Offshore petroleum cost recovery levy

The Offshore Petroleum Laminaria and Corallina Decommissioning Cost Recovery Levy (OP Levy) is a temporary levy on offshore petroleum production.

Our department is decommissioning the Northern Endeavour floating production, storage and offtake (FPSO) facility and remediating the Laminaria-Corallina oil fields. The OP Levy recovers the decommissioning and remediation costs from oil and gas companies.

The levy ensures the public don’t pay for these activities.

About the levy 

The Australian Government passed the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Act 2022 to create the OP Levy. It took effect on July 2021. 

Registered holders of petroleum production licenses under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 pay the levy. 

The levy applies to each financial year from 1 July 2021 to 1 July 2029. It will end on 30 June 2030 at the latest. The Australian Taxation Office (ATO) collects the levy each financial year and publishes the amount in its annual report.

If the government recovers its costs before 1 July 2029, the Minister for Resources may end the levy early to prevent over-collection of funds. 

What the levy covers

The OP Levy covers the costs the Commonwealth incurs for Northern Endeavour decommissioning-related activities. These activities are carried out by, or for, the Commonwealth and include:

  • operating and maintaining the Northern Endeavour, wells and infrastructure
  • decommissioning and preparing for decommissioning
  • getting relevant insurances
  • disconnecting, removing and disposing of the FPSO
  • suspending, plugging (whether temporary or permanent) and abandoning wells in the Laminaria and Corallina oil fields and flushing of associated pipelines
  • removal or any other treatment of subsea infrastructure from the Laminaria and Corallina oil fields
  • associated environment remediation. 

How the ATO calculates the levy 

Registered holders of petroleum production licenses must report how much petroleum they produced in the previous financial year to the ATO by 31 December. 

The ATO works out how much a registered holder owes by applying the levy rate. This is now A$0.48 per barrel of oil equivalent (BOE) applied to the number of barrels of petroleum recovered. 

Once the ATO receives all reports, it reviews the information and issues companies with a notice of assessment. The notice outlines the total levy the company must pay in 21 days. 

Read more about how the ATO calculate the OP Levy on their website.

How much the ATO has collected

  • 2021-22

    In the first year, the ATO’s annual report estimated the OP Levy would collect $407 million. Once all companies completed their returns, the ATO revised this figure to $391 million in the 2022-23 annual report.

  • 2022-23

    In the second year, the ATO’s annual report estimated $360 million. The actual amount it raises will be in the ATO’s 2023-24 annual report.

  • 2023-24

    There are no estimates available yet for the third year. The ATO will publish an estimate in their 2024-25 annual report.

Note: The ATO collects and reports the levy income year's total in the next financial year. This is because the levy income year ends 30 June, but companies can lodge their OP Levy return up to 31 December.

How we’re using the funds

This is the first time the Australian Government has undertaken a decommissioning and remediation program of this kind. Our department needs a broad range of services to complete the program.

The Australian Government awards all contracts for services in line with the Commonwealth Procurement Rules. AusTender has details of all awarded contracts with a value of over $10,000.

Northern Endeavour program contracts

This table outlines contract commitments valued over $8 million as at May 2024. This is not a complete list of contracts. All other contracts below this value are on AusTender’s website.

Supplier name Contract purpose Description of services Total value of all contracts (A$)
Petrofac Facilities Management Limited Northern Endeavour Decommissioning Project: Phase 1 Acts as the operator of the Northern Endeavour FPSO. Services include ongoing critical maintenance and activities to maintain the class of the FPSO and prepare it for disconnection and decommissioning. $504,169,649.50 
Upstream Production Solutions Pty Ltd Operations, maintenance and services agreement Contract ended September 2022. Services included maintaining the FPSO in ‘lighthouse mode’ and undertaking critical maintenance and condition of class works. $265,527,665.92
Arthur J Gallagher and Co (Aus) Limited Financial and insurance services Gives insurance brokering services, including placement and management of insurance services and policies about maintaining the FPSO in ‘lighthouse mode’. $33,169,919.38 
Xodus Group Pty Ltd Technical and project support services Gives project management and specialist technical advice on oil and gas decommissioning matters. $16,466,775.00
Ngamuru Advisory Pty Ltd Commercial services and professional advice on tender documentation development Gives commercial advice on procuring lead contractors for phases one, 2 and 3. $8,789,747.08

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