Chevron attacks rival Woodside for its ‘failings’ over sale of floating rig

Chevron has attacked rival Woodside Petroleum’s decision to sell a floating rig to a smaller company that couldn’t afford to decommission it – a decision that has resulted in the government imposing a levy on the entire offshore oil and gas industry to pay the clean-up bill estimated at $1bn.

Woodside sold the floating rig, the Northern Endeavour, and the fields associated with it in the Timor Sea to Northern Oil & Gas Australia (Noga), a company owned and controlled by businessman Angus Karoll, in 2016.

In a submission to a parliamentary inquiry into legislation enabling the levy, Chevron said it was obvious that Noga lacked the resources to run and decommission the rig at the time of the sale.

It also complained that under the levy it would have to pay more than $200m as its share of the clean-up bill even though it had never had anything to do with the Northern Endeavour or the Timor oilfields.

Noga collapsed into administration in September 2019 after the rig was shut down by the National Offshore Petroleum Safety and Environmental Management Authority (Nopsema) over safety concerns.

Since then, the Northern Endeavour has been in the hands of the federal government.

In May’s budget the resources minister, Keith Pitt, announced the government would impose a levy on the entire oil and gas industry to fund the clean-up.

In its submission, Chevron said Woodside’s sale of the Northern Endeavour and the Laminaria-Corallina oilfields produced an outcome “inconsistent with the commonwealth’s regulatory objectives, and the expectations of industry with respect to appropriate stewardship”.

“The circumstances under which Noga was permitted to acquire ageing and late-life offshore assets, despite obviously lacking the appropriate technical or financial capability to operate those assets or meet its decommissioning obligations, is concerning,” the company said.

“In its current form, the levy punishes Chevron and other responsible resource holders for the failings of others.”

It said the fields had produced “billions of dollars in petroleum production”.

“Chevron is also being asked to pay via the levy a substantial proportion of the decommissioning costs of the LamCor assets, thereby subsidising the failings of the companies that participated in and benefited from the production of that asset,” the company said.

Tim Beshara, manager of policy and strategy at the Wilderness Society, said Woodside had never been held to account for its actions in the sale to Noga.

“You can’t get a bigger alarm bell than when even someone like Chevron is willing to call out the ‘concerning’ circumstances where the regulatory system abjectly failed to prevent the irresponsible actions of an industry peer with the Northern Endeavour debacle,” he said.

“However, we do support Keith Pitt’s collective punishment approach with an industry-wide levy because we don’t believe that it’s all about one bad apple.

“The industry business model is based on selling their late-life assets to more speculative players when the liabilities build up too high. It’s a business model where the taxpayer and the environment bear all the risk and it’s urgent that the regulatory system continues to be reformed to counter this.”

Chevron estimated the cost of clean-up at $1bn and said that, as Australia’s largest offshore petroleum producer, it expected it would be levied more than a fifth of the total, or around $200m.

“Chevron will be the largest payer of the levy and estimates that it will pay almost 70% more than Woodside, the next largest levy payer,” it said.

A Woodside spokesperson said the company’s estimate of decommissioning costs was confidential.

“Woodside sold and transitioned the vessel over in good condition and with more than adequate reserves left in the field to cover any restoration obligations that the new owner had,” the spokesperson said.

“Woodside would not have sold it if we felt there was insufficient funding available.

“The transaction was properly approved by the regulators at the time.”


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