Provisions regarding Decommissioning, the fifth of the Supporting Obligations, are stated in Paragraphs 20 to 22 of the Strategy. Limited by the Safeguards, the intention and effect of the Supporting Obligations is to expand on the Central Obligation.
"Before commencing the planning of decommissioning of any infrastructure in relevant UK waters, owners of such infrastructure must ensure that all viable options for their continued use have been suitably explored, including those which are not directly relevant to the recovery of petroleum such as the transport and storage of carbon dioxide".
Relevant persons must decommission infrastructure located in relevant UK waters in the most cost effective way that does not prejudice the maximising of the recovery of economically recoverable petroleum from a region. This includes ensuring due regard is given to the obligations in paragraph 18 [i.e. optimum use of technologies] insofar as they apply to decommissioning".
Where the OGA produces a plan under paragraph 23 [i.e. a plan produced by the Oil and Gas Authority explaining how certain MER UK obligations are to be met], which relates to the obligation in paragraph 20, it may identify particular pieces of infrastructure the decommissioning of which would prejudice the maximising of the recovery of economically recoverable petroleum in a region."
Paragraph 20 stresses that all options for ongoing use of infrastructure need to be assessed before a decision is taken to decommission. The Strategy qualifies this by stating that only "viable" options need to be considered. What does "viable" mean? It is interesting to note that the terms "economically recoverable petroleum" and "satisfactory expected commercial return" are both used (and defined) elsewhere in the Strategy but the government has chosen, in respect of decommissioning, to refer instead to "viable" without a definition. We envisage that this term may need to be clarified in due course to prevent disputes about its meaning.
Paragraph 21 requires decommissioning to be conducted in a "cost effective way". That is qualified by addition of the caveat that it must not "prejudice the maximising of economically recoverable petroleum from a region". Tension could arise between a 'cost effective' solution (a subjective test?) and a solution which is not 'cost effective' on a stand-alone basis but which maximises recovery. It may be that other North Sea players would be asked to contribute to a solution which entails prolonging the life of the infrastructure in question if they will benefit consequently from further recovery of petroleum. Paragraph 5 of the Strategy (under the heading "Safeguards") provides for such contributions by beneficiaries.
It may also be possible for an infrastructure owner to decline to delay decommissioning on the basis that the alternative plan for the infrastructure in question would not produce a "satisfactory expected commercial return" (see Paragraph 3 of the Strategy under "Safeguards").
The reference, in Paragraph 21, to optimising technologies is particularly important in the context of decommissioning as operators are keen to find new ways of reducing the cost of decommissioning, which is estimated by Oil and Gas UK to be around £16.9 billion until 2024.
Under Paragraph 22, the OGA may identify specific infrastructure the decommissioning of which would be deemed prejudicial to maximum economic recovery. The owners of such infrastructure could be expected to seek appropriate contributions from beneficiaries if they were forced to keep infrastructure running for others' benefit.
Like much of the guidance in the Strategy, the provisions in respect of decommissioning raise some questions which will need to be answered in due course to provide necessary certainty for those contemplating decommissioning projects. For those wanting to know more about decommissioning, you will find details of our decommissioning training here.