Financial capability and financial securities guidelines
Permit and licence holders must put in place and maintain a financial security arrangement, approved by the Minister, as security for the performance of their obligations to decommission petroleum infrastructure and to plug and abandon wells.
Financial capability
Financial capability assessment
The Minister may carry out a financial capability assessment to determine whether a permit or licence holder is highly likely to have the financial capability to carry out and meet the costs of decommissioning.
It can be undertaken at any time during the life of a permit or licence and generally considers both financial details and wider business factors.
What the assessment looks at
The assessment generally includes both quantitative and qualitative inputs:
- Quantitative metrics: These include solvency ratios, liquidity, profitability, debt coverage, and operating margins. Cashflow forecasts are also reviewed to assess future financial strength.
- Qualitative factors: These might include factors like governance practices, emerging risks, liabilities, reserves, historical performance, or market conditions.
Monitoring and frequency
Permit and licence holders who are assessed as financially capable are usually monitored annually. A full assessment is typically carried out every 3 to 5 years unless risks emerge. If a permit or licence holder is not assessed as highly likely to meet their decommissioning obligations, more frequent assessments may be required.
Learn more
Read more detailed guidance on financial capability.
Financial capability guidelines [PDF 896KB]
Financial securities
What is an acceptable financial security arrangement?
An acceptable financial security arrangement is one that the Minister is satisfied provides an acceptable level of security if the permit or licence holder fails to carry out, or separately meet the costs of, the decommissioning.
Types of financial security
Permit or licence holders can propose one or more financial securities. Types of financial securities include:
- escrow accounts
- bank securities
- parent company guarantees
- section 97 securities.
Amount of financial security
The amount required will generally be based on the decommissioning cost estimate. The amount may be adjusted based on financial capability, tax or royalty refunds, and Ministerial discretion. Permit or licence holders may request to use part or all of any monetary security to carry out decommissioning obligations.
Learn more
Read more detailed guidance on financial securities.
Financial securities guidelines [PDF 1MB]