Offshore rig decommissioning an opportunity for Australian jobs

Published on Wed 30 March 2022 4:50pm

Thank you, Deputy Speaker, and I’m glad for the opportunity to speak in support of this bill. It’s another instalment in the government’s response to the Northern Endeavour fiasco, which if unaddressed would have left the taxpayer picking up a bill of the financial kind of several $100 million that should have been met by the operator Woodside.

Mr Wilson (6:46pm) – Thank you, Deputy Speaker, and I’m glad for the opportunity to speak in support of this bill. It’s another instalment in the government’s response to the Northern Endeavour fiasco, which if unaddressed would have left the taxpayer picking up a bill of the financial kind of several $100 million that should have been met by the operator Woodside.

This levy is a supportable and sensible means of ensuring the taxpayer does not pay for a very expensive mess that was created by some risky and I would say some questionable corporate conduct.

The Department and the Minister deserve some credit for resolving on both the trailing liability that was dealt with in an earlier piece of legislation, and for bringing along this cost recovery levy.

But based on what we now know, it is a shame, the rigor of our regulatory arrangements wasn’t sufficiently good to prevent what occurred. Unfortunately, when you have a government, that is reflexively, or some would say ideologically, dismissive of the regulatory systems that are required to guarantee the public and the national interest that deliver safety and environmental protection and good corporate conduct, this is exactly the kind of thing that will occur – regulatory failure with harmful consequences.

Deputy Speaker we’re fortunate that the mess so far is only administrative and economic in nature, rather than a mess that could well have involved very real hazards to worker safety and to the marine environment. No one in the Australian community would be unaware of the kinds of things that have happened in the past that have involved offshore oil spills, like Deepwater Horizon, Exxon Valdez, and other disasters. They, in addition to causing costs in the tens of billions of dollars, they left awful environmental legacies across hundreds and hundreds of kilometres that lasted decades, and in most cases continue today.

The member for Brand has done some very important work on this Bill, and in response to this issue more generally, and as the shadow minister just described, worked with the government to address particularly some aspects of the government’s response that raised questions about whether we had the right settings in these measures in terms of occupational health and safety, and the shadow minister already described those, but they cannot be underestimated in terms of their importance.

I do also want to acknowledge that the industry peak body APPEA ultimately came on board in supporting the measures required to ensure that companies take appropriate responsibility for their decommissioning obligations, and that the taxpayer is therefore protected from picking up the tab.

Deputy Speaker, in essence what occurred with the Northern Endeavour was a sale or transfer of an end-of-life offshore oil production asset from Woodside to a small company with insufficient operating experience and capability. And with completely insufficient financial standing.

Woodside essentially transferred the asset for what was a relatively tiny sum, and by providing some financial assistance to the purchaser, and the reason Woodside did that was because there was significant value in in them not having to bear the decommissioning costs.

It’s not surprising that in very short time, the company that received the asset proved incapable of operating that Northern Endeavor, and we should be grateful that NOPSEMA was relatively quick off the mark, and resolute in holding the operator to account and in preventing what may have escalated towards something fatal in human terms or environmentally disastrous.

One of the things that NOPSEMA considers is the adequacy of the spill response arrangements and preparations which are critical when it comes to offshore oil and gas. And in this case, I think it’s notable to record that when NOPSEMA carried out some inspections on the Northern Endeavor it determined that the new operator did not have and I quote,

“an adequate capability and capacity to support and sustain a protracted response, resulting in short and long term biological, ecological and social harm in the event of an uncontrolled hydrocarbon release.”

In other words, they weren’t in any position to safely respond if there had been some kind of oil spill there would have been short- and long-term biological, ecological and social harm if that had occurred.

NOPSEMA also found that, and I quote,

“There was a failure to maintain the oil spill response arrangements provided for by the current TSA and that would result in immediate insignificant threat to the environment.”

So, what happened next? Well, operations were stopped and not that much further down the track the Timor Sea Oil and Gas Australia company, that’s the company that received the asset, went into administration or liquidation, and it left the Australian government to step in and arrange for the Northern Endeavour to be operated in ‘lighthouse mode’ and then to arrange a proper decommissioning.

That process continues and will take some time, as the shadow minister has described. Some tenders were actually issued earlier this year. And the government has already provided something like $230 million for the expected work. That will not be the end of it, I don’t think.

The $230 million includes $8 million paid to Woodside for their expert advice. I reckon some people in the community would think that payment is pretty rich, in all the circumstances.

Deputy Speaker I said questionable earlier in terms of the whole arrangement and I think that this is an important point to make, and certainly for people in the community to understand. I said questionable because it is quite hard to look at the circumstances around the disposal of the Northern Endeavour and take the view that Woodside disposed of the infrastructure while giving due and reasonable consideration to the possibility that the receiving entity was not in a solid position to safely and properly operate the rig and was in no position to safely and properly decommission it. It is hard to believe that an operator of the capability and scale and experience at Woodside didn’t foresee that possibility.

In any case, this bill helps fix a serious and costly problem. But we know there’s further work to be done to ensure this kind of thing doesn’t occur again. And on the upside, we should ensure that the considerable volume of decommissioning work in prospect is undertaken by an Australian decommissioning industry and by Australian workers.

On that front, I welcome the establishment of CODA – the Centre for Decommissioning Australia – and I’m grateful to have met with the general manager Francis Norman on a couple of occasions.

It’s pretty incredible to reflect on the fact that there is $60 billion of offshore decommissioning that will be required in the next 30 years, that is by 2050. And a half of that in the next 10 years.

It is a very substantial and important piece of work. If it’s not done well, there will be unacceptable risks in terms of worker safety and in terms of harm to our marine environment. If it is done well, there’s the potential for a state-of-the-art Australian decommissioning industry to be created supporting investment and innovation and infrastructure and Australian jobs that are all relevant to our broader maritime capability in shipbuilding and marine science and offshore renewable energy, and, with my recycling hat on, in resource recovery and recycling.

That is what we should all hope for. That is what we should aim for. It’s entirely possible and it’s the right way to go. But it will require some concerted and rapid work from government in partnership with industry, and, as we have seen, there really is no time to waste at all.

Deputy Speaker, I’m glad to support this bill.

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