The Commonwealth Department of Industry, Innovation and Science (Department) has published the discussion paper titled ‘Decommissioning Offshore Petroleum Infrastructure in Commonwealth Waters’ (Discussion Paper) as part of a review into the Commonwealth decommissioning framework. The paper identifies five key areas for regulatory improvement: 1. scope of decommissioning obligations; 2. level of information available to government; 3. allocation of statutory (legal) responsibility and duration of that responsibility; 4. financial capacity of titleholders to meet their responsibilities; and 5. regulatory power to enforce compliance against current and former titleholders. + This note focuses on the Department’s proposed reforms in respect of legal and financial responsibility for decommissioning.
Proposed solutions include: – introducing an ‘alternative liability regime’ (i.e. titleholder liability in perpetuity); and – dedicated decommissioning financial security requirements for titleholders. + These proposed solutions could have implications for oil and gas M&A activity, including impacting the ability to generate a ‘clean exit’ from a transaction, risk allocation in joint ventures, the ability to attract private equity investment or, in the case of smaller entities, the ability to enter the market in the first place. + One of the drivers behind the regulatory review was to assess whether the current regime could adequately meet the needs of a maturing offshore petroleum industry and increasing potential for large-scale decommissioning being required. It remains to be seen if the proposed solutions will be a value-add to the current decommissioning regulatory regime in Australia and represent best practice. + Any option for improvement must carefully weigh the risk of increased red tape discouraging economic investment that is otherwise socially and environmentally responsible and consistent with community and Government expectations. + Gilbert + Tobin’s Oil and Gas team are monitoring this space and working closely with key stakeholders. For further information or assistance please contact our Oil and Gas team.
Australia’s offshore petroleum industry has continued to play a significant role in the country’s economy and energy security since commencing operations in the early 1960s. As an increasing number of offshore petroleum projects move towards the end of their productive lives, key questions arise: – What happens to the infrastructure (wells, pipelines, subsea completions etc.) when petroleum production stops? – Who bears the financial and legal responsibility for removing or otherwise dealing with the infrastructure? – How can the process be undertaken in a safe, environmentally responsible and economically efficient way?