Commonwealth releases new guide to assist countries manage expensive oil and gas closures

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United Kingdom (Commonwealth Union)_ The Commonwealth Secretariat has published a new practical guide to assist countries in handling expensive oil and gas decommissioning actions, which are likely to increase due to the global energy shift. Decommissioning is a difficult and expensive operation at the conclusion of the economic life of an oil and gas project. It entails the safe plugging and abandonment of oil wells, as well as the removal of buildings and resumption of surrounding regions.

In several oil-producing developing nations, the decommissioning procedure might cost billions of dollars, and if funds are not put aside explicitly for this purpose, taxpayers may be forced to foot the bill. Poorly handled decommissioning activities can likewise have severe environmental and community implications. In addition, as the world moves away from fossil fuels and the need for oil and gas drops over the long term, there is more possibility that several oil and gas assets may become uneconomic sooner than anticipated, leading to stranded assets. Therefore, it is essential to have effective decommissioning mechanisms in place.

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According to Naadira Ogeer, an economic consultant at the Commonwealth Secretariat who supervised the creation of the toolkit, “Decommissioning is another dimension to the just energy transition. It goes without saying that companies who have benefitted from these fossil fuels should pay for all clean up and restoration activities”. She added, “It would be unreasonable for developing countries with low capacitated regulators and weak legal requirements to shoulder the significant financial, environmental and social costs. This would easily wipe away any benefits seen from a project. The international community must be extremely vigilant and united to ensure that the ‘polluter pays’ principle is adhered to.”

Created as part of the Commonwealth Secretariat’s Natural Resources Programme, the toolkit intends to assist countries in managing the risks associated with decommissioning and includes the following essential components. It has a summary of the most important issues and their implications for governments. It gives practical tips for successfully managing the decommissioning. It also provides a checklist to identify areas where legislative requirements should be strengthened. Additionally, it features a model decommissioning provisions adaptable to national situations. The guideline is also cited in the OECD’s Equitable Framework and Finance for Extractive-based Countries in Transition (EFFECT), which was introduced during the recent COP27 United Nations Climate Change Conference.

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