Closure of wells in the Tui oil field
17 March 2020
Government agencies are working to ensure the closure of oil wells in the Tui field off the coast of Taranaki is effectively managed and safe.
Oil and gas exploration company, Tamarind Taranaki Limited (TTL), holder of the petroleum mining permit and owner of mining equipment for the Tui field, became insolvent in November 2019. Oil production in the Tui field has stopped.
BW Offshore (BWO), the owner of the ship that processes and stores the oil at sea, now wants to remove its ship from the Tui field.
We, the Environmental Protection Authority, are one of the government agencies with responsibilities related to the Tui field. We are responsible for ensuring that the disconnection of the ship from the Tui field, and the closure of the wells, complies with the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (EEZ Act).
The insolvency of TTL has presented legal and contractual issues around the responsibility for the actions required for the closure of the oil wells, and the timeframes for those actions. In the longer term, the oil wells will be plugged and permanently abandoned.
Update as at 17 March 2020
Receivers are currently seeking to realise the assets of Tamarind Taranaki Limited (TTL). There have been discussions about if and how the crude oil currently stored on the ship could be safely removed. There is no agreement on this yet and this cannot happen until Maritime New Zealand is satisfied the oil can be removed safely.
When the receivers and liquidators have finished their work, it is likely TTL will be removed from the companies register and cease to exist as a legal entity. At that point, assets of TTL that have no value, or are likely to cost money, will revert to the Crown. Government agencies involved in the oil and gas sector are considering the implications of this.
Work continues to enable the removal of the ship, which is a Floating Production and Storage Offloading unit, referred to as a FPSO.
Some of the mining equipment, attached to the FPSO, belongs to TTL, and some belongs to the owner of the vessel, BW Offshore (BWO).
The equipment needs to be removed, or disconnected, before the FPSO can leave, but only with authorisation from the EPA. We are processing two requests from BWO to remove the FPSO from the Tui field by the end of April 2020.
More background information is provided below.
TTL’s activities in the Tui field
Tamarind Taranaki Limited (TTL) has been operating five subsea wells since taking over the permit for the Tui field in 2017. After finding in 2019 that an exploratory well was dry, TTL decided not to continue with further development in the Tui field. In November 2019 TTL was placed in voluntary administration; a month later it was placed into receivership and liquidation.
TTL was placed into voluntary administration because it became insolvent. This means TTL is unlikely to be able to pay for the costs of decommissioning of the Tui oil field.
In late 2019, after an oil sheen was reported, the EPA issued an abatement notice requiring TTL to cease production from its five wells due to concerns over the integrity of the subsea pipelines. The abatement notice remains in place.
BWO’s role at the Tui field
BW Offshore (BWO) owns and operates the Floating Production and Storage Offloading unit, or FPSO.
BWO’s contract with TTL, to process and store the crude oil produced by the Tui field, was terminated at the end of 2019, so BWO wants to remove (demobilise) the FPSO from the Tui field, including its anchors and mooring lines.
Before removing the FPSO, BWO needs to disconnect it from TTL’s equipment on the seafloor. This equipment includes flowlines for oil extraction, pipelines to inject gas down the wells so that it flows, and umbilical pipelines that provide chemicals and power to the wellheads. Other equipment is attached to the seafloor to protect these pipelines and operate the wells. This equipment would be temporarily placed on the seabed for later retrieval if we, the EPA, provide the relevant approvals for BWO to disconnect.
To demobilise the FPSO, a number of authorisations will be required under several regulatory regimes. We and other agencies, including WorkSafe New Zealand and Maritime New Zealand, would need to provide authorisation under the legislation relevant to each agency; in our case the EEZ Act.
We are currently processing two requests by BWO to allow it to remove the anchors and mooring lines and to disconnect the FPSO from the equipment on the seafloor. We may only provide these rulings if we consider the adverse effects of the activities, on the environment or existing interests, are likely to be minor or less than minor.
Decommissioning of the Tui field wells
With TTL ceasing operations, decommissioning of the oil wells will need to take place. This means permanently plugging the wells and removing all structures associated with them.
Decommissioning oil wells is a specialist process that needs to be carefully planned and implemented. There will be several government agencies involved in giving consents and approvals for the various activities that need to occur.
Our role centres on ensuring all activity that occurs is compliant with the EEZ Act and avoids or minimises any adverse effects on the marine environment.
In a routine situation, the oil and gas operator would be responsible for decommissioning its wells and paying the costs of decommissioning. The insolvency of the operator of Tui field wells, TTL, has presented complex issues around how the decommissioning will be managed and where the costs will fall, which are currently being worked through.
Multi-agency involvement in decommissioning
We, the EPA, are one of the government agencies working closely with TTL and BWO in respect of the disconnection and decommissioning process.
Our role is to ensure the operator complies with the obligations in its authorisations. These obligations are placed on the operator under the EEZ Act, and are designed to manage the environmental impacts of the activity.
We have a robust inspection programme taking place under the EEZ Act. This supports our role in ensuring compliance with the law, through monitoring and enforcement.
There are three other government agencies primarily involved in the oil and gas sector in the Exclusive Economic Zone: WorkSafe New Zealand; Maritime New Zealand, and NZ Petroleum and Minerals (in the Ministry of Business, Innovation and Employment).