Stakeholder response to abandonment challenges in Australia

Abstract

Australia’s early efforts in field abandonment have been limited in comparison to more mature basins, but have proven both complex and high cost, with delayed approvals caused by regulatory uncertainty and social concerns.

Three underlying challenges impact operators and government and require action on both sides to resolve: (1) increasing size and scale of decommissioning liability, (2) limited understanding of challenges and cost drivers, and (3) uncertainty of regulations and taxes.

Abandonment expenditure is expected to accelerate, with most industry companies already active and more companies expected to abandon in the future (e.g. Gippsland, North Carnarvon). Between 2017 and 2030, the overall impact of decommissioning is estimated to be ~US$5.5 billion, with the government taking up to 60% of this cost through taxes and liabilities.

Many companies are looking to upgrade abandonment capabilities and take advantage of new technologies and approaches to reduce costs (although they seem to be struggling to bring programs forward in this period of lower prices). Some companies look to sell assets to late-life operators who tend to be smaller with less abandonment experience and capabilities. In an environment where regulations remain unclear and there is a lack of technology, skills and knowledge around abandonment, the industry is facing unprecedented challenges. Through strategic cost reduction, new technology and operating models, we believe costs could be optimised by a further 10–35%.

The industry, National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) and government have started engaging to clarify uncertainty in abandonment regulations. This will require an unbiased process that balances value and risk to all stakeholders and avoids the taxpayer bearing increased costs/rebates from inefficiencies.