Woodside (ASX:WPL) share price struggles following rig dumping proposal

Could Woodside set a precedent for the future with its plan to create an artificial reef?

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The Woodside Petroleum Limited (ASX: WPL) share price has finished the week lower.

On Friday the $21.51 billion oil and gas giant slipped 1.06% to $22.34 a share. This is despite oil prices climbing higher overnight.

There are no official announcements from the company today. However, reports from ABC News reveal Woodside plans to lay waste to an oil facility. The interesting aspect is the intention to create an “artificial reef” by doing so.

Is it so ‘rig-diculous’ of an idea?

The proposal involves Woodside’s Nganhurra oil facility which was decommissioned from service in 2018. While the company initially planned to tow the production and storage vessel back to shore shortly after ceasing operations, a design flaw stopped this occurring.

Now the company’s ‘ingenious’ plan is to sink the 83-metre-long riser to the bottom of the ocean. This consists of 325 tonnes of iron ore slurry. In the process, the company hopes to create an artificial reef. However, this route does not come without its issues either.

The National Offshore Petroleum Safety and Environmental Management Authority (NOPESEMA) is investigating Woodside for potentially breaching the law by allowing the rig to degrade, leading to the inability of disposing of it on land.

Additionally, the facility proposed for dumping contains an estimated 65 cubic metres of polyurethane foam. This was approved by NOPESEMA due to the safety risks posed by attempting to remove it.

However, there now seems to be confusion over whether the oil and gas company will remove the foam or not. This could have weighed on the Woodside share price on Friday.

The reason why this plan is drawing eyeballs is the potential cost savings if Woodside’s approach is approved. A study from the National Energy Resources Australia (NERA) points to a $50 billion exercise in decommissioning and removing facilities in the coming decades.

In the study, NERA concluded that half of those costs could be eliminated by leaving most of the materials in the ocean.

Woodside share price snapshot

The Woodside share price has experienced an underwhelming past 12 months. During the period, the company’s share price has climbed a paltry 6%, compared to the S&P/ASX 200 Index (ASX: XJO) which delivered a 22.8% return.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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