Regulations in the North Sea Keith Mayo, Head of Offshore Decommissioning, DECC, UK Date 1/2 October 2009

What is DECC? Set up by the UK Prime Minister in October 2008 Focus is on twin challenges of climate change and energy supply DECC is responsible for UK meeting climate change targets And for affordable, secure and sustainable energy supplies

Affordable, secure and sustainable energy supplies means - UK must make the most of its own oil and gas resources That means encouraging companies to develop all possible reserves whilst discoveries get smaller So decommissioning liabilities must be managed effectively and responsibly as part of the package of regulations for oil and gas developments

UK industry - some facts 8 installations with large concrete substructures 31 with large steel jackets (> 10,000 tes) 214 other steel jackets 278 subsea production systems 21 floating production systems >15,000 km pipelines <5,000 wells <200 cuttings piles

UK industry – decommissioned since installations with large concrete substructures 3 with large steel jackets (> 10,000 tes) 15 other steel jackets 7 floating production systems 2 subsea production systems 16 pipelines 10 other facilities (loading buoys, flares etc)

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UK Government obligations Meet international rules and public expectations –UN Law of the Sea –International Maritime Organisation –OSPAR Convention for the Protection of the Marine Environment of the North East Atlantic Ensure the companies concerned can do the work Don’t obstruct future developments and production unreasonably

International Rules UN Law of the Sea International Maritime Organisation OSPAR Convention for the Protection of the Marine Environment of the North East Atlantic

OSPAR Decision 98/3 Agreed by the 15 members after the Brent Spar incident UK Government approved disposal of the Spar in a deep sea trench Shell reversed its plans following Greenpeace campaign Spar was removed and recycled as foundations for a quayside in Norway

Decision 98/3 requirements No dumping or leaving in place of installations in the marine environment Should be brought ashore for re-use, recycling or final disposal Possible exceptions for large concrete substructures, footings of jackets >10,000 tes, concrete anchor bases and damaged structures. No requirements for pipelines, wells, subsea facilities

UK Legislation Petroleum Act 1998 enables DECC to make companies liable for decommissioning Joint and several liability for all companies concerned Liability maintained throughout field life; new owners will take liability; may be withdrawn from sellers DECC can insist on financial security if concerned about ability to pay for decommissioning

Decommissioning Programmes Petroleum Act requires companies to prepare decommissioning programme Other regulators and public consulted Programmes approved after all comments considered Decisions based on balance of impacts on safety, environment, other users of sea and economics

Financial Security Trend in North Sea is for smaller companies to develop new fields and take over old assets from majors DECC can keep liability on original developers if concerned about strength of buyers DECC can require financial security such as letters of credit Basic test is whether decommissioning costs more than 50% of company’s shareholders funds

UK Decommissioning Costs £14 billion for installations £5 billion for subsea systems £4 billion for pipelines £23-25 billion in total

Issues for regulators Pipelines – leave in place or remove? Mattresses – leave in place or remove Drill Cuttings Piles - cover, remove, leave to degrade naturally? Wells – standards for plug and abandonment Radioactive scale in pipes and vessels Re-use of oil and gas facilities for hydrocarbon gas storage, CO2 sequestration Low carbon decommissioning