Australia’s Offshore Resources Decommissioning Roadmap

Understanding Australia’s decommissioning value chain

Australia’s decommissioning value chain spans both onshore and offshore activities. There are a wide range of different businesses involved in the many separate activities that make up the decommissioning value chain, including: 

  • planning, preparing, contracting, and securing the necessary approvals
  • securely plugging oil and gas wells and removing hundreds of kilometres of pipelines and flow lines from the sea floor
  • dismantling steel structures, with large production decks, embedded in the sea floor and removing floating oil and gas producing facilities and their anchors
  • transporting these materials to ports and dismantling yards, recycling steel, plastics and other materials, and sorting, treating, and safely disposing of waste materials.
Value chain. Full description follows.

Australian offshore oil and gas decommissioning value chain (KPMG 2023)

The key activities in the value chain start with planning, which involves:

  • Innovation and technology research
  • Tender and contract award
  • Decommissioning planning and engineering design
  • Collaboration across operators for efficiency
  • Regulatory approvals including stakeholder consultation and environmental impact assessments.

The value chain then moves offshore, which involves preparation and well plug and abandonment. This includes:

  • Well plug and abandonment
  • Cleaning, purging and isolation
  • Preliminary categorisation of waste streams

Offshore activities also include removal, which involves:

  • Topside preparation for removal activities (cutting, separation)
  • Heavy lift operations
  • Subsea asset lifting
  • Support vessel activities

And logistics to port, which involves:

  • Transfer of material to barge as required
  • Transportation of materials to port
  • Transfer of material to shore

Decommissioning then moves onshore to include:

Handling and dismantling at the port, which involves:

  • Cutting and dismantling of assets
  • Waste sorting, handing and preparation
  • Lifting and handling of structures

Transport to waste service providers, which involves:

  • Loading and transport of materials and waste for final processing (road/rail)

End of life waste management, which involves:

  • Material reuse evaluation
  • Material processing and recycling
  • Waste disposal

Commodity manufacturing and market, which involves:

  • End market evaluation for materials (including steel, plastics)
  • Manufacturing of new product using recycled material
  • Product export.

Eighty-nine per cent of the total mass of decommissioning projects will be offshore north of Western Australia. The Gippsland Basin in eastern Victoria has 9% of material to be decommissioned with the rest in the Otway and Bass Basins. There are also some pipelines and wells in waters offshore the Northern Territory. In the decades ahead, offshore wind infrastructure will also need to be maintained, replaced, and decommissioned as that industry scales up. 

A map of Australia that shows the total amount of material to be removed from the ocean in Western Australia, the Northern Territory and Victoria. Full description follows.

Australia’s offshore decommissioning landscape (NOPSEMA 2023a)

In the Northern Territory and Western Australia, decommissioning will need to remove:

  • 35 platforms
  • 6076 km of pipelines and static umbilicals 
  • 483 subsea lifts
  • 11 floating facilities 
  • 120 flexible risers and dynamic umbilicals
  • 548 wells to be plugged and abandoned

In Victoria, decommissioning will need to remove:

  • 22 platforms
  • 2089km of pipelines and umbilicals
  • 52 subsea lifts
  • 120 flexible risers and dynamic umbilicals
  • 460 wells to be plugged and abandoned.

The Centre for Decommissioning Australia (CODA) estimates there is roughly 5,695 kilotons of offshore infrastructure that will need to be removed in Australia’s offshore areas. This is mostly steel and concrete (CODA 2022b). Australia’s offshore infrastructure to be decommissioned includes:

  • 1,008 wells
  • 57 fixed facilities (with supports to the seabed)
  • 11 floating facilities (including floating, production, storage and offloading facilities) 
  • 4,960 km of pipelines (taking oil or gas from a production area to onshore processing or distribution areas)
  • 1,700 km of flowlines (transferring oil, gas or other liquids in a production area)
  • 1,500 km of static umbilicals (bundled tubes and cables for control services and production substances)
  • 535 subsea structures (wellhead production systems and supporting subsea systems and equipment)
  • 120 flexible risers and dynamic umbilicals (from subsea production areas to surface infrastructure) (CODA 2023). 

The pipeline of decommissioning activity in Australia stretches out to 2060 and beyond, and will grow as the offshore wind industry scales up over time. Initially, the offshore Gippsland and North Carnarvon Basins will have decommissioning costs of around $11 billion to 2032. Additional decommissioning peaks are expected in 2033–2037 and 2043–2047 as large projects reach the end of their productive life. 

Potential decomissioning pipeline. Full description follows.

Potential decommissioning pipeline in Australia from 2023 to 2060 (Wood Mackenzie n.d.)

A vertical bar graph showing the potential amount of decommissioning in US dollars that needs to take place in 4-year increments between 2023 and 2060 in offshore Western Australia and Victoria. It includes decommissioning in Western Australia’s Bonaparte, Canning, Browse and North Carnarvon basins, and in Victoria’s Bass, Otway and Gippsland basins. This shows the expected peaks and troughs of decommissioning activity.

The first large tranche of decommissioning work, expected from 2023 to 2027, will take place in the Gippsland and North Carnarvon Basin at an estimated cost of US$6 billion. 

The following 4 years from 2028 to 2032 will have around half as much decommissioning occurring in the Gippsland, North Carnarvon and Bonaparte basins. 

The largest peak is expected between 2033 and 2037 with an estimated US$8 billion worth of decommissioning happening mainly in North Carnarvon, followed by Gippsland, Bonaparte, Canning and Otway basins. This decade will be the end of Gippsland decommissioning. 

From 2038 decommissioning is expected to decline with the next peak in 2043 to 2047 with US$6 billion worth of decommissioning occurring in the Canning, Browse and North Carnarvon basins. 

The last tranche of expected decommissioning in 2058 to 2060 will be in the Browse and North Carnarvon basins.
 

Spotlight: Northern Endeavour

The Northern Endeavour is a 274-metre floating production storage and offloading (FPSO) facility. The Australian Government took responsibility for the decommissioning of the Northern Endeavour after the liquidation of its owner. This includes associated Laminaria and Corallina oil fields in the Timor Sea, 550 km north-west of Darwin. The government is now the owner of the FPSO, all associated assets and is responsible for its safe disposal.

The Northern Endeavour is a large-scale decommissioning project in Australia where the government has direct responsibility for the activity. The onshore components of its decommissioning journey will, where possible, take place in Australia. This will help grow the local industry in advance of further industry decommissioning projects in the future.

The government is setting a best practice standard for decommissioning. Costs for the decommissioning of the Northern Endeavour are recovered from a levy on the oil and gas industry.

The government recognises that the decommissioning of the Northern Endeavour presents a unique opportunity. It allows for industry to work with the government on a project of strategic and environmental significance. Australian industry will play a major role in the plugging and abandonment of the wells and/or the removal and management of the subsea infrastructure in future phases of decommissioning. This includes the recycling process for decommissioning waste, while applying the principles of product stewardship and the circular economy.

The Northern Endeavour is a valuable learning experience for our regulatory regime. Important reforms in 2022 gave government greater oversight of companies looking to enter or leave the regime. They expanded the circumstances in which a former titleholder or related party could be called back to take responsibility for decommissioning.