Sale of decaying petroleum wells puts taxpayers at risk of funding cleanup in iconic Kimberley bay

Community groups say the Cook Government must take urgent action to protect WA taxpayers from a multimillion dollar cleanup bill for stricken petroleum infrastructure within a heritage-listed Kimberley bay, after the responsible company was sold off for a fraction of its original value. 

For years, community groups have called on the WA Government to force Rey Resources to clean up its decaying and corroding petroleum well infrastructure on the shores of King Sound, part of the National Heritage listed West Kimberley National Heritage Place. 

Photos of the degraded and partially inaccessible wells are available here.

Point Torment. Photo: Supplied.

Rey Resources’ latest quarterly update (see page two) confirms that a $400,000 deal to “dispose” of subsidiary Gulliver Productions, which owned three petroleum tenements that included the stricken wells in and adjacent to King Sound, has been finalised. 

Rey’s December 2024 quarterly report suggested there were yet to be met conditions (Page 3) as part of the deal to sell Gulliver to little-known overseas company China Guoxin Investment Holdings. Gulliver Productions was once valued at $4.8 million.

Documents obtained from the WA Mines and Petroleum department by Environs Kimberley through freedom of information laws revealed that in 2021, the three King Sound gas wells were corroding, there was oil staining on the ground, and a blow-out preventer was incorrectly positioned. The department identified 44 possible breaches in total, however it is unclear what, if any, remediation work has occurred since inspection. The 2021 inspection report recommended issuing seven “directions notices” to Gulliver Productions, which were not issued at the time for unexplained reasons.

Media reports this morning that the department recently issued one “directions notice” requiring the company to conduct cleanup works.

Groups working to protect the Kimberley are now calling on the government to take much stronger action to protect the WA taxpayer, and King Sound itself.

Stokes Bay. Photo: Supplied.

Environs Kimberley Executive Director Martin Pritchard said, “The Minister for Mines and Petroleum David Michael needs to take charge of this before we get into a ‘Northern Endeavour’ type situation. His department has allowed an obscure overseas company to take over petroleum leases for $400,000 that have potential clean-up liabilities of millions of dollars.

“We’re calling on Minister Michael to explain how taxpayers will not become liable for the clean-up costs. His department has already said that taxpayer liabilities for onshore oil and gas well clean-ups at two abandoned sites in the Kimberley amount to $2.9 million which is a significant underestimate in our view. See background below.

“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 its mess. Millions of dollars of public funds are being spent on cleaning up the damage done by onshore oil and gas companies. Minister Michael needs to take charge here and stop this waste of taxpayer funds.”

Lock the Gate Alliance WA spokesperson Simone van Hattem said, “West Australians don’t want to see oil and gas companies destroy the majestic Kimberley.

“Right now, fossil fuels including fracking threaten the Kimberley, but this is a really good opportunity for the Cook Government to begin righting the wrongs that put this iconic region at risk.

“With the stroke of a pen, the Cook Government could make sure the threat of oil and gas in the heritage-listed King Sound environment is removed forever. It could make sure oil and gas never again threatens the water, land, and communities in this part of the Kimberley. It could be an important first step to banning fracking in the Kimberley altogether. 

“The Cook Government should permanently remove these tenements. They never should have been approved in King Sound region in the first place.”

West Kora. Photo: Supplied.

Background: A $1.5 million estimate for the ex-New Standard Energy well in the southern Kimberley was made in 2021 (source here) and $1.4 million for the Vienta-1 and Waggon Creek-1 wells near Kununurra (See page 44) Given the three wells that are now owned by Guoxin are located in a sensitive and relatively inaccessible coastal environment, it’s logical to assume rehabilitation costs will be much greater.

A petroleum company’s attempts to offload stricken oil and gas infrastructure on an environmentally sensitive peninsula within the National Heritage-listed King Sound for a fraction of the value it was estimated to be worth should ring alarm bells for the WA Cook Government.

Environs Kimberley and Lock the Gate Alliance say the situation highlights the risks the fracking industry poses to the unique Kimberley region.

Deteriorated and inaccessible by vehicle: the causeway to the Point Torment well site. Photo: supplied.

Rey Resources is attempting to offload its Kimberley-based assets and 100%-owned subsidiary Gulliver Productions to an overseas company called China Guoxin Investment Holdings, after writing down the value of its assets from nearly $5 million to about $400,000. In response to this announcement, the ASX sent a series of questions to Rey probing the company's financial situation was sufficient to warrant its continued listing and expressing uncertainty over “the group’s ability to continue as a going concern.”

Documents obtained by Environs Kimberley under Freedom of Information reveal that in 2021, the three King Sound gas wells were a mess, with oil staining on the ground and wellhead corrosion, among 44 possible breaches departmental officials identified. It is unclear what, if any, remediation work Rey has undertaken since inspection. 

Environs Kimberley and Lock the Gate Alliance fears there is a significant risk that if Rey Resources successfully offloads its assets, they will be abandoned and the hefty rehabilitation bill will fall to the WA taxpayer, as has recently occurred with New Standard Energy and Advent Energy projects in the Kimberley. The stranding of these wells resulted in multi-million cleanup bills and potentially “profound” ecological damage.

Rey Resources' cleared drill pad at Point Torment. Photo: supplied.

Shortly before announcing this planned “disposal” deal to the ASX, Rey Resources also lodged a state petroleum exploration application to clear grid lines more than 3000 km long for seismic testing across a 5058 km2 tenement near Derby and south east of its existing wells in the Kimberley. Under current WA rules, these tenements are able to be fracked, should Rey apply to do so. This tenement is included in the proposed offload deal. 

Environs Kimberley recently wrote to the Foreign Investment Review Board, urging it to reject Rey’s attempts to offload its subsidiary and Kimberley assets. This followed letters to WA Mines and Petroleum Minister David Michael expressing concerns over the company's plans. 

Environs Kimberley Executive Director Martin Pritchard said, “It was a reckless decision to allow drilling for oil and gas in the mangrove lined flats of King Sound in the first place. The cost of cleaning up the mess left behind in this remote and sensitive location will run to millions of dollars.

“The Department of Mines and Petroleum has let the drill sites deteriorate to the point where one of them is now inaccessible by vehicle and they’ve had to chopper in staff to investigate. 

“The department seems to let these oil and gas companies get away with poor management without consequences. The Petroleum Minister David Michael needs to take charge of the situation to make sure taxpayers aren't footing the clean-up bill for another oil and gas company. 

“It’s really clear that fracking in these areas would be an absolute disaster when the government departments can’t manage three wells and make companies accountable for poor practices.”  

The Stokes Bay well site. Photo: supplied.

Lock the Gate WA Coordinator Claire McKinnon said, “No oil and gas company should ever have been given permission to drill in an area as environmentally significant as the National Heritage listed King Sound.

“Rey must be forced to fund the decommissioning and closure of all the wells on its tenements. The WA taxpayer must not be left to once again pick up the clean up bill for an oil and gas company.

“This concerning situation shows why it’s so important that the Cook Government ban fracking in the Kimberley. 

“The high cost of unconventional gas extraction means it’s likely that if a fracking company was able to get a project going in the Kimberley, it would result in the drilling of many hundreds if not thousands of wells. 

“This sorry situation shows the Cook Government is not up to the task of adequately regulating a mere three conventional wells, let alone thousands of frack wells”.