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Calls for Australian energy giant to pay out A$200m to clean up decaying FPSO it operated until 2016

14 August 2020

An Australian government review has recommended that past owners of offshore production sites should be made liable for remediation costs after they have sold a site. The review came after calls were made for energy giant Woodside Petroleum to pay around A$200m (£109m) to clean up an FPSO in the Timor Sea which it owned until 2016.

Representative image: Shutterstock
Representative image: Shutterstock

Woodside owned the Northern Endeavour FPSO from 1999 until 2016 when it sold the site for A$24m (£13m) to Northern Oil and Gas Australia (NOGA). After the Northern Endeavour was sold to NOGA, it experienced three years of disrupted production before Australia’s national safety regulator forced work to stop in July 2019, warning that corrosion at the site could cause fatalities, the Guardian newspaper reports.

The Northern Endeavour is permanently moored in the Timor Sea offshore Darwin on the northern coast of Australia. The shutdown of the FPSO led to NOGA filing for administration in September and then liquidation in February 2020. Due to its location in Australian waters, the Australian government was forced to intervene and ensure that the Northern Endeavour was safe. The Guardian reports that the government signed a contract with Upstream Petroleum Services to maintain the FPSO, and potentially took on decommissioning and remediation liability which has been estimated to be up to A$230m (£125m).

This led to a government commissioned review of the events leading up to NOGA’s liquidation, a report of which was published on August 13. The independent review was conducted by Steve Walker, a prominent expert with almost 40 years of offshore regulation and industry.

The report states that Woodside announced it was planning to cease production and decommission the Northern Endeavour site in late 2016 before a deal was made with NOGA. Walker goes on to recommend that the relevant authorities should consider introduction “trailing liability” where offshore production site owners would continue to be liable for decommissioning even after selling a site. The report questions whether the trailing liability could even be applied retrospectively. 

In a statement on August 6, the office of Keith Pitt, the Minister for Resources, Water and Northern Australia, said that the government remained committed to keeping the Northern Endeavour facility and the surrounding marine environment safe and secure, and to finding a longer term solution to the facility and associated oil fields. In April, Pitt announced that Upstream Production Solutions would continue to operate the Northern Endeavour facility and associated subsea facilities and wells in ‘lighthouse mode’.

Pitt said, “The safety of offshore workers and protection of the marine environment remains the Government’s number one priority. No petroleum production is occurring and critical maintenance necessary to maintain a safe working environment is being undertaken.”

Pitt also said that he was committed to consulting with industry on the findings and recommendations of the independent review into the administration and subsequent liquidation of NOGA. “It is crucial that the Government understands how and why this situation arose to consider how best to minimise the risks of a similar event occurring in the future,” Pitt said.

The Guardian quotes a spokesperson for Woodside as saying that the company was working with the government with a decommissioning study at the Northern Endeavour and was contributing to policy discussions to prevent similar incidents from occurring again. The spokesperson added that Woodside did not accept it should be liable for any clean-up of the site.

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