Rethinking North Sea Decommissioning: Balancing Costs and Environmental Benefits

Peter Bruce asks: is OSPAR still fit for purpose in 2017?

One hundred and fifty-three projects in the UK Sector of the North Sea have been scheduled for decommissioning within the next 10 years1. Estimates for the direct economic costs of decommissioning come with a high degree of uncertainty, however there is agreement that projections of the overall price tag are unacceptably large and are curbing efforts to maximise economic recovery of hydrocarbon reserves in the North Sea basin. Further, there is a growing concern amongst environmental practitioners that the environmental costs of decommissioning are also too high.

UK government policy on the decommissioning of structures and installations is currently led by the 1992 Convention of the Marine Environment of the North East Atlantic (OSPAR Convention), specifically OSPAR Decision 98/3 (the 98/3 decision). The OSPAR Convention (1992 – 1998) originally recognised the option of disposal at sea on a case-by-case basis. The 98/3 decision came about as a response to Shell’s proposal to dispose of the obsolete Brent Spar oil storage platform at sea.

Shell proposed to dispose of the Brent Spar in a deepwater location (2.5 km below LAT) in the Atlantic Ocean in 1995. Despite having secured the necessary approvals from the UK government and the OSPAR commission, plans were met by strong resistance from environmental NGOs, with a successful media campaign leading to a boycott of Shell across Northern Europe. Eventually, the need to avoid further reputational damage led Shell to cancel plans to sink the Brent Spar2. Costs associated with decommissioning the Brent Spar increased by 85 per cent as a result.

Following the Brent Spar experience, several OSPAR contracting parties expressed concern that oil companies were using proposals for artificial reef creation as a cover for avoiding their obligations to remove obsolete structures3. In spite of science-based objections, the resulting response from the OSPAR commission was to unanimously support the requirement to remove all abandoned or disused structures or installations, with very limited exceptions. On this basis, the UK government has adopted a clean seabed policy. Although derogations have successfully been sought by the UK from OSPAR, only a few projects are eligible to apply (for example, large concrete gravity base structures, or the footings of large steel structure greater than 10,000 tonnes can be left in place in some circumstances).

With the rest of the world outside of the North East Atlantic region still considering decommissioning proposals on a case by case basis, there are now renewed calls for the 98/3 decision to reviewed. The next opportunity to revisit the terms of the convention will be in 2018.

The 98/3 decision introduced a blanket ban of disposal at sea, with very limited possibilities for derogation. While there is a five-yearly review cycle of the OSPAR convention, the original intent of the decision was to see the allowable derogations further limited, rather than reversed. This approach overlooks the fact that many of these structures are largely fabricated steel, designed for extended submersion in the marine environment, and therefore pose little or no contamination risk to the marine environment. In the absence of storage cell facilities, only the topsides of aplatform would be in contact with hydrocarbons, whereas the sub-structure or jacket is generally clean and relatively inert steel or concrete. The removal of many such structures or installations may result in greater environmental harm than leaving them in situ.

Research programmes (such as INSITE4) are underway, which seek to test the hypotheses that offshore oil and gas installations enhance marine ecosystems through increased biological productivity, improved ecological connectivity, and the restoration of deep-sea benthos (such as cold-water corals) by restricting access to fishing vessels. Enhanced marine ecosystems can, in turn, provide enhanced value to people5. Calculations from the Ekofisk field on the Norwegian continental shelf have shown that leaving the installations as artificial reefs and establishing a marine reserve would have generated the highest net present value for fisheries, compared with removal and onshore disposal options. However, under the current rules in the North East Atlantic region, only ‘virgin materials’ can be used for the creation of artificial reefs and an onshore disposal route was selected due to the ‘clean sea bed’ rules6.

In the event that a greater number of offshore structures and installations were to be disposed of at sea, the most commonly cited externalities relate to the fishing industry. Offshore structures make potential fishing areas inaccessible, particularly for demersal and some pelagic fishing vessels. Hence, there is a perceived conflict between disposal of obsolete installations at sea and the commercial interests of fisheries. That said, comparing the area of all operational safety zones for platforms and subsea structures (which exclude fishing vessels) with the total area of the North Sea, the exclusion zones represent less than 0.02 per cent of the total area. Thus, with appropriate mitigation, such as marking post-decommissioning safety zones for subsea structures in FishSafe and on admiralty charts, the impacts should be acceptable.

Aside from the environmental rationale for reconsidering the OSPAR convention rules, in the UK there is a strong financial imperative to challenge the status quo. Wood Mackenzie put the overall price tag for North Sea decommissioning projects at £53bn. Under UK tax relief agreements, the UK tax payer will cover approximately £24bn over 25 years (approximately 45 per cent) of the decommissioning costs. Over this period, the North Sea will potentially switch from providing significant income to the UK treasury to creating a significant cost. This raises questions regarding the public’s willingness to pay towards the full removal of structures and installations, where, in some cases, there may be a much cheaper and environmentally beneficial alternative.

The recent spring budget in the UK recognised the need to address the burden of potential decommissioning costs and their role in depressing activity to ‘maximise economic recovery’ in the North Sea basin. The budget includes the establishment of an expert panel to examine the current tax regime, to enhance levels of investment and help offset the decommissioning liabilities faced by both industry and government7. In tandem with these efforts, there is a strong and urgent need for the UK government to challenge the OSPAR commission’s position on decommissioning rules.

With the next meeting of the OSPAR commission set for 2018, the future of North Sea decommissioning is at a critical juncture. There is a need to promote the potential benefits that the creation of artificial reefs could have for marine ecosystems and the value that will be lost if we continue to pursue a clean seabed approach. A science first approach, using an ecosystem services framework to assess each decommissioning case on its own merits, would offer robust and balanced decision-making.

An approach based on multi-criteria analysis8 with a range of stakeholders and experts, informed by sound environmental and socio-economics studies, for example net environmental benefit analysis (NEBA), and quantitative risk analysis for safety issues would, in our view, identify those installations and structures that should be removed from the marine environment, and deliver on the opportunities to maximise cost savings and environmental benefits where structures can be left in place. In turn, this would support the government’s stated aim to maximise economic recovery in the North Sea by reducing overall decommissioning costs.

1. Oil and Gas UK, 2016, Decommissioning Insight 2016, Facts and Figures – UK and Norway Sector
2. Osmundsen, P and Tveterås, R. (2003) Decommissioning of petroleum Installations — major policy issues. Energy Policy, 31(15), pp. 1579-1588
3. Jørgensen, D (2012) OSPAR’s exclusion of rigs-to-reefs in the North Sea, Ocean & Coastal Management 58 (2012): 57-61
4. URL: http://www.insitenorthsea.org/ – INfluence of man-made Structures In the Ecosystem
5. Macreadie, P. I., Fowler, A.,M., and Booth, D. J., (2011) Front Ecol Environ 2011; 9(8): 455–461
6. Osmundsen, P and Tveterås, R. (2003) Decommissioning of petroleum Installations — major policy issues. Energy Policy, 31(15), pp. 1579- 1588
7. UK Budget opens review of North Sea tax rules, Financial Times, March 8, 2017
8. Fowler, A.M., Macreadie, P.I., Jones, D.O.B., and Booth, D.J (2014) A multi-criteria decision approach to decommissioning of offshore oil and gas infrastructure, Ocean & Coastal Management 87:20-29

RAMBOLL ENVIRON
Peter Bruce is Manager at Ramboll Environ. Ramboll Environ is the global Environment and Health practice of leading engineering, design and consultancy company, Ramboll. Trusted by clients to manage their most challenging environmental, health and social issues, Ramboll Environ has more than 2100 staff worldwide. Ramboll works across the areas of Buildings, Transport, Planning and Urban Design, Water, Environment and Health, Energy, Oil and Gas, and Management Consulting, and has more than 13,000 experts across 300 offices in 35 countries.

For further information please visit: ramboll.co.uk/services-and-sectors/environment-and-health