As the North Sea energy sector transitions into a new era, there are a range of challenges and opportunities on the horizon.
One area where there is huge potential is decommissioning, which is already becoming a focal point for cutting-edge engineering and the development of exciting new technologies.
The scale of the task is vast, with recent figures from OEUK predicting around 60% of topsides and substructures will be removed from our oil and gas fields before 2032. Almost two-thirds of the 283 active oil and gas fields in the North Sea will cease production by 2030.
There is a substantial opportunity here for businesses already involved in the energy sector to transfer skills, equipment, and technology to rise to the opportunity and to work together to sustainably exit the North Sea. Collaboration and innovation have helped the sector to get to the point where it is now and will continue to be crucial heading into the next chapter.
However, with formal collaboration comes complex ways of working, partnerships and joint venture agreements with multiple parties sometimes striving to reach different goals. This can be tricky to manage, particularly when partners may be working to a different timeline or have other interests to protect, and requires clear communication and negotiation – it may take months or even years to agree on the best way forward once production is over.
In many cases, there are often historic contracts to contend with too, where platforms were built and designed in the 1970s or 1980s with less focus on removal at the end of its life cycle. In the case of additional projects that begin on the back of new licenses being granted by the UK Government in October, there will be a huge contrast where decommissioning is a priority from the outset and built into every new agreement.
Another complex aspect is determining where the liability lies once the infrastructure is no longer in use. With many partners involved throughout an asset’s life cycle, it may not only be the current operator that is legally responsible for getting the structures and equipment back to shore.
Section 29 of the 1998 Petroleum Act states that companies that have benefitted from the production of hydrocarbons must also shoulder the responsibility for decommissioning, which can lead to some difficult conversations when the time comes and businesses have grown, moved on, or even folded.
Often there will be conditions put in place when an asset changes hands or is taken over by a new operator, including specific funds being set aside, based on an annual estimated valuation of the works required, or a security arrangement between new and erstwhile operators. Planning for decommissioning will involve a review of all of these measures in plenty of time before work is scheduled to commence.
Underpinning all of the decommissioning activity that will take place over the next decade is the need for balance – not only in a legal sense. On the one hand, you have a significant economic opportunity, with average annual decommissioning spend predicted to hit £2 billion over the next three to four years.
On the other, there is also an environmental impact to mitigate. Every decision that is made, whether it’s about using chemicals to plug a well or how to safely remove a pipeline from the seabed, needs to be based on robust information that will lead to the best, most balanced, outcome.
Coupled with the transition to renewables, decommissioning will soon become the bread and butter for companies working in the North Sea and further afield. There may be challenges to overcome, but the expertise and ways of working developed here in Scotland could pave the way forward for other oil-producing nations to do the same safely, economically and sustainably over decades to come.
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