$349m Tui oil field debacle prompts law change

Wednesday, 23 June 2021

The Tui oil discovery ended in bitterness after taxpayers were left to pick up the tab for decommissioning.

The Government hopes a law change will prevent taxpayers from having to pick up the tab for decommissioning oil fields in the future, after the $349 million Tui oil field debacle.

Energy Minister Megan Woods has tabled legislation that would place “a statutory obligation” on petroleum permit and licence holders to pay for such clean-ups in future.

Energy Resources Aotearoa, which represents oil companies, expressed unease over the plan.

The law would mean that if an oil company on-sold a permit along with the responsibility to clean-up a site – as happened with Tui – the responsibility to decommission the field would bounce back to the original owner if the buyer of the permit didn’t fufill the obligation.

“This is to ensure those who have enjoyed the benefits of a permit can’t avoid the responsibility of cleaning up after themselves,” Woods said.

Energy Minister Megan Woods says the Tui oilfield clean-up will be much more expensive.

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The law change would also require permit holders to, in effect, hold a bond to pay for clean-up costs.

Woods told a select committee in June that the expected cost to taxpayers of decommissioning the Tui oil field off Taranaki had more than doubled to $349m.

The Government was forced to take on responsibility for the clean-up after Malaysian-owned firm Tamarind Taranaki, which bought the Tui field when it was towards the end of its life in 2017, subsequently went out of business.

“After the Crown had to take responsibility for decommissioning the Tui oil field, it became clear to me that the current requirements around decommissioning are inadequate and we need to prevent taxpayers carrying the can again,” Woods said.

Energy Resources Aotearoa chief executive John Carnegie said the rules had “good intentions”.

But holding operators liable for fields for years after they sold them had “worrying implications”, he said.

“It’s like holding a factory owner responsible for an unforeseeable issue in a factory they sold many years ago.

“No other industry is subject to this, even those with much greater risks and direct impacts on safety and the environment,” he said.

Retrospective liability was “like changing and backdating the rules of a rugby game halfway through the match”, he said.

“This combined with the requirement for a financial security could change the economics of existing fields.”

The rules might encourage oil companies to decommission fields “earlier than otherwise”, which would not be a good outcome for energy security, he said.