LONDON – Australia’s latest Budget announcement on the upstream sector included a temporary decommissioning levy, which will be imposed on the country’s offshore producers.
According to Wood Mackenzie research analyst Shaun Brady, this is designed to cover the government’s decommissioning costs for the 274-m (899-ft) long FPSO Northern Endeavour and the Laminaria/Corallina fields in the Timor Sea.
The Northern Endeavour is permanently moored between the two oil fields at a location 550 km (342 mi) northwest of Darwin.
The program, to be spread over several years, includes rehabilitation of, and the removal of risks to, the surrounding marine environment.
In February 2020, the government took action to ensure safety and security of the FPSO when the Northern Oil & Gas Australia group of companies, which owned and operated it, was placed into liquidation.
These were extraordinary circumstances, the government pointed out, and does not reflect requirements for how other projects offshore Australia are to be decommissioned.
“The policy is still light on detail, with the exact costs and terms still to be negotiated between the government and industry,” Brady said. “Depending on how the levy is designed, it is likely the bigger Australian producers will bear the brunt.
“What could be more concerning for producers will be the precedent this may set – will Australian producers be held to account in the future if another player encounters financial difficulties and can’t meet its commitments?”