Sustainable offshore platform decommissioning

Introduction

Since 1950, over 12,000 offshore oil and gas platforms have been installed globally. It is forecast that 2,600 may require decommissioning by 2040 at a cost of approximately US$210bn. Newer platforms sited in deeper waters face higher decommissioning costs.

According to some reports, over 30 percent of the world’s coral reefs have died recently and 90 percent are projected to die by 2052, resulting in part from ocean acidification exacerbated by increasing levels of carbon dioxide (CO2) absorption. Research puts the value of coral reefs at nearly US$30bn annually, estimating that nearly 1 billion people across the world depend on coral reefs for food, coastal protection and income, and they sustain 25 percent of the ocean’s marine life. As a result, continued loss of the ocean’s reefs and marine habitat poses a significant danger. Ironically, these challenges may present opportunities to accommodate more sustainable offshore platform decommissioning strategies.

Historical context

The 1958 UN Convention on the Continental Shelf and 1972 London Convention prohibited ocean “dumping” of wastes. Subsequent frameworks recognize exceptions permitting in situ offshore structure decommissioning consistent with international standards. The 1982 UN Convention on the Law of the Sea (UNCLOS), for example, allows deliberate placement of subsea structures in defined circumstances and in situ offshore oil and gas platform decommissioning has been recognized as conforming with governing treaties and legal frameworks.

Whilst well established in some jurisdictions, decommissioning regimes are less developed in others. In both scenarios, uncertainty surrounding financing obligations for decommissioning poses challenges for stakeholders.

In response, several jurisdictions are considering partial removal decommissioning whereby upper portions of the platforms are removed, leaving lower portions as marine habitat. Conceived in the US Gulf Coast, “rigs to reefs” (RTR) in situ decommissioning promises reduced environmental impacts and cost savings. Nevertheless, some jurisdictions have welcomed RTR while others remain skeptical.

Most fixed platforms are sited in water shallower than 400 feet but, increasingly, rigs are installed at depths of up to 1,400 feet. The “topside” of a platform encompasses the deck, crew quarters and drilling rig; the “jacket” supports the topside, constructed of steel structures anchored to the ocean floor. Complete removal decommissioning entails full platform removal whereas RTR decommissioning entails full removal of the topside and a portion of the jacket to a depth to ensure prevention of interference with marine navigation, leaving the lower portion of the jacket as marine habitat.

US Gulf Coast experience

Since its adoption in US coastal states in the mid-20^th century, RTR has been widely practiced. By the 1980s, the US Department of Interior’s Minerals Management Service (now the Bureau of Ocean Energy Management (BOEM)) supported RTR and the US Congress adopted the National Fishing Enhancement Act (NFEA), providing a legislative exception to full removal requirements.

OEM and the Bureau of Safety and Environmental Enforcement (BSEE) will only approve RTR in situ decommissioning if specified regulatory and technical criteria are met. However, RTR programs have been widely established along the US Gulf Coast.

A 2014 Scripps Institution of Oceanography study estimated full platform removal in deeper waters can cost up to US$5m, while RTR in situ decommissioning costs under US$1m. Under Louisiana and Texas RTR programs, the state receives a share of the savings from RTR in lieu of complete removal.

While federal law requires removal or RTR in situ decommissioning, BOEM also can approve alternative methods. Examples of recent innovative proposals include re-purposing decommissioned platforms for marine research, wind energy and green hydrogen production.

California developments

Since 1958, California’s artificial reef program has successfully increased fisheries while its RTR program has progressed more slowly. Offshore oil and gas drilling in the US is believed to have originated in California, with the first offshore platforms installed in the 1950s. In 1994, California’s legislature adopted the Coastal Sanctuary Act, prohibiting new leasing of offshore tracts. The first federal leases were issued in 1963, but none have been issued off the California coast since 1982.

There are currently 27 platforms offshore California, with its remaining operational platforms reportedly due to cease production by 2034. All federally-regulated platforms are at least three miles offshore, at depths of up to 1,500 feet. The water depth and mass therefore make jacket removal more complex and costly than in the Gulf.

California RTR legislation was proposed in 1998 and the California Marine Resources Legacy Act (MRLA) was adopted in 2010. MRLA grants California’s Department of Fish and Wildlife (DFW) authority to review RTR applications. The Ocean Protection Council (OPC) division of California’s Natural Resources Agency also reviews partial removal applications, evaluating whether an application benefits the marine environment compared with complete removal. If RTR is approved, the SLC estimates avoid removal costs.

Despite potential benefits, some stakeholders view RTR as less viable in California because of its less developed legal infrastructure, differing ecology and political constituencies. At least seven platforms in Californian waters have been decommissioned but, to date, none by RTR.

North Sea Experience

RTR also faces hurdles in the UK’s North Sea. Despite determinations that reefing of the Brent Spar platform in UK waters would have negligible environmental impacts, Green Peace organized an opposition campaign and after successive governments protested under public pressure, the proposal was withdrawn.

The Brent Spar incident has influenced regional policies. Given nearly 500 platforms are expected to cease production by 2025, stakeholders could revive discussion of RTR’s benefits. Any such proposal, however, will likely meet political resistance.

South China Sea Opportunities

Southeast Asia, Indonesia and Malaysia have some of the most challenging offshore platform decommissioning obligations globally. In addition to the significant magnitude of these obligations, uncertainty resulting from unpredictable allocation of decommissioning financial responsibility can impede international investors’ efforts to divest assets and undermine investor confidence in new projects.

Asia reportedly hosts over 1,750 offshore oil and gas assets, with 85 percent sited in Indonesia and Malaysia, most operating for 20 years or longer. Approximately 200 offshore fields are expected to cease production in Southeast Asia by 2030, with projected decommissioning costs of roughly US$100bn. Greater clarity in relation to decommissioning regimes is therefore urgently needed.

The issue is especially acute in Indonesia, where production-sharing contracts governing many concessions will soon expire. Operators or investors may view the government or national oil companies (NOC) as responsible for decommissioning costs, while government parties may assert the operator should take responsibility. Indonesia has a decommissioning legal framework, but relevant requirements are not yet fully clarified.

Malaysia has a history of artificial reef construction, independent of offshore platform decommissioning, with Malaysia’s government and NOC, Petronas, having expressed support for RTR. Malaysia’s Baram-8 decommissioning was the first RTR project in the South China Sea and was successful.

Malaysia is also exploring alternative and innovative decommissioning concepts including recreational use of decommissioned platforms.

Asia Development Bank recommendations

While the dynamics differ outside the US, the RTR debate ensues globally. Work remains to evaluate RTR’s future prospects, and the issues of costs and liability allocation require attention.

Marine organisms reportedly provide 50 percent of our oxygen, while oceans produce 15 percent of our protein and absorb about 40 percent of global CO2 emissions. But some stakeholders believe increasing CO2 levels may cause increasing ocean acidification, accelerating loss of natural coral reefs and marine habitat.

Thus, in addition to preserving and enhancing marine fisheries’ habitat and food resources, broader adoption of RTR decommissioning holds the potential to counteract the global loss of natural coral reefs and, thereby, to help preserve and enhance the marine ecosystem’s capacity to continue providing CO2 absorption and oxygen production capacity, critical to sustaining our world.