Under section 571(2) of the Offshore Petroleum and Greenhouse Gas Storage Act 2006, titleholders are required to have sufficient financial assurance to meet the costs, expenses and liabilities that may arise in connection with carrying out petroleum activities, including those associated with responding to a major oil spill, as a prior condition of acceptance of an environment plan. This requirement applies to new and revised environment plans.
NOPSEMA conducts environmental inspections to monitor titleholder compliance with the financial assurance requirements. The inspections focus on confirming titleholders are maintaining sufficient financial assurance throughout the life of the activity in accordance with the legislative requirements and the advice provided in GL1381 - Financial assurance for petroleum titles - Rev 6 - September 2017 (PDF 7.7MB)
How to demonstrate financial assurance
A titleholder is required to:
- use an independently validated method to estimate the total costs, expenses and liabilities that may arise in connection with carrying out petroleum activities under a petroleum title
- identify the type(s) of financial assurance that will be accessible
- submit a financial assurance declaration (FM1519) for the title
- submit a financial assurance confirmation (FM1465) for the specific environment plan.
How to estimate sufficient levels of financial assurance
Titleholders may choose an appropriate cost-calculation method for estimating levels of financial assurance, however, as per GL1381, this will require independent validation prior to consideration by NOPSEMA. NOPSEMA strongly encourages titleholders to engage with NOPSEMA early to allow timely validation of the method.
2018 APPEA method
The Australian Petroleum Production and Exploration Association (APPEA) has developed the 2018 APPEA Method for Estimating Levels of Financial Assurance (APPEA method) which presents a standard method that is intended to be applicable to most petroleum activities undertaken in Australian waters. Titleholders can access further information from APPEA.
On 20 December 2018, following independent validation of the methodology. NOPSEMA has confirmed it considers the 2018 APPEA method (when used in conjunction with NOPSEMA's process for making financial assurance declarations and confirmations) to be a suitable form for demonstrating financial assurance as a prior condition to acceptance of an environment plan.
NOPSEMA has clarified transitional arrangements for titleholders utilising the APPEA method. Read the Transitional arrangements for 2018 APPEA Method - December 2018 (PDF 161KB) for more information. APPEA has also produced a management of change guideline for titleholders to estimate financial assurance levels. Contact APPEA for more information.