PERTH (miningweekly.com) – The Australian government is considering ways to strengthen the existing financial assurance regime for offshore oil and gas titleholders, to better insulate taxpayers against future decommissioning liabilities, Resources Minister Madeleine King told Parliament.

In 2021, Parliament passed reforms with bipartisan support that prevented companies from selling off ageing oil and gas assets, unless the Commonwealth can be assured that the new owners of those assets have the capacity to meet their decommissioning liabilities. 

King said on Wednesday that these reforms helped to clamp down on a practice that allowed big oil and gas companies to sell off ageing assets to junior resources companies who may not have the financial capacity to fund a decommissioning programme. 

The Parliament also expanded the circumstances in which a former titleholder could be held responsible for decommissioning costs, even if they had already sold off an asset to a separate company that was unwilling or unable to pay. 

“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. 

“It is important to ensure that the offshore resources industry continues to meet their obligations to responsibly decommission offshore projects,” she said.

The Minister’s comments come amid work progressing at the Northern Endeavour floating production storage and offtake facility.

The federal government has been responsible for maintaining the Northern Endeavour and associated subsea facilities since February 2020 after its owners, the Northern Oil and Gas Australia (NOGA) group of companies, were placed in liquidation. The Northern Endeavour stopped producing oil in 2019.

Federal Parliament last year passed legislation to impose a temporary levy on industry to recover the costs of decommissioning and remediating the oilfields and associated infrastructure, delivering on the government’s commitment to ensure Australian taxpayers are not left footing the bill. 

“The government was forced to take responsibility for the Northern Endeavour because the owners of the vessel entered into administration, defaulting on their decommissioning obligations,” King said on Wednesday.

“The Northern Endeavour illustrated that inadequate maintenance, regulatory gaps and poor planning pose a significant risk to the safe management of ageing oil and gas infrastructure in this country.  

“Such gross mismanagement also had the potential to cause an environmental disaster.”

King told Parliament that decommissioning work at Northern Endeavour continued apace, with work now under way to prepare for the next stage of the programme which will involve the plugging of existing oil wells and the removal of infrastructure on the seabed. 

Phase 1 of the Northern Endeavour decommissioning programme commenced last year and is focused on making the vessel safe, and disconnecting the vessel from its surrounding oil fields.

“The government is also preparing a disposal strategy for the physical Northern Endeavour vessel, which will include all necessary measures to protect the environment during disconnection, towing and dismantling.

“In working to decommission the Northern Endeavour, the Australian government’s first priority has always been the safety of the workers undertaking this difficult task. Nothing is more important than the safety and security of Australians working offshore, many of whom operate in some of the most dangerous workplaces anywhere in Australia,” King said.