Member Article

For the many players in the oil and gas industry awareness of the regime for decommissioning offshore installations is increasingly important. Decommissioning is fundamental to petroleum operations and needs to be considered early, due to the various complexities involved. Many offshore installations in the North Sea have been operational well beyond their expected 25 year lifespan and are now up for decommissioning, although the recent high oil price granted a temporary postponement. The many complexities of dismantling aside, two other pressing concerns for companies with offshore activities are the increasing awareness of the environmental considerations relating to decommissioning (e.g. Brent Spar incident) and the expensive nature of the process itself (estimates for Ekofisk are around £700 million and Brent about £3billion). The 2005 Review by Scottish Enterprise shows that between 2005 and 2050 about £15 billion will be spent on decommissioning in the North Sea with £8.3 billion in the UK alone. It is therefore the duty of all interested parties to ensure that decommissioning is carried out in a responsible manner. The regulatory framework for decommissioning in the UK is based on a number of international and regional instruments (UNCLOS 1982, OSPAR 1992 & IMO Guidelines 1989) and the 1998 Petroleum Act. Section 29 of the 1998 Act enables the Secretary of State to issue a written notice for the submission of a decommissioning programme for each offshore installation and pipeline. However, the Secretary of State does not have to issue such a notice if adequate provision (including financial security arrangements) is made to ensure that a satisfactory decommissioning programme will be carried out. Thus, all (new and existing) licensees are jointly and severally liable under the Petroleum Act 1998 for the submission and execution of a decommissioning programme. The UK regime is increasingly perceived as a workable model in various other jurisdictions around the world. Consequently, a number of countries now insist (before drilling operations commence) on a detailed decommissioning plan or programmes to deal with all the issues involved.

 

Footnotes: Leon Moller is a solicitor specialising in oil and gas with UK law firm Shepherd and Wedderburn. +44(0)1224-343 557