The North Sea is one of the world’s most prolific producers of oil. At its peak, the region was producing billions of barrels of oil. The UK alone has siphoned 42.8 billion barrels of oil equivalent (BOE) from the region, and much of the country’s economic development during the ‘80s was buoyed by revenue from North Sea oil.
But the region’s golden days are behind it. As the world pushes more aggressively for carbon neutrality and transitioning to renewables, the task of decommissioning hundreds of massive oil rigs becomes a more pressing issue for the industry.
How the oil and gas industry approaches detoxing the North Sea will have deep environmental, political, and economical implications. The decisions made for decommissioning can potentially affect ability to meet climate targets and the future of green energy itself.
An Undertaking of Decades
The UK’s oil and gas footprint on the North Sea is vast. Some installations are nearly half a century old, erected in a time when the black gold rush of oil painted a long future of prosperity.
Now the bill is due to be paid. Over 470 installations in the UK’s territorial waters need to be decommissioned in the next 30 to 40 years. It’s a massive undertaking that’s expected to cost around £17 billion.
The cost of decommissioning continues to fall year-on-year, now down by £13 billion from the initial £59.7 billion–welcome news, provided that much of the bill will be footed by taxpayers. The government has offered companies tax reliefs to incentivise investment into decommissioning.
Beyond Costs
Beyond the financial challenges of removing scores of oil and gas platforms, there are also considerable logistical issues to contend with.
These structures easily weigh hundreds of thousands of tonnes, reaching deep into the depths and dug miles into the seabed itself. The age of the components, incomplete documentation from the time the installation was built, and technical complexity in such an extreme environment make every project incredibly dangerous.
It’s a technological issue that the industry’s been puzzling over since the ‘90s, when the first wave of platforms started reaching the end of their lifecycle. Ideas have ranged from sinking structures into the sea, to turning them into reefs for marine life.
Decommissioning technologies have improved significantly since then. Yet some companies argue that the risk remains too great. In 2017, Shell submitted a bid to the UK asking to leave the massive concrete legs of some of its installations in place. The company claims that the “probability of technical failure and the risk to human life and the environment are unacceptably high”.
The request was met with scorn, both by environmental groups and European states. Germany has filed a formal complaint, raising concerns about the hazardous waste these structures release into the surrounding environment as they decay. “Germany finds it absolutely unacceptable that these crude oil quantities remain in these structures,” said Germany’s environmental ministry spokesman Stephan Gabriel Haufe. In total, the containment units inside the legs still contain 12,125 tons of crude oil.
Fueling New Life Into Old Platforms
The technical complexity, hazards, and incredible expense of dismantling oil and gas platforms have experts looking into other options. Indeed, the UK’s Oil and Gas Authority (OGA) are urging companies to look into every other alternative before starting to plan for decommissioning.
One of those alternatives are repurposing assets into infrastructure that could be used to support clean energy such as offshore wind. These “second life” solutions envision using exhausted oil wells to store carbon dioxide. Carbon capture and storage is a process that will be essential in meeting the UK’s decarbonisation goals, especially if blue hydrogen becomes a large part of the energy mix of the future.
Some studies are looking at turning the structures into a hub for wind, solar, and tidal energy, or as research stations for students in various environmental fields. One particularly radical proposal reimagines oil rigs as habitats for populations displaced by climate change.
Before any real plans begin, the industry needs a more cohesive plan of action for decommissioning. Currently operators are hampered by inexperience in the field, lack of leadership, and no clear consensus on which approach works best in terms of cost-efficiency. “With limited technical experience and evolving regulatory and commercial frameworks the overall decommissioning cost impact of the energy transition plus any potential repurposing is uncertain and expected to remain so for the next 2 to 5 years,” says Fraser Moonie, CEO of Decom North Sea.
It Takes An Entire Industry
Cleaning up the North Sea is not the responsibility of only one state, even though the UK is looking at twice the costs as other countries. Oil’s sustainable exit out of the region can only be achieved through a coordinated effort across operators, governments, and contractors.
However, the volatility of the oil and gas market hasn’t fostered the most collaborative environment. Traditionally risk-averse operators are dragging their heels, wary of being one of the first to spend millions on dismantling end-of-life assets–an endeavour that’s bound to cost more money than it would make, if it makes any at all.
Companies are also unsure of who to trust with the task. Decommissioning is a job order that’s worth millions and can stretch decades. You can’t just hire anyone. But for such a specialised task, there’s not a lot of contractors yet who have comprehensive experience in the field. After all, most of the assets have been around for decades. “It’s a lot about an emerging set of companies and we don’t yet know which is going to be the winning model,” says Philip Whittaken of consulting firm Boston Consulting.
The sustainable removal or repurposing of oil and gas platforms will be crucial for transitioning the North Sea into a greener future. But it’s a costly affair, one whose price falls mostly on taxpayers.The focus on the next couple of years will be how to further drive costs down, as well as developing a safer and more integrated approach.
