Australian oil industry looks to cut costs on offshore decommissioning

MELBOURNE: The oil and gas industry in Australia on Wednesday launched an effort to work on ways to cut the costs of dismantling offshore oil and gas facilities at the end of their lives, a task estimated at A$50 billion ($38 billion).

Backed by BHP Group , Chevron Corp, Exxon Mobil Corp's Esso Australia, Santos Ltd and Woodside Petroleum and others, the Centre of Decommissioning Australia (CODA) aims to help the industry build local expertise, come up with dismantling plans, and cut costs.

"We're looking at A$50 billion of work over the next 50 years, so decommissioning represents a multi-generational challenge for Australia," said Miranda Taylor, chief executive of National Energy Resources Australia (NERA), an industry group coordinating the effort.

More than half of that work needs to begin within the next 10 years, according to a study done for NERA.

NERA sees opportunities to cut the estimated decommissioning costs by 35%, or around A$18 billion, while at the same time building up a local services industry to handle the task.

One major cost factor is that all equipment must be removed from offshore sites and disposed onshore - which currently means shipping all equipment to be disposed overseas.

"First we're looking at if we are to move to 100% disposal and recycling at the end of life, how do we do that in Australia," said NERA's decommissioning general manager, Andrew Taylor.

Companies could save A$2 billion by not having to transport materials to other countries, he said.

Firms could also save money by aligning schedules for decommissioning activities, so they could share the costs of bringing equipment from other countries to handle the work.

Other opportunities include repurposing oil and gas facilities for offshore wind farms, an idea Taylor said could work in the Gippsland Basin off southeast Australia.