and dismantle 10 rigs at its Bass Strait operation near Gippsland which it owns with BHP.
With sales and delays becoming increasingly difficult, the industry’s last chance to cut its $56 billion dismantling bill is to justify leaving the equipment in the ocean forever.
On this issue, the board that advises NOPSEMA thinks that the industry is not meeting its obligations.
“Although it has been a legal requirement to completely retire equipment since the 1960s, the industry does not appear to have had this as a default consideration in its planning, nor have assets been assessed on a full opt-out basis,” said the minutes of a 2020 board meeting obtained via a Freedom of Information request.
Woodside recently suffered two setbacks to its plans for “dismantling in situ,” the industry term for leaving things in the ocean.
In April 2020, Woodside proposed to NOPSEMA that 23 kilometers of pipeline and a parallel cable called an umbilical on its Echo Yodel field off WA, which together contained 400 tons of plastic, remain on the seabed forever.
Woodside argued that the environmental damage caused by plastic that could take centuries to break down would be outweighed by the benefit of providing structure on the seafloor for a reef.
It appears Woodside’s reasoning has not been accepted and the company now plans to remove both the pipeline and the umbilical, according to a consultation document released in November 2021.
The cost of removing this tiny piece of Woodside’s offshore infrastructure could be as high as $150 million, according to plans filed with the regulator.
Woodside also wanted to lay an 83-meter-long piece of equipment on the seabed near WA’s Ningaloo Marine Park as part of an artificial reef. His initial plan to tow it to shore for dismantling had been rendered impossible due to the structure’s poor maintenance.
The dumping claim was withdrawn in October 2021. The Department of Agriculture, Water, and Environment told a Senate committee it had formed a preliminary opinion that the plan violated an international convention on marine pollution.
In December, NOPSEMA reminded industry that it is only allowed to leave equipment in the ocean indefinitely if doing so results in a better environmental outcome than complete removal.
Demonstrating this is a significant hurdle for companies to justify not fully reflecting the cost of the move on their balance sheets.
If Woodside succeeds in buying BHP’s oil division, it will likely be heavily impacted by the new, more robust approach to decommissioning regulations.
The Advisian report which estimates that the next wave of decommissioning work will cost $40.5 billion identified two areas where 74% of spending will take place: the North Carnarvon basin off the Pilbara coast in WA and the Gippsland Basin off Victoria.
BHP’s deal will double Woodside’s stake in the North West Shelf project, which is the largest owner of offshore infrastructure in the North Carnarvon Basin, and give it a 50% stake in ExxonMobil’s sprawling facilities in Gippsland.
Woodside’s decision in 2015 to save money on the Northern Endeavor could prove costly in the long run.
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