United Nations Climate Change
Our aim is to help our clients understand the potential opportunities and challenges that COP25 may have on their business.
As the Australian gas market moves through its primary production phase, it is estimated that over the next 50 years the industry can expect to invest US$21bn1 in operational expenditure for decommissioning and abandonment works of both facilities and pipelines as projects reach the end of their productive life.
Decommissioning is a process of transformation (including dismantling, demolition, and rectification/remediation) that a productive asset or series of assets experiences upon the end of the productive/reasonable life cycle of that particular asset.
Decommissioning may include the repurposing of these assets or processes or, in certain circumstances, the abandonment of the assets – depending on the type of the particular asset, and its location. The repurposing of those same assets, processes and relationships can create a more resilient industry, and deepened community engagement.
Notwithstanding Australia’s significant capital investment in infrastructure of this nature, National Energy Resources Australia (NERA) rates Australia below the world median for the ‘abandonment’ phase of project lifecycles2– significantly below the world leaders in this field.3
Australia’s on and offshore petroleum exploratory, development and production activities are governed by Commonwealth, and State and Territory legislation and codes of practice, which specifically address the responsibilities of petroleum leaseholders and pipeline licence holders to decommission assets at end of their life. It is necessary for contractors and principals alike to ensure compliance with all relevant statutory regimes and codes of practice.
In a highly competitive domestic market, what will you need to consider to position your business at the forefront of this emerging area of opportunity? Both onshore and offshore operators and contractors must consider a host of issues to ensure all stakeholders are appropriately managed, legal obligations are met, opportunities are maximised and potential risks are mitigated. Some considerations include:
To ensure you are prepared to mobilise and take advantage of this long term transition in your industry, it is crucial for all participants in the marketplace to be aware of, and develop, commercial strategies to appropriately manage all risks and obligations that are specific to your business.
Please contact Peter Lamont for further details.
Wood Mackenzie (2016). Upstream Data Tool.
National Energy Resources Australia, Oil & Gas Industry Competitiveness Assessment - Report on the Framework, Baseline Score, Insights and Opportunities (September 2016), 13.
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 passed Parliament last week and received royal assent shortly after.
The Court of Justice of the European Union (CJEU) has delivered its decision in A Ltd, a case concerning the location of insured risk, and therefore which jurisdiction can charge IPT, on cross-border M&A insurance policies.