Source : the age
An ASX-listed company has sold stricken petroleum wells in the Kimberley for a fraction of their original value, as the state belatedly tries to crack down on the company’s regulatory breaches.
While environmentalists fear the horse has already bolted, the company is now pressing to explore further, with no plan to decommission and rehabilitate its original infrastructure.
The three wells this masthead in February revealed were the site of numerous breaches identified in 2021, including corrosion, poor maintenance and integrity risks. The surrounding drill pads were eroded and strewn with weeds and waste in the region of King Sound, partly in and partly adjoining a National Heritage area.
WAtoday reported Rey Resources had a deal to “dispose” of its subsidiary and the associated wells to Chinese holding company China Guoxin Investment Holdings.
An agreement specifying the sale was only to be completed once the government approved an extension of the tenement hosting one of the wells.
It now transpires that despite the lease extension still not being granted, the share transfer had been made, the news buried in a “change of company details” update to the Australian Securities & Investments Commission and in a note to a quarterly report stating the transfer was complete with the transition of that lease still subject to “certain conditions which has [sic] not been fully satisfied”.
The extension was not only withheld, but in April the regulator, the Department of Energy, Mines, Industry Regulation and Safety, placed it on hold “pending cancellation”.
It is not the only action the government has since taken to rein in Gulliver Productions, the now Chinese-owned subsidiary. Since this masthead’s report the regulator has now issued Gulliver with its first formal direction requiring clean-up works at one of the tenements, four years after identifying the breaches.
In March, it also refused the company’s environmental plans for the two well-containing tenements, telling this masthead they did not meet requirements.
The regulator has now listed both the well-containing leases as pending cancellation, and said it prefers sites to be decommissioned and rehabilitated before cancellation takes place, because this facilitates access arrangements.
Rey Resources, which sold the subsidiary and wells but remains their operator, has no apparent use for them and ascribes little value to them; before the sale it wrote down their value from nearly $5 million to $400,000 and its latest shareholder update gives no mention of them in its text or tenements map.
But rather than plan decommissioning or rehabilitation, after the government knocked back its last environmental plans for the sites, Rey Resources lodged two fresh plans for only annual inspections and maintenance.
Environmental group Lock the Gate says they also contain multiple inaccuracies; they do not reference or address the 44 breaches the regulator identified in 2021 that gave rise to the recent government directions notice, instead referencing a nearly decade-old inspection.
They also refer to tanks and fences that Lock the Gate says no longer exist on the sites, and security measures Lock the Gate says were also not executed. Lock the Gate also says they contain passages that are obvious remnants of older documents.
DEMIRS has estimated the cost to close an abandoned gas well at $1.5 million but that was in 2021 and an easier location, leading Lock the Gate to estimate that the clean-up for these three wells could exceed $5 million given their greater number.
Operator Rey Resources hopes to strike it rich from its other leases, including the huge Derby Block tenement covering King Sound and the land adjacent to the wells.
Shortly before announcing the China Guoxin deal, Rey applied to clear more than 3000 kilometres of grid lines across Derby Block for seismic testing, prompting fears from Lock the Gate that it lacked either the serious intention or capabilities to safely carry out such work in this high-value location, which is also subject to floods, extreme tides and cyclones.
The applications then disappeared and in March, Rey lodged a new plan for Derby Block, which the regulator says it is “screening”.
The WA government has also listed the Derby Block tenement as under 12-month suspension with an extension application lodged in September 2024 for a second year.
Rey Resources recently advised investors it was “actively contacting with Native Title holders and landowners for the land access for the proposed 3D Seismic survey” and “working with consultant [sic] for the update of [Derby Block’s] seismic environmental plan.”
It remains unclear whether the department intends to issue further directions notices to China Guoxin/Gulliver Productions regarding the two other wells.
Photographs released under FOI laws reveal an open tank of oil, left, and corroded wellheads, right.
Rey Resources did not respond to a request for comment. Attempts to contact China Guoxin Investment Holdings were unsuccessful.
Environs Kimberley executive director Martin Pritchard said Minister for Mines and Petroleum David Michael needed to take charge before this evolved into a “Northern Endeavour” situation, referring to the ageing disused oil vessel Woodside sold to an inexperienced company that failed and left the federal government with an enormous clean-up bill.
“We’re calling on Minister Michael to explain how taxpayers will not become liable,” Pritchard said.
Piping, black plastic poking through the ground and a pair of thongs were among the waste left around the sites. Credit: DEMIRS
“Oil and gas companies appear to have free rein in the Kimberley to undertake exploration, but it looks like existing legislation is failing to ensure that industry cleans up the mess.”
Lock the Gate says the government should permanently remove these tenements, which could represent the beginning of an extensive fracking industry in the region.
Minister Michael said the safe, timely and responsible decommissioning of oil and gas infrastructure was a government priority.
He said the complexity of ownership and operational history at particular sites often required thorough due diligence to resolve liability, which DEMIRS prioritised to ensure compliance.
In March 2024, he said, DEMIRS released a new guideline outlining the requirements for decommissioning of petroleum and geothermal energy assets, including wells, in WA’s onshore areas and state coastal waters.
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