Oil, Gas and Energy Law Intelligence August 2007

The UK government's consultation on decommissioning offshore energy installations closes on 13 September 2007. Since the consultation document was issued on 21 June 2007, there has been much discussion about the changes being touted.

These range from those who view the proposed measures as simply filling in the gaps in the current regime to those who regard it as a significant creep of regulatory powers.

The consultation focuses on a number of issues, the principal ones being on how best to ring-fence funds earmarked for decommissioning in an insolvency; extending the classes of people on whom decommissioning obligations can be imposed; permitting earlier service of decommissioning notices (and requiring the provision of decommissioning security at an earlier stage); widening the government's information seeking powers; and exploring more cross-industry collaboration and co-operation in decommissioning.

Particularly in respect of this last issue, the use of new technology has often figured in current discussions.

Liaising across the decommissioning industry to identify new technologies to meet proven needs, saving time, costs and 'reinvention of the wheel' is an objective supported by all stakeholders whether it be the service companies conducting the decommissioning or the asset holders seeking to discharge their decommissioning responsibilities.

There is a wide acceptance that, from now onwards, more than £1 billion per year will be spent on decommissioning schemes in the UKCS.

Leon Moller, an Aberdeen based lawyer with Shepherd and Wedderburn who specialises in decommissioning said: "We have seen significant interest in this and expect this to be one of the fastest growing areas over the next few years. The removal of installations involves careful planning and use of innovative technology to reduce the cost of the process.

The complexity of the decommissioning market requires that companies, operators and contractors develop an understanding of all aspects of the decommissioning process and we are able to provide support and guidance in this area."

Over the next decade, the DTI anticipates that more than 80 structures in the North Sea will be decommissioned, with costs for individual projects such as Shell's Brent field reaching the £3 billion mark. Technology that can help reduce those costs is therefore in high demand.

Eddie Grant, managing director of Norsk Cutting and Abandonment Limited, which has its UK headquarters in Aberdeen, commented: "We have seen a marked growth in demand for our services during the last three to four years and expect this to rise dramatically during the next decade. It's vital companies have an innovative and technology-driven approach to decommissioning. Only through this, and good preparation, will they prevent costs from spiralling."

Current decommissioning in the UKCS includes:

  • Amoco/BP, North West Hutton: removal of large steel topsides and jacket to top of footings to shore;
  • Total, MCP01: removal of topside to shore with concrete substructure remaining in place; and
  • Shell, Indefatigable field including installations – Juliet, Kilo, Lima, Mike and November: topside jackets and two hose bundles removed to shore and five pipelines decommissioned in-situ.