The decommissioning challenge facing Australia is coming into sharp focus, presenting critical legal and contractual issues for all involved, according to law firm Wotton Kearney (WK).
In a recent update, the firm outlined the scale of the task facing operators, contractors and engineering teams against a regulatory environment that will be watching closely.
Over the next 50 years, Australia is expected to see more than US$40bn in offshore decommissioning activity, with most of that spend focused on well plugging and abandonment, as well as pipeline removal.
Titleholders are legally responsible for the full cost and safe removal of offshore infrastructure under the Offshore Petroleum and Greenhouse Gas Storage Act 2006, and must meet strict environmental and consultation obligations.
“While this signals significant economic opportunities for the broader Australian maritime sector,” WK noted in the update, “in an era when much greater focus and emphasis is placed on the green economy, decarbonising, and prioritising environmentally sound practices over economic expediency, it also raises questions.”
These questions include not only the technical feasibility in carrying out these complex and potentially hazardous operations, but also precisely what the decommissioning and environmental obligations are for operators and infrastructure owners.
“The media has recently focused on some high profile examples, such as Esso’s decommissioning plan for 12 platforms in the Bass Strait, Victoria, with the Maritime Union of Australia raising concerns that not all of the infrastructure will be removed,” the WK update added.
It noted that the discussion around Esso’s proposal has prompted debate as to what the 2006 Act actually permits.
“While decommissioning activities under the 2006 Act cannot commence without the titleholders securing a series of environmental approvals through the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), Esso’s decommissioning proposal includes leaving rigs in place and converting these into artificial reefs. This was previously done in the Gulf of Mexico.”
But the practice of leaving some infrastructure in place has created debate about the environmental implications and whether that breaches any legal obligations, WK added in the update.
In this regard, decommissioning involves a range of “complex and sometimes controversial issues,” WK stated.
Australia, like other nations, also has international obligations as a signatory to the United Nations Convention on the Law of the Sea 1994 (UNCLOS), which is the primary international legal instrument governing decommissioning.
What it means is that “complying with regulatory requirements for decommissioning is far from the straightforward.”
That is purely from a legal and regulatory perspective, without the additional burden from any public scrutiny or reputational risks arising from decommissioning activities.
“It’s therefore crucial to develop an appropriate strategy with appropriate stakeholders, align this with insurance cover, and coordinate execution of this plan with logistic and supply chain suppliers,” WK added.
The law firm is exploring some of these issues in a series on decommissioning to identify key issues for stakeholders and to help navigate the uncertainties ahead.
