FPSOs still likely to end up on foreign shores for dismantling
More than 2.7 million tonnes of offshore infrastructure will be decommissioned and removed from Australia’s federal waters through 2070, although floating production, storage and offloading vessels likely will still need to be sent overseas as the country has no suitably licensed dismantling facility.
New research from global energy consultancy Xodus has revealed the estimated cost of fully removing Australia’s offshore oil and gas infrastructure is benefiting from increasing efficiency and understanding in the country’s decommissioning sector.
The Australian Offshore Oil & Gas Decommissioning Liability Estimate 2025, commissioned by the Australian government’s Department of Industry, Science & Resources, found that between 2025 and 2070, full removal of infrastructure in Australian Commonwealth waters is expected to cost A$43.6 billion (US$28.25 billion) or A$66.8 billion by 2063 when adjusted for inflation, compared with a previous 2020 estimate of A$61.8 billion.
The reduction reflects improved assumptions and greater accuracy in forecasting, particularly around well plugging, pipeline removal and vessel mobilisation, noted Xodus. The estimate covers more than 700 wells, 7600 kilometres of pipelines and 520 subsea structures.
The decommissioning of wells represents the largest portion of the decommissioning liability, with an estimated cost of A$17.9 billion. This is followed closely by pipeline decommissioning, with an estimated liability of A$17.85 billion.
The report found that 61% of the decommissioning liability is off the coast of Western Australia, 23% is off Victoria and 16% is off the Northern Territory. Around 55% of the decommissioning will occur before 2040.
At least 2.7 million tonnes of infrastructure will be removed — a large portion of which is steel — that may have the potential for local recycling.
Ports suitable for decommissioning activities for fixed platforms and oil and gas infrastructure are Barry Beach Marine Terminal (BBMT) for Victorian assets, and Henderson and Onslow for Western Australian assets.
All Victorian assets, other than concrete Gravity Based Structures (GBS), are assumed to be transported to BBMT for disposal. Concrete GBS offshore Victoria are assumed to be transported to Port Kembla, the report stated.
“For west coast assets, it is assumed that Onslow can accommodate all infrastructure weighing up to approximately 400 tonnes for dismantling. Anything larger than 400 tonnes will need to be transported to Henderson, this being due to ability to handle larger structures and the requirement for a deeper draft to handle extremely large transport barges.”
The reported further noted: “The majority of equipment cannot be cleared of contamination in-situ and needs to be assessed onshore, hence the assumption is made that all equipment will be transported onshore Australia.
“The exception to the assumption that all equipment will be brought back to shore in Australia are FPSOs. These will likely need to be transported to an appropriately licensed shipbreaking facility in the UK, Norway, Denmark or Turkey for disposal, due to current lack of licensed facilities in Australia.”
Andrew Taylor, head of advisory APAC at Xodus, said: “Accurate cost forecasting is critical as Australia develops a safer and more sustainable decommissioning sector. This research gives both industry and government the tools to plan, budget and execute decommissioning more efficiently.
“The revised estimate not only reflects a maturing approach but provides a baseline for smarter, more collaborative strategies going forward.”
Future cost savings will likely come from better coordination, improved technologies and the development of local infrastructure. The report also explored the cost-saving potential of aligning decommissioning campaigns with offshore wind construction activity.
The methodology assumes full removal as the default scenario and draws on Class 5 AACE estimates to account for uncertainty, added the energy consultant. Costs were calibrated regionally and reflect input from decommissioning managers across Australia’s major operators.
Based on current projections, Xodus expects significant investment in vessels, ports and recycling infrastructure will be needed to meet demand through to 2070, underscoring a key opportunity for private sector innovation and public sector planning.
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