Shareholders deceived by offshore gas

Friends of the Earth

A new international report by an independent energy think tank says energy industry shareholders are effectively being deceived by an offshore gas and oil industry keen to cover up its pending liabilities.

The report, entitled Australia’s decommissioning challenge raises financial risks for governments and shareholders, from the global Institute for Energy Economics and Financial Analysis (IEEFA), also says that the Australian taxpayer will inherit billions of dollars in clean-up costs if there is a rapid global exit from gas.

It was written by Josh Runciman, who is a former Director for the Australian Competition and Consumer Commission, and a former economist for the Australian Productivity Commission.

Mr Runciman says industry shareholders face a material financial risk due to the under reporting of liabilities associated with the decommissioning of retired offshore oil and gas assets, describing company disclosures as “inadequate.”

He also says a rapid phase-out of oil and gas due to accelerated climate action could reduce the industry’s ability to meet its decommissioning liabilities, leaving governments at risk of carrying the costs.

And then he accuses the industry of using Carbon Capture and Storage (CCS) to delay decommissioning:

“Companies may also seek to avoid or defer decommissioning costs by proposing that infrastructure be repurposed for carbon capture and storage (CCS). For example, Santos withdrew decommissioning plans for the Bayu-Undan field following a proposal to use it for CCS (despite not releasing any cost estimates or technical studies that demonstrate its feasibility).”

Friends of the Earth Offshore Fossil Gas Campaigner Jeff Waters says it is more evidence that the oil and gas industry is treating its own shareholders, as well as taxpayers and the environment, with contempt.

“It’s clear to any reasonable observer that governments have been completely captured by the gas industry, with its massive political donations and offers of jobs for politicians in retirement,” Jeff Waters said.

“Who will stand up against these pirates, who come to Australia and take advantage of our natural resources, but deceive their own shareholders, the public and governments?

“This report is calling for new financial measures to make sure the industry cleans up its own mess, and we couldn’t agree more.

“The existing temporary decommissioning levy should be increased and extended indefinitely as a form of insurance to protect Australians from what could be tens of billions of dollars in liabilities, to pay for dedicated recycling facilities, at least one decommissioning ship and to set up a federal authority to administer the process properly,” he said.