The Northern Endeavour oil vessel will cost the taxpayer $10 million every few months to keep it safe while the Commonwealth Government works with industry to avoid taxpayers suffering decommissioning costs of up to $200 million.
Woodside, that had planned to decommission the Northern Endeavour, in 2016 paid newly-formed Northern Oil and Gas Australia $24 million to take over the vessel and the Laminaria Corallina oil field in the Timor Sea.
NOGA suffered numerous technical and financial issues for the next three and a half years before offshore safety regulator NOPSEMA shut production down in July 2019 to allow a long list of safety issues to be fixed. The company went into administration in September and was liquidated in February, effectively leaving the Commonwealth Government in charge of the facility.
Department of Industry deputy secretary Mike Lawson told the Senate economics estimates committee on Wednesday night that the sale by Woodside did not require approval by the National Offshore Petroleum Titles Administrator as the company holding the titles remained the same, just its ownership changed.
Senator Rex Patrick described the failure of NOGA as "only the tip of the iceberg."
"There are a number of older rigs all around Australia, and in some sense, you've got these entities like Woodside selling off an older product," Patrick said.
"Surely there must be a risk in places like the Bass Strait where this could occur again?"
ExxonMobil announced in September that it would try to sell its 50% share in the Bass Strait oil and gas operations it owns with BHP. The operation includes the oldest offshore facilities in Australia, with some built in the 1960s.
Patrick said the Government and former Resources Minister Matt Canavan could have done more to avoid NOGA going onto liquidation.
"The taxpayer now owns an FPSO (floating production and storage vessel). Who would have thought?" he said.
Future costs a mystery
The Senator repeatedly pushed to get an estimate of what the eventual cost to the taxpayer might be.
Lawson said that "even a rough order of magnitude of the likely cost" was unavailable.
The Government is seeking approval from Parliament for $10 million to keep the vessel in a safe "lighthouse mode." The charge is an additional cost to any eventual decommissioning of the vessel and fields that could cost up to $200 million.
"We are working with industry; we have no reason to believe we can't find a better solution to this than...a cost being imposed on the taxpayer," Lawson said.
Patrick was doubtful the industry would help the Government out of its predicament.
"What leverage do you have over industry?" Patrick asked. "Why wouldn't they say 'your problem government'?".
NOPSEMA chief executive Stuart Smith told the committee that the regulator's action to close down production on the Northern Endeavour was not responsible for the failure of NOGA.
He said it was NOPSEMA's view that NOGA had been undercapitalised for some time before NOPSEMA issued its notices.
"That resulted in inadequate investment in maintenance on the facility that led to an increasing number of issues," Smith said.
"By July last year, you had pieces falling from the roof significant enough that if they hit a worker, it would have been a fatality."
Main Picture: Northern Endeavour oil production vessel in the Timor Sea. Credit: Northern Oil and Gas Australia.