Australia Opens Consultation on Decommissioning Planning and Finance

The Australian Government has published a consultation paper seeking feedback on reforms to Decommissioning and Financial assurance arrangements for the offshore oil and gas industry.

Australia has up to A$60 billion of offshore oil and gas decommissioning activities expected to occur over the next 30 to 50 years.

While the paper focuses mainly on oil and gas projects, it is also seeking input on the regulatory regime for decommissioning carbon capture and storage projects.

Experience in Australia and internationally has shown that decommissioning safely and cost effectively becomes increasingly challenging the longer the period between ending production and completing decommissioning. Decommissioning is a cost mainly paid out at the end of a project’s life, when revenue from the project is either lower or has stopped. Postponing decommissioning can be financially appealing, as it allows titleholders to delay decommissioning outlays, maximize short-term financial returns, and skew financial viability to increase investor interest.

Additionally, there are many examples of titleholders underestimating the cost or complexity of their decommissioning obligations.

A government report released