The Australasian Centre for Corporate Responsibility (ACCR) warned that tighter regulation of oil and gas decommissioning was long overdue, after federal Resources Minister Madeleine King announced an issues paper on decommissioning, released today.
Commenting on the announcement, Alex Hillman, Lead Analyst at the Australasian Centre for Corporate Responsibility said:
“The Australian oil and gas industry has been sitting on a ticking time bomb of decommissioning liabilities for decades, and has not been honest with the government or investors about the true extent of the costs and risks.
“Today’s public consultation on strengthening regulations is long overdue.
“The Australian offshore oil and gas decommissioning liability has been estimated at $60 billion to 2050, with a significant portion of work due to occur within this decade.
“$60 billion is likely an underestimate, because the true state and cost for many aging offshore oil and gas facilities in Australia is uncertain: existing public datasets are limited, and company disclosure is generally minimal.
“Internationally, remediation costs have exceeded provisions, by an average of 76%. Yet companies who could have foreseen these risks have not sufficiently disclosed their preparation plans or financial liabilities, leaving investors in the dark about these substantial costs.
“The Australian regulator NOPSEMA expects the decommissioning to be ‘complex, expensive, span many years and introduce many new and significant safety, environmental and well integrity risks’.
“Shareholders urgently need more information about how liabilities are being measured and managed.
“Santos admitted as recently as June this year that it would not plug its abandoned methane wells at Legendre oil field which have been leaking for a decade - a situation that the regulator NOPSEMA considers ‘unacceptable’ and is investigating. Companies that cannot clean up their mess should not make it in the first place.
“Many operators are assuming they will be able to leave a significant amount of infrastructure 'in-situ', despite the fact that the full removal of offshore infrastructure is currently expected in Australia.”
In January 2023, ACCR published extensive research on offshore oil and gas asset decommissioning.
In 2022, Woodside and Santos faced shareholder resolutions at their Annual General Meetings calling on the companies to disclose decommissioning liabilities.