Trailing liabilities now a reality: Feds 

OFFSHORE titleholders are going to find it harder to permanently walk away from rust buckets, or offload them to minnow single asset companies, after the federal government passed a suite of new decommissioning laws. 
Trailing liabilities now a reality: Feds  Trailing liabilities now a reality: Feds  Trailing liabilities now a reality: Feds  Trailing liabilities now a reality: Feds  Trailing liabilities now a reality: Feds 

The Northern Endeavour in better times

Helen Clark


The tougher new decom regulations, finalised and released today, aim to ensure taxpayers aren't hit for clearing up old oil fields and offshore operations. 
Minister for natural resources Keith Pitt, whose office oversees all exploration and production in Commonwealth waters, said there would be a strengthening of trailing liabilities, increased oversight of changes in company control, and increased requirements for financial assurance. 
All three of these could have prevented the Northern Oil and Gas Australia debacle by ensuring the single asset company could never take over Talisman Petroleum, which held a 40% stake in the Coralina Laminara fields in the Timor Sea and the Woodside Petroleum-operated Northern Endeavour FPSO . 
When NOGA, which contracted GR Engineering subsidiary Upstream Production Solutions to operate the vessel and safety case on its behalf, was forced to shut operations by the safety regulator it went into administration then liquidation, with no ability to pay creditors or for decommissioning work. In fact, it had never had the funds for the work and operated at a loss most years. 
Its fitness to take Talisman and the field could not be assessed by the offshore titles administrator under existing legislation. 
The new decommissioning laws will also modernise field development plans and enhance decommissioning planning, see "earlier and proactive use of remedial directions powers if required" and improve transparency and public engagement on decommissioning, Pitt's office said. 
"A mix of legislation and regulation changes will support the measures, starting with the release of an Exposure Draft of a Bill to improve Australia's offshore oil and gas decommissioning regime," Pitt said this morning. 
The Bill is open for comment until Friday 23 April 2021
"The Bill also gives effect to the relevant recommendations of the Walker Review. It expands existing trailing liability provisions, increases oversight of changes in titleholder ownership and control, and increases scrutiny on companies operating, or looking to operate, within the regime." 
The Walker review was completed last year by Steve Walker, who has extensive experience in the North Sea where decommissioning has ramped up. One of his key recommendations was to implement trailing liabilities whereby prior titleholders may be called back to foot some of the bill. 
Were those directions in place now Woodside may be called up, but instead it is currently being paid A$8 million to provide expert advice on its former oil project to the Commonwealth. 
"As a previous owner of the Northern Endeavour, Woodside is well placed to provide timely, detailed advice," Pitt said in August last year. 
The Walker report contained nine recommendations which also included a recommendation on an environmental and safety regulator reviewing practices so it could better identify underlying issues. 
Walker said "it is essential that current titleholders continue to have prime liability for decommissioning". 
Walker believed the fault lay in legislation and not the bodies tasked with enforcing it, finding the National Offshore Petroleum Safety and Envionmental Authority  a "robust, professional and independent regulator" which had concerns from the very beginning. 
The National Offshore Petroleum Titles Administrator had " to work under a number of legislative limitations which it considered prevented it from being able to fully consider, and influence, the ramifications of the change of titleholder," he found. 
"The experience of the Northern Endeavour has demonstrated that titleholder governance is a crucial issue worthy of NOPTA and JAs' oversight." 
The joint authority oversees areas of state and federal waters. 
It seems his work has been taken to heart by the federal government, though as yet finer details such as the amount of tax paid on production as an offset to later liability costs is not known. 
"It is important to strike a balance between implementing regulatory safeguards for Australian taxpayers, managing the impost on industry while encouraging continued investment in oil and gas development," Pitt said today. 
There is a decommissioning boon coming, according to National Energy Resources Australia, which would be worth up to A$50 billion should all offshore infrastructure be removed. 
Many of Australia's legacy offshore projects in the Carnarvon Basin offshore Westen Australia and the 60-year old  ExxonMobil assets in the Bass Strait are reaching the end of their lives. Exxon has twice tried to sell off its share, without success.