The Australian Government will introduce a temporary levy on offshore petroleum production in Commonwealth waters. This is to recover the Commonwealth’s costs to decommission and remediate the Laminaria-Corallina oilfields and associated infrastructure.

The levy will commence on 1 July 2021 and will apply at a rate of $0.48 per barrel of oil equivalent (BoE) produced, as measured at the well-head.

All entities with an ownership interest in a petroleum production licence issued under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 will be liable for the levy.

The levy will apply at the title holder (entity) level, with all members of a joint venture (JV) individually liable in proportion to their interest.

The JV lead will be responsible for providing sufficient information to its partners to enable each entity to calculate its respective liability.

Where an entity is entitled to petroleum produced from more than one project, the entity will make one levy payment to cover all of its interests for the year.

The Government said the levy will ensure that taxpayers are not left to pay for the decommissioning and remediation of production facilities and associated infrastructure.

However, APPEA Chief Executive, Andrew McConville, said it would leave a number of offshore oil and gas companies ‘footing a massive bill for a project they have never been involved in, never benefitted from and up to 3,500 kilometres away from their operations’.

“To slug an entire industry $0.48 per barrel and not put an end date on it is over the top,” Mr McConville said.

“Any levy is unreasonable in any form but one being so extreme will be a major disincentive for investment at a time when policy stability and certainty is critical.”

“This is a terrible precedent and could have serious repercussions to Australia’s economy, to jobs and to our attractiveness as an investment destination when, as the global economy recovers, competition for investment capital will intensify,” he said.

Mr McConville believes that the government should systematically consider alternatives to reduce the costs of its own current management of the project, overall decommissioning costs and look at alternative decommissioning and cost-recovery measures.

“The Government should not be washing its hands of this through a blunt instrument like a levy, but working constructively and collaboratively with industry to minimise costs and explore all options being put on the table to get the best and most economically efficient outcome for the environment, the industry and the community,” he said.

“More broadly the industry remains committed to working with the government towards a sensible development of a new decommissioning policy framework.”