Regulations in the North Sea

Keith Mayo, Head of Offshore Decommissioning, DECC, UKDate 1/2 October 2009

What is DECC?

• Set up by the UK Prime Minister in October 2008

• Focus is on twin challenges of climate change and energy supply

• DECC is responsible for UK meeting climate change targets

• And for affordable, secure and sustainable energy supplies

Affordable, secure and sustainable energy supplies means -

• UK must make the most of its own oil and gas resources

• That means encouraging companies to develop all possible reserves whilst discoveries get smaller

• So decommissioning liabilities must be managed effectively and responsibly as part of the package of regulations for oil and gas developments

UK industry - some facts

• 8 installations with large concrete substructures

• 31 with large steel jackets (> 10,000 tes)

• 214 other steel jackets

• 278 subsea production systems

• 21 floating production systems

• >15,000 km pipelines

• <5,000 wells

• <200 cuttings piles

UK industry – decommissioned since 1988

• 3 installations with large concrete substructures

• 3 with large steel jackets (> 10,000 tes)

• 15 other steel jackets

• 7 floating production systems

• 2 subsea production systems

• 16 pipelines

• 10 other facilities (loading buoys, flares etc)

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UK Government obligations

• Meet international rules and public expectations

– UN Law of the Sea

– International Maritime Organisation

– OSPAR Convention for the Protection of the Marine Environment of the North East Atlantic

• Ensure the companies concerned can do the work

• Don’t obstruct future developments and production unreasonably

International Rules

• UN Law of the Sea

• International Maritime Organisation

• OSPAR Convention for the Protection of the Marine Environment of the North East Atlantic

OSPAR Decision 98/3

• Agreed by the 15 members after the Brent Spar incident

• UK Government approved disposal of the Spar in a deep sea trench

• Shell reversed its plans following Greenpeace campaign

• Spar was removed and recycled as foundations for a quayside in Norway

Decision 98/3 requirements

• No dumping or leaving in place of installations in the marine environment

• Should be brought ashore for re-use, recycling or final disposal

• Possible exceptions for large concrete substructures, footings of jackets >10,000 tes, concrete anchor bases and damaged structures.

• No requirements for pipelines, wells, subsea facilities

UK Legislation

• Petroleum Act 1998 enables DECC to make companies liable for decommissioning

• Joint and several liability for all companies concerned

• Liability maintained throughout field life; new owners will take liability; may be withdrawn from sellers

• DECC can insist on financial security if concerned about ability to pay for decommissioning

Decommissioning Programmes

• Petroleum Act requires companies to prepare decommissioning programme

• Other regulators and public consulted

• Programmes approved after all comments considered

• Decisions based on balance of impacts on safety, environment, other users of sea and economics

Financial Security

• Trend in North Sea is for smaller companies to develop new fields and take over old assets from majors

• DECC can keep liability on original developers if concerned about strength of buyers

• DECC can require financial security such as letters of credit

• Basic test is whether decommissioning costs more than 50% of company’s shareholders funds

UK Decommissioning Costs

• £14 billion for installations

• £5 billion for subsea systems

• £4 billion for pipelines

• £23-25 billion in total

Issues for regulators

• Pipelines – leave in place or remove?

• Mattresses – leave in place or remove

• Drill Cuttings Piles - cover, remove, leave to degrade naturally?

• Wells – standards for plug and abandonment

• Radioactive scale in pipes and vessels

• Re-use of oil and gas facilities for hydrocarbon gas storage, CO2 sequestration

• Low carbon decommissioning