Statement to Parliament on offshore decommissioning
Speaker, I rise today to update the House on the future of offshore oil and gas industry decommissioning in Australia.
Throughout our history, Australia’s prosperity has been closely tied to the success of our resources sector.
The contribution of the sector to our national prosperity is unequalled, and it continues to play an essential role supporting our economic wellbeing today.
Australia’s resources sector will only become more important as we pursue our commitment to reach net zero emissions by 2050.
The sector will be integral to the development of clean energy supply chains not just in this country, but in our region and around the world.
As I have said before in this place, the road to net zero runs through the Australian resources sector.
Speaker, the Government will always support a strong and resilient resources sector.
But in supporting the sector, we also have a responsibility to future generations to ensure that industry rehabilitates the natural environment once a project reaches the end of its productive life.
For Australia’s maturing offshore oil and gas industry, this means spending approximately $60 billion to remove, dismantle, scrap and recycle ageing offshore infrastructure.
While this is an extraordinary task for the offshore resources industry, it is also an extraordinary economic opportunity for Australia.
With the right policies and regulatory settings, and by harnessing the expertise of our existing offshore resources workforce, we can capture this economic opportunity and build a vibrant maritime decommissioning economy.
Decommissioning, in basic terms, involves removing and dismantling oil and gas infrastructure, permanently and securely plugging disused wells, and rehabilitating the surrounding seabed.
The removal of all offshore oil and gas property once it is no longer in use is the default decommissioning requirement under Australian law.
Alternatives to full removal of infrastructure may be considered where that approach delivers equal or better environmental outcomes.
Speaker, Australian law obligates the oil and gas industry to pay all costs associated with decommissioning offshore oil and gas infrastructure.
The Australian community expects nothing less.
Decommissioning expenditure will ramp up in the decades ahead as a number of offshore oil and gas projects in Victoria, Western Australia and the Northern Territory come to the end of their productive life.
The Government’s objective is clear – as industry starts investing to decommission $60 billion in offshore infrastructure, we want as much of that investment to be spent backing Australian industry and Australian jobs.
But more than that – we want to build an enduring decommissioning industry that is equipped to service not just ageing oil and gas assets in Australia and our region, but also to capture a solid pipeline of activity to meet future decommissioning demand for new industries like offshore wind.
We are thinking that far ahead.
Australian hands have built a multi-billion-dollar offshore resources industry from the ground up.
We want to harness their expertise, and deploy their know-how, to build a vibrant domestic maritime decommissioning economy.
NORTHERN ENDEAVOUR UPDATE
Speaker, as many in this place will recall, in February 2020 the then-Australian Government stepped in to take responsibility for the Northern Endeavour – a 274-metre-long floating production storage and offtake facility.
The Government was forced to take responsibility for the Northern Endeavour because the owners of the vessel entered into administration, defaulting on their decommissioning obligations.
The Northern Endeavour illustrated that inadequate maintenance, regulatory gaps and poor planning pose a significant risk to the safe management of ageing oil and gas infrastructure in this country.
Such gross mismanagement also had the potential to cause an environmental disaster.
We aren’t alone in this – other countries like the UK, New Zealand and the US are all facing similar challenges.
Speaker, today I am glad to update the House that the Northern Endeavour decommissioning program continues to progress.
We are taking a deliberate, responsible and diligent approach to a project that is technically complex and extraordinarily difficult.
This difficulty was underscored just yesterday when the contractor aboard the Northern Endeavour temporarily suspended the subsea flushing campaign currently underway due to unforeseen technical issues.
Safety will always come first. This work cannot be rushed, and it must be done properly.
Doing so sends a strong signal that Australia remains a responsible country for safe and sustainable offshore development.
Phase 1 of the Northern Endeavour decommissioning program commenced last year and is focused on making the vessel safe, and disconnecting the vessel from its surrounding oil fields.
Work is now underway to prepare for the next stages of the program, which involves the plugging of existing oil wells and the removal of infrastructure on the seabed.
The Government is also preparing a disposal strategy for the physical Northern Endeavour vessel, which will include all necessary measures to protect the environment during disconnection, towing and dismantling.
In working to decommission the Northern Endeavour, the Australian Government’s first priority has always been the safety of the workers undertaking this difficult task.
Nothing is more important than the safety and security of Australians working offshore, many of whom operate in some of the most dangerous workplaces anywhere in Australia.
Speaker, the decommissioning of the Northern Endeavour is an expensive undertaking and not something the Federal Government should have to do.
In 2022, the Parliament legislated a levy on the offshore oil and gas industry to pay for the decommissioning of the Northern Endeavour.
The Australian Government remains committed to ensuring that taxpayers are not left to pick up the cost of industry’s decommissioning obligations.
The levy was a bipartisan effort and I thank the former Minister, the Member for Hinkler, for his sustained engagement with Labor to progress that important piece of legislation.
I also thank Adrian Evans, Penny Howard and others from the Maritime Union of Australia for their constructive engagement with Labor as the Parliament legislated the levy, and for their long-standing advocacy for the establishment of a decommissioning industry in Australia.
STRENGTHENING OUR REGULATIONS
While the process of decommissioning the Northern Endeavour is complex and difficult, we have learnt some important lessons that have translated into stronger and more resilient regulations.
In 2021, Parliament passed reforms with bipartisan support that prevented companies from selling off ageing oil and gas assets, unless the Commonwealth can be assured that the new owners of those assets have the capacity to meet their decommissioning liabilities.
These reforms help to clamp down on a practice that allowed big oil and gas companies to sell off ageing assets to junior resources companies who may not have the financial capacity to fund a decommissioning program.
The Parliament also expanded the circumstances in which a former titleholder could be held responsible for decommissioning costs, even if they had already sold off an asset to a separate company that was unwilling or unable to pay.
The Australian Government is now considering how we can strengthen the existing financial assurance regime for offshore oil and gas titleholders, to better insulate taxpayers against future decommissioning liabilities.
Over time, we want to improve the Government’s ability to monitor and assess the financial mechanisms that the offshore resources industry has in place to pay for future decommissioning activity.
It is important to ensure that the offshore resources industry continues to meet their obligations to responsibly decommission offshore projects.
The decommissioning of the Northern Endeavour has provided valuable insights into what a future offshore decommissioning industry in Australia could look like.
Speaker, we have the expertise, the capacity and the willingness to decommission large offshore oil and gas infrastructure in this country.
That is why I am working with Australia’s offshore industries, the offshore workforce, state and territory governments and my ministerial colleagues to develop a roadmap for a future Australian offshore decommissioning industry.
The roadmap will examine how we can capture this significant economic opportunity in the years and decades ahead.
It will examine infrastructure requirements, explore regulatory best-practice, and map the services that we will need to help underpin a decommissioning industry in Australia.
The roadmap will identify opportunities to create new, high-paying, high-skill jobs in the regions, supporting the transition of our existing offshore workforce.
The roadmap will explore how a decommissioning industry can provide services to adjacent industries like offshore wind, and it will identify opportunities to export our expertise to the Asia-Pacific.
The roadmap will also explore how a decommissioning industry could facilitate onshore reuse and recycling opportunities.
Norway and the United Kingdom see up to 97% of the steel from offshore projects recycled and reused into things like offshore turbines.
Rather than strip down old steel and export it as scrap, there is an opportunity to reuse and recycle the steel from offshore oil and gas infrastructure onshore.
In addition, the roadmap will look at different ways to build opportunities for First Nations people and businesses, as well as boosting the participation of women in our offshore industries.
To support the development of the Roadmap, the Australian Government is launching an issues paper today and will shortly commence public consultations.
With the right settings in place, Australia is well placed to scale up a viable domestic offshore decommissioning industry in this country.
We can do it here. We should do it here. And we can export our expertise to our region.
I thank the House.