The Australian government has announced proposed reforms to Australia's offshore oil & gas regulation, which are aimed at achieving appropriate stewardship of assets by increasing government scrutiny over oil & gas transactions and expanding the current trailing liability provisions for decommissioning and remediation.
This month the Australian government released a consultation bill foreshadowing amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) ("OPGGSA"). The proposed amendments are intended to reflect an adjustment in Australia's regulatory focus as its offshore oil & gas industry matures. There are two significant proposed areas for reform:
- Broader government approval requirements; and
- Expanded trailing liability provisions.
Change in Control
Government approval is currently required for any transfer or assignment of petroleum titles. The Australian government has sought greater scrutiny over industry participants by proposing to expand the transactions that would be subject to government approval.
Under the proposed reforms, government approval would be required for any transaction in which an entity proposes to acquire an interest above 20% in a titleholder, or in which an entity proposes to reduce its interest in a titleholder below 20%. In the case of a joint venture, approval would be required where an entity acquires more than 20% of a titleholder, even if that entity's overall interest is less than 20%.
When assessing a proposed transaction, the government would consider a broad range of matters, including the titleholder's future technical and financial capacity, and the proposed acquirer's record of compliance and governance.
Decommissioning of Australia's oil & gas assets has come into sharp focus recently. To address the risk of decommissioning defaults, the government has proposed a significant expansion of trailing liability obligations.
Under the proposed reforms, former titleholders and related entities may be required to decommission or remediate the environment, with regulators granted wide powers to issue directions not only to current titleholders, but a range of persons, including:
- Previous titleholders;
- Related entities of current and previous titleholders; and
- Persons who have significantly benefitted financially from the project (or will) or persons who are (or have been) in a position to influence an entity's compliance with the OPGGSA.
At this stage, the trailing liability provisions would affect permits, leases, and licences other than those which ceased to be in force before 1 January 2021.
The bill is open for public consultation until 23 April 2021. We expect there will be close attention paid to the above amendments before the bill is formally introduced to Federal Parliament.