Australia’s Offshore Resources Decommissioning Roadmap

1. A regulatory framework to protect the environment and attract investment

Australia’s legislation governing offshore petroleum and greenhouse gas storage activities is the OPGGS Act. It regulates exploration and recovery of petroleum activities and greenhouse gas storage activities in Commonwealth waters. Industry must ensure that all decommissioning activities are compliant with Australia’s regulations. This includes early planning for decommissioning, and carrying out decommissioning activities in a timely, safe and environmentally responsible way.

The regulatory environment governing offshore decommissioning involves navigating many different pieces of federal and state legislation, and requirements under international law. Businesses participating in the decommissioning value chain therefore need to consider many different pieces of legislation that come into play when decommissioning. 

Navigating regulatory complexity

The regulatory environment as it applies to decommissioning and downstream processing can be complex for companies that have not completed a decommissioning activity before. 

Research commissioned to inform this roadmap shows that complexities in interpreting and complying with regulatory and legal requirements can create delays and more costs (CSIRO 2024a). For example, some infrastructure, such as pipelines, can cross jurisdictional boundaries from Commonwealth into state and territory waters. This can require multiple approvals in different jurisdictions. 

This regulatory complexity bolsters the case for a coordination function within government to drive alignment and efficiency across the industry. Up until now Australia has lacked a holistic, end-to-end view of decommissioning including how it interacts with different jurisdictional needs.

In some circumstances, industry collaboration can generate efficiencies that lead to faster, more cost-effective decommissioning without compromising environmental and safety outcomes. There are examples where different operators have collaborated to bring heavy lift vessels from the Northern Hemisphere to Australia or collaborated on maintenance activities creating economies of scale. The Australian Competition and Consumer Commission (ACCC) can grant exemptions for behaviour that otherwise may breach competition law, where conduct does not substantially lessen competition or has a net public benefit.

First Nations regulatory impacts involve considering the Native Title Act 1993, along with Commonwealth and state and territory culture and heritage protection legislation, particularly if environmental risks might impact cultural and heritage sites. Industry must protect Indigenous cultural and intellectual property through all project stages. 

Regulation internationally and in Australia. Full description follows.

Overview of international, Commonwealth and state/territory laws and regulations across the decommissioning value chain (KPMG 2023). Additional detailed regulatory mapping will occur in 2024–25

Summary of all relevant international, Commonwealth, state and territory laws and regulations throughout each stage of the decommissioning value chain. The decommissioning value chain includes offshore and onshore activities, from planning and preparation, to removal and logistics to port, to handling and dismantling, to transport and waste management and to commodity manufacturing and market phases. This shows the overlap and differences in the regulations across these activities at each jurisdiction. This results in a complex and uncertain regulatory space. Refer to Appendix 1 for a summary of the relevant regulations.

Making our regulatory settings stronger

As decommissioning activity continues to increase, it is critical that all companies operating offshore have sufficient funds to meet the costs and liabilities of decommissioning oil and gas projects. The government is considering additional reforms to ensure that the oil and gas industry appropriately fund and execute their decommissioning obligations.

NOPSEMA is responsible for regulating the plugging and abandonment of wells. NOPSEMA engage with titleholders to ensure this process is done appropriately, and that any environmental impacts are as low as reasonably practical. The government is working in collaboration with NOPSEMA and other relevant agencies to assess any risks posed by the rare occurrence of plugged and abandoned wells that may be seeping.

The government is considering what policy options are available to identify, monitor, and remediate any seeping plugged wells. This analysis will consider international learnings, best practice, and initiatives that could be further applied to the Australian regulatory regime. There will be robust engagement with stakeholders on any policy options considered.  

The government is working to strengthen existing requirements for offshore decommissioning planning throughout a project’s life, and to place financial assurance obligations on individual titleholders. These reforms will increase transparency across the decommissioning value chain and strengthen the government’s ability to monitor the financial and operational health of offshore titleholders. The reforms will ensure that titleholders retain the financial capacity to meet their decommissioning obligations into the future as required under law. This is integral to social licence in the sector. 

The government is also reviewing Australia’s offshore environmental management framework. The review will recommend improvements to our offshore environmental management regime in Commonwealth waters. It will make sure the regime is fit for purpose in a decarbonising economy, reflects best practice for offshore environmental management, is consistent with reforms to our national environmental laws, and is consistent with Australia’s international obligations for emissions and sustainable development.

Actions

To support a regulatory framework that helps protect the environment and attract investment in decommissioning the Australian Government will:

  • continue to progress the review of Australia’s offshore environmental management framework to ensure it is fit for purpose and reflects best practice, including for decommissioning activities  
  • implement new guidance to improve regulatory certainty for the community and for industry, including guidance on the removal of offshore infrastructure
  • support the decommissioning industry through work by the Offshore Decommissioning Directorate to:
    • enhance transparency across the pipeline of planned decommissioning activity to help businesses plan investment decisions 
    • establish intergovernmental agreements with state and territory governments to enhance cooperation and collaboration between all levels of government on decommissioning policy 
    • develop an updated decommissioning cost estimate that will benchmark costs, inform government priorities, and support competition and greater efficiency across the decommissioning value chain
    • engage with planned industry activity to help create efficiencies and reduce costs without compromising environmental protections 
    • develop rigorous financial assurance reforms to ensure industry is prepared for decommissioning and to give the community confidence that industry is managing its decommissioning obligations responsibly
    • deepen engagement with advanced offshore decommissioning jurisdictions, including the UK and Norway, to ensure Australia emulates international best practice.

Spotlight: North Sea Transition Authority

The North Sea Transition Authority (NSTA) is the regulator for the oil and gas, offshore hydrogen, and carbon storage industries in the UK. Working with government, industry, and other regulators, the NSTA aims to reduce emissions and support the transition to net zero while aiding the UK’s energy security.

The NSTA has also influenced the sector to share lessons and adopt best practice. These efforts were critical to reducing the total cost estimate for decommissioning all remaining offshore oil and gas infrastructure in the UK by £15 billion between 2017 and 2021.

The success of the authority is based on collaborative, practical industry engagement processes and the setting of clear expectations. The NSTA works closely with other regulators to ensure they align on shared visions and values, while also building trust and relationships with industry. This helps to give stakeholders a complete view of the opportunities and challenges in decommissioning planning and delivery.

The Australian Government considers models such as the NSTA to be a best-practice approach to support decommissioning and this has influenced the initial design of the Offshore Decommissioning Directorate. The directorate will have some similarities with the NSTA, such as focusing on driving coordination across industry and improving visibility of the pipeline of decommissioning work.