Australia slaps tax on oil industry to pay for field clean-up

[MELBOURNE] Australia has agreed to pay A$325 million (S$331 million) for the first stage of clean-up at an abandoned oil field in the Timor Sea, and Parliament has passed a law to slap a levy on oil and gas producers to cover the cost, the government said on Friday (Apr 1).

The government has signed a A$325 million contract with Petrofac Facilities Management to disconnect the Northern Endeavour vessel from subsea equipment in the first phase of the clean-up, Resources Minister Keith Pitt said in a statement.

The Northern Endeavour is the giant floating production storage and offloading (FPSO) vessel at the Laminaria-Corallina oil fields that was abandoned when the fields' owner, Northern Oil & Gas Australia, collapsed in 2019.

The government stunned the oil industry in May when it proposed to make all offshore oil and gas producers cover the cost, estimated to be as high as A$1 billion, of removing facilities and cleaning up the area around the fields.

Parliament passed legislation late on Thursday imposing a levy of A$0.48 per barrel of oil equivalent on all offshore petroleum producers to recover the costs.

"This delivers on the Australian government's commitment to ensuring Australian taxpayers aren't left footing the bill," Pitt said.

Global majors Chevron, Exxon Mobil and Shell last year expressed strong opposition to paying for decommissioning a site they had nothing to do with.

They face the biggest share of the tax burden based on their offshore production, along with Australia's Woodside Petroleum and Santos.

The majors declined to comment on Friday, referring queries to the Australian Petroleum Production and Exploration Association, which said the industry takes decommissioning seriously.

Contractor Petrofac said it expects disconnection of the Northern Endeavour to take about 18 months.

The Northern Endeavour mess led Australia to pass a law last year making former owners of oil and gas fields responsible for the costs of dismantling facilities if later owners fail. REUTERS