Australian law firm Johnson Winter Slattery (JWS) has released a paper on some of the legal issues surrounding what it calls the 'rising regulatory scrutiny' on offshore petroleum assets.
It has been estimated that around 5.7 million tonnes of decommissioning material will need to be removed from Australian waters over the next 30-40 years at a cost of around US$60bn.
The document — entitled ‘Navigating the Waters of Decommissioning: Legal Obligations and the Rising Regulatory Scrutiny on Offshore Petroleum Assets’, by Rebecca Cifelli, a Partner at JWS — highlights key steps and processes facing operators and contractors in this fluid environment.
“Decommissioning forms part of the offshore petroleum lifecycle,” the paper notes. “Obligations to remove or appropriately deal with property arise for titleholders, not just at final cessation of operations, but throughout the operation phase as assets within an operating field reach the end of their useful life.”
As the Australian oil and gas industry matures, a number of fields are reaching end of life. Accordingly, the paper notes, decommissioning liabilities are coming into “sharper focus” for both industry and regulators.
“Regulators are increasingly concerned that titleholders meet their obligations during the operations phase by proactively decommissioning throughout the life of the project and planning for decommissioning as early as possible,” it notes.
This is reflected in The National Offshore Petroleum Safety and Environmental Management Authority’s (NOPSEMA) information paper, ‘Planning for proactive decommissioning’ and its ‘Decommissioning Compliance Strategy 2024-2029’.
NOPSEMA sets out its expectations that titleholders engage in planning for decommissioning from the inception of a project and detail this planning in environment plans (EPs) submitted under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (OPGGSA).
The JWS paper goes on to other key areas of interest such as decommissioning obligations in Commonwealth waters and the timing for removal of physical infrastructure and assets.
NOPSEMA’s ‘base case’ for all offshore operations is the full removal of all property unless an alternative arrangement is accepted, it adds.
In terms of timelines, Section 270 (OPGGSA) requires decommissioning to be completed on a title before it is relinquished. However, the OPGGSA does not otherwise stipulate any timeframes for the completion of decommissioning obligations.
The Australian Government and NOPSEMA have interpreted section 572 as requiring timely decommissioning. In the absence of any express timeframes in the legislation, NOPSEMA’s ‘Decommissioning Compliance Strategy’ 2024-2029 sets the following targets:
Non-producing wells: to be suspended with downhole barriers within 12 months of loss of real-time monitoring and permanently abandoned within 10 years of suspension.
Floating infrastructure: to be removed within 12 months of cessation of production (COP).
All wells: to be plugged and abandoned within three years of COP.
All other property: to be decommissioned to approved end state within five years of COP.
“While these are targets only, our experience indicates that NOPSEMA will apply them to its assessment of EPs and will need to be satisfied that departures from the targets are justified,” the JWS paper adds.
The vast majority of decommissioning liabilities are located off Western Australia and will therefore fall within the jurisdiction of either NOPSEMA or the WA Department of Energy, Mines, Industry Regulation and Safety (DEMIRS).
Victoria is the only other State that has significant property to be decommissioned in its coastal waters.
In the second half of 2024, the Victorian Government launched an inquiry into offshore petroleum infrastructure requiring decommissioning over the coming decades and the regulatory powers of the Victorian Government to ensure oil and gas producers meet their obligations.
The JWS paper also explores areas such as permissioning documents and early planning, as well as remedial directions and trailing liability.
