"It's not simple," Herbert Smith Freehills partner Stuart Barrymore told the recent APPEA 2017 conference in Perth.

 

"If you talk to your grandmother she will have a view on whether facilities should be completely removed, or should be left in place."

 

As the North Sea experience has shown over the past 30 years, the public has certain expectations around decommissioning, however the total removal of facilities, which is mandated in international law, may actually not be best practice as the removal may expose the environment to more risks than leaving some structures and pipelines in place.

 

Barrymore said that Australian legislators had given very little thought to the realities of decommissioning when the law was established in 1967.

 

"The Petroleum (Submerged Lands) Act came into Australia simply to provide a foundation for the Bass Strait to be developed," he explained. 

 

"There were no applicable laws, and there was a fight at the time between Victoria and the Commonwealth, and it was very much a pro-development regime."

 

While that legislation has been updated as the Offshore Petroleum Greenhouse Gas and Storage Act, it has still not given much attention to the practicalities of decommissioning, which is why the Australian government has initiated a process that should provide more certainty.

 

The Commonwealth is looking at best practice around the world, and is preparing a discussion paper with a view to a new policy position being adopted for Australia by 2019.

 

Barrymore said the Commonwealth's starting point was that the state should not pick up the costs, but he said there should be a balance for legacy liabilities.

 

He said a "Hotel California" approach - such as that in the North Sea where "you can stay but never leave" - risked dampening developments, so any new policy needed to consider ways to maximise resource recovery as well as defining the best pathway to decommissioning. 

 

There have been no major decommissioning projects in Australia, beyond FPSOs such as Buffalo, but there are some 70 offshore platforms operating, and around half are more than 25 years old. 

 

Production is set to cease from 32 facilities weighing a staggering 20 million tonnes over the next decade, and a number of facilities in the Carnarvon Basin have already reached the end of their life. 

 

There are a further seven floating facilities that are likely to end their lives by 2026.

 

The expectation is that the costs of decommissioning will be much higher than they are estimated at today, and oilers are looking to the regulatory regime to provide guidance on ways to reduce the costs.

 

Barrymore said Australia would probably look to the experience of more established regions such as the Gulf of Mexico, the North Sea and Asia Pacific.

 

Barrymore said annual estimates published by the United Kingdom shows the scale of that undertaking: 100 platforms, 1800 wells, 8000km of pipeline and $30 billion to be spent by 2025 on mature facilities.

 

Around half the costs are in the plugging and abandonment of subsea wells. 

 

"When society looks at this, they see these very large platforms, but the obligation to completely remove all of the facility is a significant contributor to cost," he said.

 

In terms of facilities, the current regulations make no distinction between deeper water facilities such as the North Rankin complex and the relatively shallow fields like Cliff Head in the offshore Perth Basin. 

 

Barrymore had the law had evolved in some ways, but Australia's approach to decommissioning was "pretty much set" in 1967, and at that stage the principle was complete removal of all offshore facilities, but change was coming.

 

"We are now in a situation where the International Law Foundation has clearly acknowledged that less than full removal and be appropriate," he said.

 

It has issued guidelines that embed the importance of a case-by-case treatment of facilities.

 

Beyond the ‘how' of decommissioning, is the question of who is responsible for the work, particularly if there are delinquent parties on the title.

 

"If relevant regulators are concerned that appropriate removal or decommissioning activities are not being carried out they have the ability to order that titleholder, or persons who are engaged in the region, obviously support vessels or drilling companies, to go and discharge the obligation," Barrymore said.

 

"The interesting position that gets people's focus at the moment is what the position is as far as prior titleholders are concerned."

 

He said the law allowed for the regulator to give direction to prior titleholders to step up and remove equipment, however it could be argued that companies who had surrendered block had undergone an assessment of their obligations at the time of surrender. 

 

"However it is, of course, possible for the regulator, as part of consenting to approving a new titleholder to impose conditions as part of that consent process," he said.

 

He said globally, where there was a disposal of interest in mature and late life fields, there was an important issue for regulators to consider: will there be parties able to discharge the obligations required?

 

There is also no formal embedded requirement to provide security with a time in the production cycle where decommissioning becomes apparent.

 

Barrymore said JV partners were often concerned that their partners should meet their obligations under abandonment, and they often sought to protect their rights under operating agreements so there was money at the end of the project.

 

By requiring securities the last company standing with the financial capacity would not be left holding the bag alone.

 

EDIT: This article has been lightly edited for clarity.