Tougher policing of offshore oil and gas decommissioning

Offshore oil and gas operators that continually delay costly decommissioning will now be watched more closely by offshore safety and environment regulator NOPSEMA.

Tougher policing of offshore oil and gas decommissioning

Offshore oil and gas regulator NOPSEMA will have a heightened focus on owners of offshore titles that do not decommission facilities when production ends, according to a draft policy issued today.

The draft policy that will apply to vessels, platforms, wells and subsea equipment may mean operators start to spend time and money on an unprofitable activity they often delay as long as possible.

“NOPSEMA expects facilities to be designed, constructed, inspected and maintained such that they can be removed in a manner which reduces risks to health and safety to a level that is as low as reasonably practicable,” the policy states.

NOPSEMA’s default expectation is that all equipment is removed. The regulator may allow some equipment to remain in place when that option “is expected to have equal or better environmental outcomes when compared to removal of property.”

NOPSEMA will request operators of fields no longer in production that have not removed all equipment and made wells safe by plugging and abandoning them to submit a plan to complete the work.

If the requests - that are likely to create some work in the beleaguered oil and gas sector - are not met “NOPSEMA may escalate to enforcement action.”

Boiling Cold understands that operators of fields in production will be required to document how that will carry out decommissioning when the environmental plan for the field next undergoes a five-yearly review by NOPSEMA. More detail will be expected in plans for fields closer to the end of production.

NOPSEMA will require a well operations management plan for every well until it is permanently plugged and abandoned. The WOMP “must also contain a justified timetable for carrying out and completing the well activities.”

The justification may be difficult for operators of many wells that have long since stopped production but not yet plugged and abandoned to delay the considerable expense.

Canavan's late move

NOPSEMA’s new guidance was produced in response to revised expectations of the regulator issued in October 2019 by then Minister for Resources Matt Canavan. Canavan asked NOPSEMA to “give heightened focus to…obligations in relation to maintenance and removal of property” and only accept alternative arrangements to decommission a field when it was justified.

Canavan’s issued his instructions a month after the owner of the Northern Endeavour oil production vessel in the Timor Sea entered voluntary administration. The company, Northern Oil and Gas Australia, later went into liquidation leaving taxpayers with a decommissioning bill that could reach $230 million.

Most offshore fields are operated by the company with the biggest share of the joint venture awarded the title to the field.

The arrangement for the Northern Endeavour was different. The title and facilities were owned by NOGA but operated under contract by Upstream Production Solutions. The new policy makes clear the titleholders are responsible for decommissioning, not the contracted operator.

Before October 2019 Canavan’s official expectations of the regulator had not mentioned decommissioning or removal of property.

The new NOPSEMA policy does not cover whether operators have the financial resources to perform decommissioning. That issue, made prominent by the Northern Endeavour, is included in the Department of Resources Offshore Petroleum Decommissioning Guideline.

The department is reviewing how decommissioning is managed and plans to issue a new policy in 2020 and implement it in the following years.

NOPSEMA will accept feedback on the draft policy until 9 June 2020.

The WA Government also has concerns about the performance of the oil and gas industry in decommissioning onshore wells and other equipment.

In November the Department of Mines, Industry Regulation and Safety posted on its website that it was "focusing on successful decommissioning, rehabilitation and closure with more petroleum projects nearing the end of field life."

DMIRS said it wanted decommissioning plans included in approvals for new projects and to be updated through the project life.

"For example, areas no longer required for use are progressively rehabilitated," DMIRS said.

Boiling Cold understands DMIRS has not changed the regulatory arrangements for onshore decommissioning.

Update: 7 April 2020, 4:45PM. WA Government perspective added.

Main Picture: NOPSEMA chief executive Stuart Smith. Source: NOPSEMA