Offshore oil and gas industry to foot bill for first phase of Northern Endeavour's decommissioning

The federal government has signed a $325 million contract to start removing an ageing oil vessel floating in the Timor Sea but, with offshore industry to bear the cost, a senator fears the job will not be as thorough as it should be.

The Northern Endeavour is a 274-metre former oil production vessel connected to the Laminaria and Corallina oilfields about 550 kilometres north-west of Darwin.

It became the responsibility of the federal government in February 2020 when its former owners, Northern Oil and Gas Australia (NOGA), went into liquidation.

It meant taxpayers were initially going to foot the bill for the decommissioning of the ageing, rust-riddled vessel, which, along with its undersea oil wells and infrastructure, was estimated to cost up to $1 billion.

But legislation passed last week will force the cost onto the offshore oil and gas industry, with a 48-cent per barrel levy imposed on all offshore operators, backdated to July 1, 2021.

"Decommissioning the Northern Endeavour is a unique and unprecedented responsibility for the Commonwealth," Federal Minister for Resources Keith Pitt said.

"We are working closely with industry and regulators to progress decommissioning as safely, efficiently, quickly and cost-effectively as possible."

UK-based company Petrofac has been contracted to disconnect the Northern Endeavour from its subsea equipment, temporarily suspend the wells, and ready the vessel to be towed to shore.

Another separate contract is expected to deal with the permanent plugging of the wells and removal of the remaining subsea infrastructure.

The federal government previously contracted Upstream Production Solutions to maintain the vessel in "lighthouse mode", which has cost $251 million.

The levy is expected to cover the maintenance costs.
Questions over scope

Independent South Australian senator Rex Patrick has been following the issue of the Northern Endeavour closely and said the signing of a contract for the decommissioning was a positive step.

"Unfortunately, we don't know the full scope of the contract work, or how the sea floor will be left in the end," he said.

"There are many different ways which you could disconnect the vessel.

"There are simple ways where you leave a bunch of infrastructure on the sea floor, then there can be the more expensive task of restoring the sea floor to its original pristine state, and we don't know what this contract covers off on."

He feared the new levy meant the offshore oil and gas industry would put "a bunch of pressure on government to do the minimal work that is required, rather than the proper job of bringing it back to its pristine state".

Petrofac said the disconnection of the Northern Endeavour was "expected to occur over approximately 18 months".

"All activities will be done in close consultation with the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) to make sure strict safety and environmental protections are in place," a statement on Petrofac's website said.
Creditor continues legal action

Meanwhile, Castleton Commodities, a creditor to NOGA, is suing the federal government in the New South Wales Supreme Court.

It wants to take control of the vessel, so it can sell it and recoup the money they are owed by NOGA, believing it should have taken control when the Northern Endeavour's previous owners went into liquidation.

According to federal budget papers detailing risks to the government's fiscal position, Castleton is "seeking orders for the delivery of the [Northern Endeavour], the appointment of a receiver to realise the value of the property and a declaration that it is entitled to a first charge over the proceeds".

Senator Patrick said he understood the government was "moving towards a settlement" of the case.

"But I don't know whether or not it will come through to the end without the taxpayer having to bear some cost," he said.

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