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Environmentalists alarmed there is no written guarantee Woodside will meet decommissioning and remediation costs
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Last modified on Wed 18 Aug 2021 01.57 EDT
Woodside Petroleum has not given a guarantee it will pay for billions of dollars in decommissioning and remediation costs linked to a portfolio of oil and gas fields it has agreed to take over from BHP.
Green groups say Woodside lacks credibility in paying for clean-ups after selling a floating rig, Northern Endeavour, for a nominal amount to a company that collapsed three years later without paying decommissioning costs estimated at between $200m and $1bn. Woodside has claimed the sale was reviewed by regulators and approved.
“We are committed to working with the Australian government and our industry peers to collaboratively develop and improve the decommissioning framework so that it strengthens protections for the environment, taxpayers, the government and industry.”
In May’s budget, the Morrison government slapped a levy on the entire offshore oil and gas industry to pay for the decommissioning of Northern Endeavour, sparking outrage among producers who had nothing to do with the operation.
BHP has agreed to merge its $20bn worth of oil and gas assets into Woodside, creating a company that will rank among the top 10 petroleum companies in the world, in return for 48% of the newly enlarged entity.
The assets include 50% of a field in the Bass Strait, operated by ExxonMobil, that has been operating since 1969 and is now starting to run dry, requiring decommissioning that could cost as much as $1bn.
The enlarged Woodside will be responsible for decommissioning the assets when they reach the end of their lives. It is understood BHP will transfer a total of about $3.9bn of rehabilitation costs into the merged entity.
Rather than obtain a written guarantee from Woodside that it will meet the decommissioning costs, BHP is instead relying on due diligence it has done on Woodside’s portfolio and its positive view of the financial strength of the merged entity.
Adding to BHP’s comfort, management of the newly enlarged Woodside will be drawn from both BHP and Woodside.
However, the deal has alarmed environmentalists.
“Given Woodside’s record with Northern Endeavour, questions must be asked whether it will attempt to avoid decommissioning responsibilities in the Bass Strait,” Dan Gocher, director of climate and environment at activist shareholder group the Australasian Centre for Corporate Responsibility, said.
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Anthony Collins, a campaigner with the climate change movement 350 Perth, said Woodside was “acting as BHP’s ‘useful idiot’; taking on a burden that BHP has decided is too toxic to touch”.
“Woodside itself has demonstrated that it has no interest in anything other than producing as much oil and gas as possible and has neither the ability nor the willingness to make its business model appropriate for the times in which we live,” he said.
The Woodside chief executive, Meg O’Neill, refused to say how much the company expected to pay to decommission Bass Strait.
She said that when doing due diligence on the BHP deal “decommissioning was absolutely one of our key focus areas” and the valuation of the assets done for the merger “fully accounts for those decommissioning obligations”.
“We obviously as an experienced offshore operator have experience in this and we’ve had our best people digging into it, so we’ve got a good understanding of what Bass Strait decommissioning costs are likely to be,” she said.
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“I think it’s worth bearing in mind that those costs are spread out over probably 20 years.
“Bass Strait continues to be an asset that will be very productive and generate value for the merged company over the near term and in the decades to come.”
A Woodside spokesperson said the Northern Endeavour sale “was reviewed by the regulators and approved at the time”.
“Subsequent events have been disappointing, but neither the government or industry can go back in time and reverse approvals that were granted at the time,” the spokesperson said.
The Woodside shares received by BHP will then be distributed to BHP shareholders, on the expectation that those with green investment criteria will sell them.
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