Australia imposes tax on oil industry to pay for field cleanup

Clear skies over the Australian Federal Parliament where Treasurer Wayne Swan will later present the 2012 Federal Budget, Canberra May 8, 2012. REUTERS/Andrew Taylor

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  • Levy set at AUD 0.48 per barrel on all offshore producers
  • The total cost of the cleanup could eventually reach A$1 billion
  • Chevron, Exxon, Shell lost their fight against the levy

MELBOURNE, April 1 (Reuters) – Australia has agreed to pay 325 million Australian dollars ($244 million) for the first stage of cleaning up an abandoned oil field in the Timor Sea, and parliament has passed a law to impose a tax on oil and gas producers to cover costs, the government announced on Friday.

The government has signed a 325 million Australian dollar contract with Petrofac Facilities Management to disconnect the Northern Endeavor vessel from underwater equipment in the first phase of the cleanup, Resources Minister Keith Pitt said in a statement.

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

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

Parliament passed legislation on Thursday evening imposing a levy of AUD 0.48 per barrel of oil equivalent on all offshore oil producers to recover costs.

“It fulfills the Australian Government’s commitment to ensure Australian taxpayers don’t foot the bill,” Pitt said.

Last year, global majors Chevron Corp (CVX.N), Exxon Mobil Corp (XOM.N) and Shell Plc (SHEL.L) voiced strong opposition to paying for the dismantling of a site with which they did not had nothing to do.

They face the largest share of the tax burden based on their offshore production, along with Australia’s Woodside Petroleum (WPL.AX) and Santos Ltd (STO.AX). Read more

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

Contractor Petrofac said it expects disconnection of the Northern Endeavor to take around 18 months.

The Northern Endeavor mess led Australia to pass a law last year making former owners of oil and gas fields liable for the costs of decommissioning facilities if subsequent owners fail. Read more

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Reporting by Sonali Paul; Editing by Leslie Adler, Chris Reese and Christian Schmollinger

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Denise W. Whigham