20. 02. 2017

Decommissioning in the North Sea: Rigs, Reefs, but not much Realism

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We hear a lot these days about how the oil and gas industry is winding down in the North Sea – and so it is. Which means that huge numbers of rigs, pipelines and other offshore facilities will need to be ‘decommissioned’ over the next ten years and beyond.

At the moment, the plan is to dismantle every single one of them at sea, right down to their concrete sub-seabed foundations, and then bring them onshore for breaking apart and (where possible) recycling. This is referred to as ‘best decommissioning practice’, and is vigorously supported by most NGOs, particularly Greenpeace, for whom the Brent Spar story back in the early 1990s is still a very big deal.

But will this really be best practice? Personally, I very much doubt it. A couple of years ago, Forum for the Future was very involved in a cross-sectoral collaboration (the Living North Sea Initiative) investigating the potential for partial decommissioning at sea, before collapsing much of the below-surface structures to form artificial reefs.

Ed Davey (former Secretary of State at DECC) and myself recently wrote an article on this for the Times, which you’ll see below. On 14th February, I also did an interview for ‘Costing the Earth’ about the whole ‘rigs to reefs agenda’, and you may be interested to get more of the background here

Article for 'The Times' by Ed Davey and Jonathon Porritt (published version 23rd January 2017)

Do free lunches exist? They may - in the North Sea. With a veritable feast for the environment and taxpayer.

For as production ends in many North Sea oil and gas fields, decommissioning platforms and pipelines presents a gargantuan challenge for industry and taxpayer. The Oil and Gas Authority’s decommissioning strategy estimated costs of up to £50 billion.

But scientific research now suggests decommissioning law – mostly designed decades ago – may not meet the twin aims of protecting the environment and taxpayer, and may actually do the reverse. For the sake of Britain’s marine environment and national finances, we need an urgent review.

Two principal issues need review. First, should decommissioning offshore infrastructure mean its entire removal? There’s growing concern this ‘clean seabed principle’ enshrined in international conventions and domestic law might actually harm the marine environment. Second, how should the long term liability for decommissioned oil and gas assets be organised? Is the UK approach of “perpetual liabilities” for the owners, the safest for the environment and Treasury?

“Best decommissioning practice” was highly influenced by the debate over the decommissioning of the Shell oil storage and tanker loading platform, Brent Spar, in the early 1990s. Environmentalists argued decommissioning should return the sea bed to its previous state, and won. While practical considerations have seen exemptions, the ethos behind the “status ante” or “clean seabed” approach still holds, governed by the international ‘OSPAR Decision 98/3’ and by the 1998 Petroleum Act.

Yet environmental science now questions this legal framework. The evidence is that foundations of oil and gas platforms and wind turbines – rather like ship wrecks - can provide important habitats for valuable marine species. From hard surfaces acting like a natural reef to ‘de facto’ marine conservation areas, helping to replenish some fish stocks, many offshore installations have helped nurture marine eco-systems as equally biodiverse as natural reefs. So removing every piece of steel and concrete could seriously harm many fragile species.

There isn’t yet consensus on a “new best decommissioning practice” to take account of this science. But before we spend billions removing potentially valuable habitats we should find out. Alternative approaches already exist elsewhere in the world, like the “rigs to reefs” method. Structures are left or semi-collapsed to form cold water reefs. This still leaves substantial costs for industry - and there is a need for tight regulation. Yet given the potential for preserving marine biodiversity, it’s essential such options are properly considered. 

Solving the second legal problem for decommissioning – of perpetual liabilities – doesn’t provide any immediate environmental gain, but it could underpin a new financial settlement for the North Sea’s ecology.
Under the Petroleum Act, successive Governments and lawyers have said that any current or previous owner of the oil and gas assets will always and forever be responsible for liabilities occurring after decommissioning.

This approach has two problems. The presence of large, uncertain future liabilities acts as a barrier to new thinking about what is actually ‘best decommissioning practice’. Second, it gives a false sense of security, as even the biggest corporations can evolve or die and therefore the ability of the UK to reach the ultimate beneficiaries may be more theoretical than real.

A collective insurance approach to provide for distant and highly unlikely risks – a North Sea basin insurance fund - could protect our marine environment from the natural attrition of companies, and at a lower cost.
Yet many environmentalists and taxpayers would see this as a bad deal - if only the Treasury and industry saw financial gain from such change. That’s why it’s essential the environment and taxpayer share in some of these potentially huge savings. Through a new North Sea Environment Fund.

A North Sea Environment Fund could be capitalised over the next two decades, from a share of the savings generated from a more flexible approach to decommissioning. The exact formula and calculations would be for analysis and debate, but it would be reasonable to expect a fund of at least £5 billion over this period.

And while the uses of such a Fund must also be debated, strong contenders would be restoration of natural reefs in the North Sea; North Sea renewables like offshore wind and wave power; the re-booting of Britain’s Carbon, Capture and Storage policy; and support for those communities that are going to be seriously impacted as we transition out of the era of fossil fuels.

So maybe a free lunch does exist – with abundant healthy seafood on the menu.
 

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