BW Offshore has been wanting to disconnect the vessel from pipes which connect it to the seafloor and move it for almost a year, but was blocked from doing so after the Environmental Protection Agency (EPA) issued an abatement notice in March.
Despite successfully appealing the notice this week, BW Offshore warned that the losses it was facing from the Umuroa, which included paying crew all year, could no longer be sustained.
The troubles date back to 2019, when the company which owns and operates the Tui field, Tamarind Taranaki, collapsed, after a well which it hoped would increase production from the field found nothing. Tamarind Taranaki is ultimately owned by Tamarind Resources, which is headquartered in Malaysia.
Oil companies are meant to hold money in reserve to cover the cost of decommissioning oil fields, but Tamarind failed to do so, leaving the costs to fall on taxpayers.
In September 2019 Tamarind Taranaki terminated its contract with BW Offshore. Two months later the company warned it "may be insolvent". It was placed into liquidation at the end of December.
In March, the Ministry of Business, Innovation and Employment (MBIE) assumed full responsibility for the decommissioning of the field and for disconnection of the FPSO.
As soon as Tamarind terminated its contract for the Umuroa, BW Offshore immediately began planning to demobilise the vessel, however as it prepared to disconnect, the EPA took steps to stop it.
BW Offshore says it has spent US$21 million (NZ$31.5m) to keep the Umuroa on-site and complying with regulatory requirements. The company says it has also not been paid by Tamarind for more than 12 months.
BW Offshore said in a statement that "after almost a year of continuous efforts" to reach a deal to disconnect the Umuroa or to cover the costs of leaving it there, the directors of the subsidiary that owns the vessel "have been left with no choice but to place the company into voluntary liquidation in order to prevent further accumulation of unsustainable losses".
The company said it had paid all of the costs of maintaining the vessel including paying local crew and suppliers. It said today it would ensure that "no contracted party or crew member is left out of pocket" as a result of the liquidation.
"We have assumed responsibilities far beyond the scope of the contract to ensure the safety and integrity of the vessel, and the protection of the environment, pending an agreement with MBIE to move ahead with the FPSO disconnection," BW Offshore Marco Beenen said in a statement.
"We have not been able to reach an agreement with MBIE which provides a viable solution despite significant efforts from our side, which includes offering to plan and execute the disconnection for MBIE at cost and without any profit."
Beenen said the company was facing costs of more than US$1m a month and rising. "This is unsustainable for us as a company."
The liquidation of the company could see the Crown take responsibility of removing and likely disposing of the Umuroa, which was already nearing the end of its life before Tamarind's troubles.
When Tamarind bought the rights to the Tui permit off several other companies, including New Zealand Oil & Gas, it assumed the costs of the cleanup. In return, the former owners effectively paid Tamarind to take the field off their hands.
Since the collapse, Energy Minister Megan Woods has said Tamarind exposed a "giant loophole" in New Zealand's regulatory regime.
By buying an existing operating company, AWE, Tamarind did not have to go through the process which a company seeking a permit to act as an operator would need to go through.
A different Tamarind subsidiary owns onshore oil production fields, but the Crown is unable to directly take the money from that production.
While Tamarind Resources offered the Crown a guarantee over the costs of decommissioning Tui, it would be forced to take legal action to enforce the guarantee in Malaysia.
