Page 9 - AsianOil Week 19 2021

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Australian decomm levy

frustrates upstream

The oil and gas sector has been left wrong-footed by the government’s decision
to tax the entire sector to cover the cost of decommissioning two fields

COMMENTARY THE Australian government’s 2021-2022 of the Laminaria and Corallina fields had been
budget, which was published on May 12, recovered.
has caught the upstream industry somewhat The fields, located in production licences
WHAT: off-guard. WA-18-L and AC/L5 in the northern Bonaparte
The government has On the one hand, Canberra has unveiled fur- Basin, lie in around 400 metres of water.
introduced a levy in ther funding for the development of gas reserves “This [levy] will ensure taxpayers are not left
its 2021-2022 budget earmarked for the domestic market. The initia- to pay for the decommissioning and remedia-
to cover the cost of tive has, unsurprisingly, pleased the sector. tion,” it said in budget papers.
decommissioning the Industry body Australian Petroleum Produc- Canberra has given unlimited indemnity
Northern Endeavor FPSO tion & Exploration Association (APPEA) was to Upstream Production Solutions (Upstream
and associated fields. upbeat about the AUD58.6mn ($45.3mn) for PS), which it hired in February 2020 to operate
Northern Territory gas infrastructure projects as the Northern Endeavour in lighthouse mode,
WHY: well as AUD173.6mn ($134.2mn) for upgrades “against any pollution or loss of well control …
The assets’ previous to the territory’s road network. The body’s CEO, except to the extent caused by Upstream PS’s
operator, NOGA, entered Andrew McConville, described support for gross negligence or wilful misconduct”.
liquidation in 2019, gas-related strategic basins as a “big tick”. Canberra opted to take over the stranded
leaving the government to On the other hand, however, the government FPSO after operator Northern Oil & Gas Aus-
assume responsibility for has also unveiled plans to tax the upstream sec- tralia (NOGA) entered voluntary administra-
its production licences. tor to cover the cost of decommissioning the tion in September 2019 and left only a skeleton
stranded Northern Endeavour floating produc- crew running vessel from November 2019.
WHAT NEXT: tion, storage and offloading (FPSO) vessel as well NOGA’s liquidation followed offshore reg-
Bigger operators are as associated oilfields in the western Timor Sea. ulator National Offshore Petroleum Safety and
expected to bear the APPEA has said for all the good contained Environmental Management Authority’s (NOP-
brunt of the new tax. in the budget, the new levy will hurt investment SEMA) decision in July 2019 to close the FPSO
confidence and jobs. after it found corrosion at the facility during an
inspection. The regulator said there were major
Taxation solution concerns over the technical integrity of the
The government said it intended to tax the FPSO’s critical structures and equipment.
industry until the cost of Northern Endeav- NOGA bought the two production licences,
our’s decommissioning and the remediation along with the 170,000 barrel per day (bpd)

The Northern Endeavor FPSO. Image: NOGA

Week 19 13•May•2021 www. NEWSBASE .com P9