Tim Watson was formerly decommissioning manager for Amoco with responsibility for the North West Hutton platform and other Amoco assets in the North Sea before leaving to become an independent decommissioning consultant. E&P asked him about the major issues surrounding platform decommissioning which are presently facing operators and contractors in the North Sea and elsewhere.

Essentially the major issues are regulatory uncertainty, accurate cost estimates, decommissioning equipment and reputation.

First and foremost there are two distinct areas concerned with decommissioning: the North Sea (actually the North East Atlantic) and the rest of the world. They are distinct on two accounts, regulation and cost.
Since 1998, and as a direct result of the Oslo and Paris Treaty (OSPAR), the European Union responding largely to Greenpeace, the long standing International Maritime Organization (IMO) rules for decommissioning were changed in the North Sea to, effectively, a regime of total removal. This has inevitably increased costs since choice of option has been removed. Decommissioning costs of the North Sea are estimated to be up to 60% of the rest of the world, i.e. US $26.87 billion to $35.83 billion, due largely to the size of the structures, the oceanographic conditions and high operating costs. The additional cost to the North Sea industry because of the OSPAR regulations is over $2.70 billion.
For the rest of the world the United Nations IMO rules prevail so far but the uncertainty is that regional UN regulators will look to the OSPAR regulations as an example. Experience has shown that the oil industry has little lasting influence in regulatory matters that involve the environment.

The other three issues over which operators have some influence are cost estimates, future decommissioning equipment and reputation.

The accuracy and need for cost estimates depends on the situation, and inevitably this is related to the other issues above. For most of the life of a field operation, cost estimates are largely required for audit, bookkeeping, borrowing and insurance.

Nearer the time of decommissioning, estimates need to be accurate since late changes cannot be paid for by production. Accuracy is more critical for new field entrants where the cost of borrowing is tied to the estimate or to the cost the other established participants (or governments) consider reasonable. New entrants can pay over the odds for a letter of credit or bank guarantee over several years if estimates are not accurate. Good cost estimates should take into account operational procedures, contingency, risk, deviations from day rates, and contractual arrangements among other considerations all embedded into a thorough knowledge of the installations and infrastructure.

Technicalities

Essentially the technical issue is that the very large crane vessels required at present to remove platforms both in the North Sea and internationally in increasing water depths, (e.g. the Saipem 7000) may not be around for decommissioning in 15 to 20 years. At best they may be in areas at the other side of the world and high mobilization costs - inevitably not in the cost estimate - will be liable. Replacement crane barges are not being built specifically for decommissioning and no contractor can give a guarantee of being available when required, no more than an operator can state when he or she is ready. This is a serious complication (and disincentive) to contractors for unlike installation, predicting a decommissioning date with certainty is near impossible for operators. North West Hutton and Heather in the Northern North Sea, for example, were mooted for removal in the mid 1990s and, for a multitude of reasons, are still there.

On the other hand some platforms have suddenly been removed with minimum notice and planning that frustrates contractors who could have provided for it in their schedule at potentially lower cost. Other platforms have taken on new owners and new life, tearing up any realistic decommissioning timing estimates. It is not surprising that timing predictions of North Sea decommissioning work have been consistently wrong, and by implication most of the cost estimates as well.

As an alternative to crane barges worldwide, there is little sign that the very large single lift equipment being developed in the North Sea will become a reality since necessary and guaranteed clients for a project are not emerging. Buoyancy bags and Versatruss still wait for further commercial use and development.

Issues

Since Brent Spar, reputation issues are at the top of the list, especially for the major operators and especially in the North Sea. Shell is concerned with, and very good at, bringing interested parties into discussions of decommissioning options and pertinent issues. BP has several large decommissioning projects to come in the North Sea and in the Far East with the inherited Arco platforms. Reputation maintenance is their rationale for prolonged discussions. On North West Hutton, actions here are likely to set a precedent in North Sea decommissioning.

Future decommissioning options under IMO will largely be driven by global reputation protection both by Governments and operators alike, such that total removal, even when not required, is likely to be selected. There will be significant exceptions of course, North Sea concrete structures such as in Ekofisk and Frigg will be examples of platforms left in place, but these are merely two projects from an estimated 7,000 platforms worldwide. It is a point of concern by many environmentalists that there is insufficient debate on decommissioning and sustainability where Greenpeace have effectively hijacked the agenda on an anti-oil industry stand and operators pragmatically need to protect share value. Growing expenditure for a clear seabed regime especially in the North Sea might not be best for world wide society where so many real environmental problems could be solved with a fraction of the amount spent on unsubstantiated decommissioning compliance.

In summary, to a greater or lesser degree decommissioning doggedly occupies the attention of operators, co-venturers, governments, interested parties and many other bodies. They all view issues differently but one fact unites them: decommissioning in some manner must be carried out. As the saying goes in the North Sea "Decommissioning is the best reason to sell your platform to someone else." And so it is.

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