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30 October 2020

Independent Senator Rex Patrick has condemned a Morrison Government bungle that will ultimately cost the taxpayer more than $250 million to resolve.

"The infamous Leppington Triangle might have cost the taxpayer $30 million, but here's another Government disaster that's going to cost taxpayers more than eight times that amount", Senator Patrick said.

”Most taxpayers would be surprised to learn that they own the disused Floating Production, Storage and Offloading vessel ‘Northern Endeavour’ moored 550km north-west of Darwin,” said Senator Patrick. “They would be horrified to learn that this vessel is costing them over a million dollars a week and that the final bill to dispose of the vessel is likely to run to more than $250 million dollars.”

”And they would rightly be disgusted to find out that the Government was fully aware of the developing situation that led to this financial disaster and was complicit in getting things to the point they are at today.”

In 2016 a company called Northern Oil and Gas Australia (NOGA) acquired the production licenses for the Laminaria-Corallina oilfield between Australia and Timor-Leste and the ‘Northern Endeavour’ FPSO off a Woodside Petroleum subsidiary. The oil field was approaching end-of-life and the ‘Northern Endeavour” was ageing.

The Government did very little due diligence on the sale because there was little involvement from the National Offshore Petroleum Title Administrator (NOPTA) due to a loophole in relevant Australian legislation. NOPTA conceded at Senate Estimates yesterday that they knew about the loophole, but they hadn't and still haven't done anything about it..

In July 2019 Australia’s National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) issued NOGA with a prohibition notice for the ‘Northern Endeavour’ due to safety concerns. The regulator was correct in doing so, but refused to work constructively with NOGA to get the ‘Northern Endeavour’ back online, despite the urging of Senator Patrick at Senate Estimates in October 2019 and his warning to the Government that they risked driving the company into liquidation with the Government then having to take on responsibility for the remediation of the tenement and ownership of the vessel.

In the Walker Review, commissioned after the mess was well established, the review author stated, “Whilst the reluctance of NOPSEMA to be drawn into such conversation [to get the vessel back up and running] for fear of regulatory capture over specific decisions is understandable, I was disappointed that NOPSEMA was not prepared to engage in a more enlightened approach on this occasion.”

The Company went into liquidation, as predicted, which has left the Australian Government carrying the can.

Australian taxpayers will now pay more than $75 million dollars over the next two years to keep the FPSO in ‘light house’ mode while the Government works out what to do and then fund the remediation at a further cost of $200 million plus. Some estimates have suggested that remediation costs will be as high as $360 million.

“The Government is paying close to $4.5 million a month to have the vessel laid up, a price that seems much higher than the monthly cost was being paid when the vessel was in full operation.” 

“Another aspect that can only be seen as adding insult to injury for taxpayers is the fact that the Government is also paying Woodside, the original owner, $8.8 million to give the Government advice on the decommissioning.”

”This was a totally avoidable situation,” said Senator Patrick. “It’s like NOPSEMA saw someone struggling in the deep end of the pool and instead of offering assistance, they held their heads under the water, and now the taxpayer is paying to recover the body, do the autopsy and sort out the funeral.”

NOPSEMA confirmed at Senate Estimates this week that they knew their course of action and approach might send NOGA into receivership, but they did not alert the minister.

”Not that they had to,” said Senator Patrick, “I raised the issue with then Minister Canavan on several occasions last year, including publicly. But he sat on his hands, saying nothing, doing nothing".

”This is a monumental Government screw-up that will cost the taxpayer dearly. I fear this self inflicted shambles won't be resolved for anything less than $250 million dollars.”

The Walker Report and videos of questioning at Senate Estimates can be found here.