Region: May, 2021
Content Types: Report
Date: May, 2021

AdobeStock 172952743The Australian oil and gas industry is, unfortunately, making all the wrong headlines at the moment as a serious row over a decommissioning levy proposed by the Australian Government continues to rage.

The tinder for this firestorm is the Northern Endeavour floating production storage and offtake (FPSO) vessel, moored between the Lamarinaria-Corallina oil fields, which was shut down by the National Offshore petroleum Safety and Environmental Management Authority (NOPSEMA) after an immediate threat to health and safety caused by structural corrosion was found at the facility. Since the former owners Northern Oil & Gas Australia (NOGA) went into liquidation in late 2019, the national government has been maintaining the vessel until, at the end of 2020, it decided to decommission the facility and all related infrastructure once and for all.

To help cover the US$200mn expected cost of doing so, in its 2021-22 budget, the Australian Government announced it would be enforcing a levy to the Australian oil and gas industry, a decision which has so far come under heavy criticism from the sector.

Last week, Australian Petroleum Production and Exploration Association (APPEA) Chief Executive, Andre McConville, led the criticism against the Australian Government calling it an outrage that many companies who were never involved with the project will have to help pay. He also noted that such a decision could potentially hold back the Australian economy as well as the 80,000 jobs that it supports. 

Now ExxonMobil and Chevron have expressed their disapproval towards the Australian Government’s decision as well.

As reported by Reuters, a spokesperson for Chevron commented, "Chevron Australia is committed to working with the government on a decommissioning policy framework that would effectively preclude the need for this type of ad hoc, arbitrary action.”

Similarly, ExxonMobil noted that it had established a track record of executing successful decommissioning operations around the world and so shouldn’t have to shoulder the burden of covering costs for other companies as well. The company, therefore, was disappointed in the decision by the federal government, as detailed by Reuters.

While the debate will no doubt carry on for some time, the problem remains that at some point the Northern Endeavour and associated infrastructure will have to be decommissioned and dismantled. At this stage, however, who will pay for it is anyone’s guess.