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He had joined the oil firm some two years earlier to spearhead its search for reserves in the North Sea. Rivals including Shell and BP had also been conducting exploration drilling in the area for years – to no avail.
When McKeown’s colleagues thought they’d struck gold, they summoned him from his bed in Norfolk to the Sea Quest drilling rig 130 miles off the coast of Scotland. Legend has it that the engineer commandeered a pickle jar from the vessel’s canteen and filled it with the substance that had been brought up from the seafloor. He then took the sample to his boss at Amoco, dumped it into an ashtray and set it on fire. It was official: there was oil in the North Sea, and plenty of it.
Now, just over 50 years on, the companies that installed the first oil platforms in the region are reckoning with declining reserves and ageing production infrastructure. Several hundred platforms in the North Sea are due to be decommissioned over the next three decades. Trade association Oil & Gas UK has predicted that almost 2,500 wells will be plugged and 200 fields will undergo decommissioning in the next 10 years alone.
Business models
All of this activity won’t come cheap. The estimated cost of retiring and removing platforms in the UK Continental Shelf was £51bn as of 2019. British taxpayers could face a £24bn bill for tax reliefs awarded to oil and gas companies for the dismantling of offshore infrastructure, according to the National Audit Office. This means that oil companies will face pressure to conduct operations in the most efficient and cost-effective way possible, while coming under scrutiny from environmentalists.
“There are over 600 platforms in the North Sea,” said Philip Whittaker, partner and director, oil and gas, at Boston Consulting Group. “Most people have no idea that there’s an entire world out there. Cleaning it up is going to be one of the biggest engineering tasks ever.”
But very few companies have decided on the operating model they want to adopt for decommissioning. They haven’t established what functions, if any, they want to outsource – and they haven’t set up a network of contractual relationships to help them through the removal process.
While the owners and operators of some oil platforms might want decommissioning to be completed by an in-house team, others might wish to delegate part of a project to a specialised liquidation unit or an independent contractor. No matter what the set-up, it’s crucial that the industry works together to create business models that can be applied across the North Sea.
“From an engineering perspective, decommissioning is not about more complex and clever solutions. It’s about really pragmatic, fit-for-purpose solutions,” said Whittaker. “But it’s also about operators collaborating, because, like any repetitive task, it’s inefficient to do things in isolation. If you do strings of activity at scale, you get very good at it.”
Environmental factors
The vast majority of oil platform infrastructure must legally be brought ashore for recycling or reuse. Since 1998, the dumping and abandonment of offshore installations has been prevented by the OSPAR Convention. The treaty’s 15 signatory governments adopted rules around marine infrastructure following a dispute over the fate of Brent Spar, a redundant oil storage installation in the North Sea.
Shell, the facility’s operator, had initially wanted to tow it into deep waters in the North Atlantic and sink it using explosives. However, a sustained outcry from activists, spearheaded by Greenpeace, led the oil firm to abandon the plan. Today, the only exceptions to the OSPAR rule are 40 of the largest oil platforms, which may be left in place following successful applications by their owners.
Research has shown that leaving oil platforms in place may actually have benefits for the marine environment. One study published last year in the journal Frontiers in Marine Science found that “novel” reef ecosystems, rich in marine life, have coalesced around subsea oil infrastructure. As such, the study’s authors say that the health of these ecosystems must become part of the decommissioning debate.
The removal and disposal of North Sea platforms is only just getting started. The eyes of environmentalists and oil majors alike will be fixed on the UK as it negotiates a cost-effective and ethical exit for its assets. Work on an oil platform doesn’t cease when production does. There’s still much to do (and to learn) from the decommissioning process.
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