Australia ponders $53 billion problem of how to remove ageing offshore rigs

Off the coast of Australia are clusters of gas and oil rigs dating back to the 1960s – part of the country’s transformation into a global resources giant.

But many of these rigs are now coming to the end of their lives, prompting concerns about how to ensure they do not cause lasting damage to the environment or water quality.

The looming decommissioning of Australia’s rigs is set to cost A$45 billion (S$40 billion) by 2040 and a total of A$60 billion (S$53 billion) by 2070, according to the federal government.

This has led to debate about whether firms should remove the rigs entirely or be allowed to leave some of the underwater infrastructure in place.

The first area to be cleared of rigs is in Bass Strait, off the coast of Victoria, and it is being conducted by Esso, a subsidiary of American resources giant ExxonMobil, which plans to dismantle at least 12 platforms by 2027.

Esso has proposed removing the above-sea structure, as well as the undersea platforms to depths of 55m below the water, and then leaving the remaining structures in place. The proposal is currently being considered by the federal government’s offshore energy regulator.

Esso told The Straits Times that its approach would minimise environmental damage because it would preserve marine ecosystems that have developed around the underwater structures.

It said it has already spent A$1 billion on decommissioning work, including plugging more than 120 wells connected to its rigs.

“If we were to completely remove the structures, we would need to undertake significant dredging of the sea floor, meaning not only removal of these ecosystems, but also significant impact on surrounding marine life,” said a spokesman for the company.

“Scientists around the world are calling for these structures to be left in place because of the significant and diverse marine ecosystems… they have built since being installed,” the spokesman said.

But Esso’s proposal has prompted criticism from some experts and environmental groups, who have said leaving decaying infrastructure in place will damage marine life and that resources firms want to avoid removing entire rigs because of the cost.

Resources firms, which are required to pay for the decommissioning, face enormous bills over the coming decades as their rigs come to an end.

Across Australia, an estimated 5.7 million tonnes of steel, concrete and other materials will need to be removed from about 60 to 100 ageing rigs, which are mainly in the Bass Strait and off the coast of Western Australia.

According to Australian law, firms should aim to remove the entire rig but can seek an exception if it leads to equal or better environmental outcomes.

An expert on offshore energy law, Professor Tina Soliman-Hunter from Macquarie University, told ST that Esso’s plan was “folly”. She said the firm should remove its entire rigs, except for any material which, if removed, could cause harm to marine life, such as pipelines which could release toxins. This has been the practice in countries such as Norway and Britain.

“The structure should be removed, wholly and solely,” she said.

“It will have coral and little fish on it, but that does not make an ecosystem. If it can be removed, they should remove it, and you cannot avoid doing it just because it costs a lot of money.”

Australia is not the only country facing questions about the safety and costs involved in bringing ageing rigs to an end.

Globally, about 2,600 rigs will need to be decommissioned by 2040, according to law firm Norton Rose Fulbright. The International Association of Oil & Gas Producers said about 200 offshore wells in South-east Asia are due to stop producing by 2030.

In countries with large numbers of rigs, such as Indonesia, Malaysia and Thailand, the plan for decommissioned rigs has mainly involved leaving them in place. The structures then attract marine life and can be used to promote tourism or become a local source of catch for the fisheries sector.

In Malaysia, for instance, an old rig off the north-eastern coast of Borneo has been turned into Seaventures, a 41-room hotel for divers, complete with a restaurant, bar and games room and easy access to a coral reef.

An expert on regional decommissioning programmes told ST that Malaysia, Indonesia and Thailand tend to have rigs in the hands of state-owned companies that do not want to pay to remove entire rigs.

“The main driver for Indonesia, Malaysia and Thailand is to reduce spending on decommissioning because it doesn’t bring in revenue,” said the expert, who works as a decommissioning project engineer for an Australian firm and asked not to be named.

“Developing countries are more focused on (economic) growth than being concerned about what is happening in their waters and environmental concerns,” said the engineer, adding: “If a structure is near an area where there are recreational fisheries, you could argue that leaving an infrastructure in place is probably the better outcome.”

In Australia, the federal government is developing a decommissioning “road map”, which it says will set out a decommissioning process that is safe, cost-effective and environmentally sound and will provide jobs.

The road map will also consider onshore sites where materials from rigs can be offloaded and potentially processed and recycled.

Research into a sustainable decommissioning approach is being conducted by the Centre of Decommissioning Australia, an independent body working with major firms such as Chevron and ExxonMobil, as well as with government and community organisations.

A commentator, Mr Selwyn Parker, wrote on the Lowy Institute’s Interpreter website in December 2023 that Australia’s collaborative approach could help to set standards in the region.

“Australia may yet provide the model for offshore decommissioning,” he said.

The Australian regulator is due to release its decision about the decommissioning of Esso’s wells by the end of August.

The government’s decommissioning road map is due to be released by the end of 2024.

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