Australia upstream group oppose decommissioning levy

The main industry group for Australia's upstream sector is opposing the Australian federal government's plans to impose a levy to cover the costs of decommissioning and remediation of the Laminaria-Corallina oil fields in the Timor Sea.

Canberra plans to start the A$0.48/bl ($0.36/bl) of oil equivalent produced in Australia levy from 1 July to be paid by all firms with an ownership interest in petroleum production licences, according to a discussion paper issued last week by the Australian Department of Industry, Science, Energy and Resources.

The proposed Laminaria-Corallina oil fields and associated infrastructure levy will see a number of offshore oil and gas companies footing the bill for a project they have never been involved in and never benefitted from, said the Australian Petroleum Production and Exploration Association (Appea). But it has not proposed an alternative mechanism to pay for the costs of decommissioning of Australia's oil and gas exhausted fields.

The prospect of a levy follows the government last year awarding a A$130mn ($100mn) contract to an engineering firm in December to maintain the floating production storage and offloading (FPSO) vessel Northern Endeavour for a year. The FPSO was used for the Laminaria-Corallina oil fields, which was operated by Australian independent Woodside Petroleum before it sold the project to Australian privately owned energy firm Northern Oil and Gas Australia that went into liquidation in February 2020.

The decommissioning of the Laminaria-Corallina oil fields is part of a wider issue of decommissioning upstream infrastructure in Australia where oil production peaked around 20 years ago. There is an estimated around A$50bn of offshore decommissioning work to be done, with over half of it needing to start within 10 years, according to a report by Advisian, part of Australia-listed engineering firm Worley.

The decommissioning could be a template on how the industry funds the cleaning up of its unused infrastructure, or whether some of this infrastructure could be used for potential carbon capture and storage projects by using exhausted oil and gas fields offshore Australia.

By Kevin Morrison