Information video
Transcript
Presenter: William Tan
General Manager, Offshore Decommissioning Directorate, Oil & Gas Division, DISR
Welcome and thank you for watching the department's information video on the offshore decommissioning and financial assurance reforms consultation process. My name is William Tan and I'm the general manager of the Offshore Decommissioning Directorate at the Department of Industry, Science and Resources.
I would like to commence with an acknowledgement of country. I would like to acknowledge the Ngunnawal and Ngambri people as traditional custodians of the land I'm joining you from and recognise any other people or families with connection to the lands of the ACT and region. I wish to acknowledge and respect their continuing culture and the contribution they make to the life of this city and this region. I would also like to acknowledge the traditional owners of all of the lands that you're watching from and any Aboriginal and Torres Strait Islander people watching as well.
The Department of Industry, Science and Resources has launched a consultation paper seeking views on proposed reforms to strengthen the decommissioning and financial assurance arrangements for the offshore oil and gas industry. Specifically, the consultation paper seeks views on the existing decommissioning framework in Australia and proposed areas for reform. There are a range of questions in the paper and I'll highlight many of the issues they cover during this presentation, but we welcome feedback on any of the topics or information in the paper.
In this presentation, I will cover a brief overview of Australia's current regulatory regime for offshore petroleum decommissioning, the key challenges with the current regime that we're seeking to address through these reforms, what the reforms aim to achieve, and an overview of the proposed reform areas that we're seeking your views on. And finally, I'll talk about the next steps for the reforms process, including how you can get more information and provide your submission.
All the focus of this consultation and the presentation is mainly on petroleum projects. We're also seeking input on the regulatory regime for decommissioning greenhouse gas storage projects, commonly known as carbon capture and storage.
But to start with, let's define what we mean by decommissioning.
Decommissioning involves the timely, safe and environmentally responsible removal of or otherwise satisfactory dealing with infrastructure once it is no longer used to support petroleum operations. Decommissioning is a normal and inevitable process during the life cycle of an offshore petroleum project. It involves a range of different activities as outlined on the slide. Organisations should be planning for decommissioning from the outset and updating these plans as required through the life of operations.
Australia's regulatory regime is designed to ensure the risks and liabilities associated with petroleum activities remain the responsibility of title holders. The Offshore Petroleum and Greenhouse Gas Storage Act or the OPGGS Act, as I'll be referring to it from now on, and its regulations are the main mechanisms for regulating offshore resource activities in Commonwealth waters.
The core decommissioning provisions under the OPGGS Act are: that title holders must remove all structures, equipment and property from the title area once it's no longer in use. They must meet this obligation for consent to be given to surrender the title.
The Government has outlined some key decommissioning principles that underpin its approach to regulating decommissioning. First, decommissioning is the responsibility of title holders. Second, early planning for decommissioning is encouraged. Third, removal of all property is the base case and fourth, decommissioning must be completed before the end of title.
In 2021, a series of amendments to the OPGGS Act and its regulations were made to strengthen Australia's offshore oil and gas regulatory framework. These included: strengthening existing trailing liability provisions to enable government to call back a former title holder to pay for decommissioning and environmental remediation if they sell a title and the new title holder is then unable to meet their decommissioning obligations. And increasing scrutiny of title holders, technical and financial capacity to fulfil their obligations under the OPGS Act during transfers of title and changes in control processes.
The measures were developed following extensive stakeholder consultation and adopted key recommendations of the Walker Review which looked into the circumstances leading to the liquidation of Northern Oil and Gas Australia Group of Companies. Previous reforms have strengthened the offshore petroleum decommissioning regulatory framework. However, there are aspects that require further reform to ensure industry is undertaking timely, safe and environmentally responsible decommissioning.
The Australian Government announced in the 23-24 Mid-Year Economic and Fiscal Outlook that it will introduce decommissioning and financial assurance reforms. The objective of the reforms is to ensure the risks and liabilities of offshore activities remain the responsibility of industry. Australia has up to $60 billion dollars of offshore petroleum decommissioning activities expected to occur over the next 30 to 50 years. Safe, timely and responsible decommissioning is essential for preserving our environment and maintaining industry’s social licence to operate.
In developing this next suite of reforms, the Government aims to provide certainty to titleholders by delivering a proportionate and balanced regulatory framework to manage environmental, safety and financial risks around decommissioning; maintain Australia's productivity and competitiveness; only introduce new regulation were absolutely necessary; and ensure the taxpayer doesn't bear the cost of decommissioning, including for its regulation.
In our discussions with stakeholders so far, some key drivers and issues with the current decommissioning framework have been highlighted. First, title holders have a range of financial incentives to delay decommissioning, despite delays often making decommissioning more challenging and costly. Second, decommissioning costs are often underestimated. This can lead to financial difficulties. Some title holders may also assume permission will be given to leave infrastructure in place, even though the base case under the OPGGS Act is for removal.
While decommissioning activities are included in various ways in the existing permissioning documents, there is no requirement for holistic decommissioning plans that are developed early and updated regularly. This lack of planning visibility impacts the ability of the market and the government to assess decommissioning approaches and risks.
And finally, government needs to have effective tools to take timely graduated actions to ensure title holders have the technical and financial capacity to decommission petroleum projects. This is to ensure that instances where the government needs to direct current or former title holders to undertake decommissioning or the worst-case scenario step-in, are limited and a last resort. A more effective regulatory framework will provide greater certainty to industry and will reduce the risk that government intervention such as the work to decommission the Northern Endeavour and the associated levy will be necessary in the future.
International and domestic onshore decommissioning regimes are useful examples for us to consider in developing our reforms. Offshore decommissioning regimes globally are diverse, shaped by different legal systems, economic settings, geographic locations and environmental priorities. However, they have the same aim of ensuring industry undertakes timely, safe, environmentally responsible decommissioning.
A few elements stand out from international approaches that should be considered throughout the reforms. In several regimes, there is a requirement to submit detailed decommissioning plans well before the end of a project's life. This often includes a standardised cost estimate. Risk based financial assurance provides confidence that enough resources will be available for decommissioning.
Domestically our onshore resources sector also uses risk-based regulation and a variety of financial assurance tools. There's also a strong emphasis on post decommissioning, monitoring and ongoing liability to ensure that any long-term risks are managed.
Australia has an opportunity to draw on effective elements of international and domestic approaches to ensure we have a fit for purpose and effective offshore decommissioning framework. However, direct adoption is not feasible. Many of these regimes have been in place for decades and offshore and onshore regimes face different technical and financial risks. The unique geographic, economic and regulatory differences for the Australian offshore petroleum industry require a tailored and flexible approach.
Throughout the consultation, we're seeking stakeholder views on what aspects of international and domestic onshore decommissioning frameworks we should consider and why, and any differences between the industries internationally and domestically that we should be aware of in looking at overseas frameworks.
The Department of Industry, Science and Resources is proposing key areas for reform to strengthen the regulatory framework. I'll go through each of them in more detail, but at a high level we're seeking feedback on the following five areas.
First, decommissioning planning.
Second, financial planning and assurance.
Third, decommissioning and financial capacity risk assessments.
Fourth, compliance and enforcement tools and fifth, title surrender and post title surrender.
I'd also like to emphasise that for any new or changed requirements, we will also need clear and effective transition arrangements for existing projects. Titleholders should have enough time and guidance to support compliance.
On decommissioning planning, the Government encourages early planning, but there is currently no explicit regulatory requirement for titleholders to submit and regularly update a holistic decommissioning plan.
As part of the reforms, we're considering introducing a requirement for early, transparent and regularly updated decommissioning plans. It is expected that they would increase in detail and specificity as a project matures. The goal is to help the market and the government to better assess risks around decommissioning.
Decommissioning planning could also enable more streamlined and efficient development and assessment of decommissioning documents for the decommissioning activities themselves. In addition, publicly releasing elements of decommissioning plans could help improve visibility across the supply chain and encourage more collaboration across projects that could result in efficiencies and economies of scale.
We're seeking feedback on what should be in decommissioning plans and when it should be submitted, both initially and for updates. We're also seeking views on any other ways the government can encourage early planning and increased transparency. As part of or alongside the decommissioning plan, the government is considering introducing cost estimate standards or requirements.
A robust estimate of the decommissioning costs is needed to inform the market and the government's assessment of risks of unfunded decommissioning obligations. There are existing financial reporting requirements outside the OPGGS Act that provides some information to government and the market on decommissioning costs. However, financial reporting obligations may vary depending on the titleholders, company size, structure or where it's incorporated or listed, so we're seeking input on how cost estimation and reporting requirements could be improved.
Another key question is how decommissioning planning could assist with managing proposals for alternative end states, including leaving infrastructure in the sea and repurposing.
It's important to note that the base case for the end state of petroleum infrastructure is full removal and it's only in limited circumstances that alternative approaches may be proposed, provided all applicable regulatory requirements are met.
The second proposed reform element is financial planning and assurance. Robust financial plans ensure titleholders will be able to fund their decommissioning when it falls due. The market and the government should be able to have confidence that the financial strategy for decommissioning a project is sound. The government currently has limited visibility of the specifics of how titleholders intend to finance their decommissioning activities. This makes it harder to gauge the ability of titleholders to meet their obligations.
The government is considering requiring titleholders to submit specific financial information, including: details of the financial aspects of the project, how they intend to fund decommissioning obligations into the future, any financial arrangements between joint venture parties, any other financial arrangements for decommissioning costs such as bank guarantees, letters of credit, trust or deed arrangements, or other appropriate forms of financial security. The level and detail of information requested would take into account information already available to the government.
The decommissioning and financial planning information could be submitted and assessed through a single process. This would reduce duplication and to ensure the Government has all the necessary information to consider decommissioning and financial capacity risks. Through the consultation paper, we're seeking feedback on what should be submitted as part of the financial plan. What criteria should be used to assess it, and what forms of financial arrangements are robust demonstrations of available funding and why?
Risk assessments are essential to ensuring that regulatory action is effective and proportionate, imposing a lower regulatory burden where appropriate. The government already undertakes processes to assess decommissioning and financial capacity risks. However, these processes can be hampered by a lack of early and detailed information on technical and financial planning for decommissioning.
The earlier reform elements I discussed will assist with this, but there may also be a need to ensure broader information gathering powers are effective. Implementing a regular, structured and comprehensive risk-based assessment would help the government to evaluate whether titleholders have the capacity to meet their decommissioning obligations when they fall due. These risk assessments could consider technical and financial risks along with the broader organisational and strategic context for the titleholders.
We could also consider the strength of governance frameworks and risk management systems. Organisations with robust internal controls and sound decision-making processes are better equipped to effectively manage decommissioning. Such a process would seek to identify vulnerabilities early and support targeted regulatory responses for higher risk titleholders.
We are seeking feedback on what factors should be considered in the risk assessments, when should they be undertaken and whether they should be done at the project level or for a titleholder across multiple projects. We're also seeking feedback on information gathering and sharing powers. Effective compliance and enforcement tools are essential to ensure the other reform elements achieve their objectives. They should reflect best practise, including risk-based regulation and proportionate penalties. They should also leverage existing mechanisms for compliance and accountability where possible. These tools need to enable escalation from soft interventions such as increased monitoring or engagement through the formal actions under the OPGGS Act and regulations.
In terms of decommissioning and financial planning, the government could have the ability to seek revisions to the documents titleholders have provided, inspect them against commitments titleholders have made. Existing powers under the OPGGS Act to issue directions and notice would continue to be used. However, it could be necessary to introduce a specific enforcement tool for projects and or titleholders representing a higher financial capacity risk. This could take the form and the power that enables the government to specify how much financial assurance it requires, in what form and by which date.
Personal accountability also needs a continued focus, particularly for directors and senior executives with decision making authority. We could consider further enforcement mechanisms to hold individuals responsible in instances of deliberate or negligent non-compliance. We are seeking feedback on what compliance and enforcement tools the government should be considering and specifically how a financial assurance enforcement tool could support compliance with decommissioning obligations.
The final reform element outlined in the consultation paper focuses on the title surrender process and post surrender issues. Title surrender requires an assessment of whether decommissioning obligations have been met. As part of these reforms, we are also considering the robustness of the requirements and the effectiveness of the assessment process. Even with the robust procedures and approved approaches, issues may sometimes arise for property that was previously decommissioned.
The existing trailing liability provisions in the OPGGS Act enable the government to direct a relevant entity to conduct remedial activities as required. However, there may be circumstances where there is no entity to direct or the direction is unlikely to be able to be enforced. We are considering what, if any, changes should be made to mitigate risks post decommissioning and title surrender and seeking feedback on this issue.
As I noted at the beginning of the presentation, the focus of the consultation paper is on the decommissioning framework for petroleum, but we're also seeking feedback on the potential implication of these reforms for the regulation of offshore greenhouse gas storage decommissioning. Alignment between these two decommissioning frameworks could reduce regulatory complexity and potential barriers for repurposing petroleum infrastructure for greenhouse gas storage. However, we need to make sure the differences between the two industries and the varying risk profiles are taken into account.
For example, post closure monitoring, along with mechanisms to address any issues may need different requirements. We're also considering how to manage decommissioning and financial assurance obligations when a project involves both petroleum production and greenhouse gas storage, or if infrastructure is being repurposed.
We are seeking feedback on how we could apply the proposed reforms in greenhouse gas storage regulations and what modifications we'd need to make. We are also interested in any reforms needed to facilitate the transition from petroleum to greenhouse gas storage titles and how we can mitigate any risks of unmet decommissioning obligations.
So, the consultation paper is available on the Department's Consultation hub. Submissions are due by 11:59 PM Australian Eastern Standard Daylight Time on 13 January 2026, but please check the Consultation Hub for any updates. You can answer some or all of the questions included in the paper. We will also run targeted stakeholder engagement during and after the public consultation period.
Your feedback to this consultation will help us develop these reforms and may also inform related activities. There will be future public consultation informed by the responses to this paper. We will also consult on any legislative changes. If you have any questions, you can contact us directly at Decomdirectorate@industry.gov.au.
Thank you for your time and I look forward to your submissions during the consultation period.