18 May 2020

Oil tanker off Taranaki poses spill risk that could cost taxpayers

6:56 pm on 18 May 2020

Taxpayers could end up liable if a ship anchored off Taranaki spills any of its 40,000 barrels worth of crude oil.

Tamarind Resources' FPSO Umuroa off the Taranaki coast.

The oil production vessel, Umuroa, has been ordered to stay where it is, about 50km off the Taranaki coast. Photo: Tamarind Resources

The FPSO Umuroa is a floating production station attached to the abandoned Tui Oil Field.

It has been ordered to remain about 50km off the Taranaki coast over winter against the wishes of the owners. Norwegian-listed company BW Offshore argued sitting tight posed a safety risk.

The vessel was contracted to Tamarind Taranaki - a subsidiary of Singapore-based Tamarind Resources - which went belly up after an unsuccessful drilling campaign at the Tui oil field late last year

The company owes creditors more than $300 million, including about $100 million owed to the government for its share of decommissioning costs at Tui.

BW Offshore wanted to detach the Umuroa from the oil field in accordance with a 2017 Environmental Protection Authority decision, but the EPA lodged an urgent appeal this year, citing Tamarind Taranaki's liquidation as a change in circumstance.

In a decision released last month, the High Court ordered the Umuroa to stay in place until it could be safely removed.

BW Offshore chief financial officer Staale Andreassen said the company's position had not changed.

"It's a more and more ageing unit and we believe the safest of all options would be to disconnect as we planned to do and remove the vessel from the field," Andreassen said.

"So although we don't feel there is any immediate danger, we believe that's the safest option."

BW Offshore had insurance cover for the Umuroa and had maintained a skeleton crew of about 30 onboard, Andreassen said.

The vessel had burned about 10,000 barrels of oil, using it as fuel, and would use all 40,000 barrels over the next three months.

He said the company was owed about $150 million by Tamarind Taranaki and had racked up costs of close to $30 million since the Tui oil field's former operator went bust.

Andreassen did not believe BW Offshore would be liable if an accident occurred while the Umuroa was connected to the Tui field.

"We don't see that as our liability. It's the liability of the operator. The crude belongs to the operator as such. So we've just got to maintain the unit and wait for the authorities to come up with a solution for demobilisation."

The operator of the Tui field is now the government, which recently took over ownership.

The government has contracted UK company Petrofac to organise the field's decommissioning.

Energy and Resources Minister Megan Woods said New Zealand operates a polluter-pays regime and owners had unlimited liability for the cost of pollution damage from their facilities.

However, Woods acknowledged if there was a spill involving the Umuroa, the government could find itself liable.

"Depending on the source of the spill and the activities ongoing at the time of the spill, liability could rest with either MBIE, with BW Offshore, or with both operators," Woods said.

"Such a determination would depend on the outcome of an investigation and subsequent findings."

She said the High Court had considered the risks when it ruled the Umuroa had to stay attached to the Tui field.

Woods said she respected the view of Justice Cook who considered that "a well-established operator like BW Offshore would be able to make safe the FPSO Umuroa over the winter months".

Climate Justice Taranaki researcher Catherine Cheung said any spill could have a devastating effect on the marine environment.

"We have had much smaller spills in previous years and we found oil balls on the Kāpiti Coast from some relatively small spills from this site and the Maari field," Cheung said.

"So we know that oil spills can travel a long way and if 40,000 barrels is the real figure, that is a huge amount."

Chueng said the situation added weight to the call by former Parliamentary Commissioner for the Environment Jan Wright for oil and gas companies to pay a levy to cover the decommissioning and cleanup cost of their operations.

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