1. Managing Decommissioning Risks for Government Keith Mayo Head of Offshore Decommissioning Unit, Department of Energy and Climate Change

2. Key Event - Energy Act 2008 Brings legislation on oil and gas decommissioning up to date Uses lessons learned All licensees become liable at same time Pipeline owners made liable when construction not production starts Widens powers to require financial information and guarantees

3. DECC Concerns Failure of banking sector to provide credit and guarantees Brought forward date for implementation of Act Decommissioning provisions in force from 26 January Issued new version (3) of Guidance Notes https://www.og.berr.gov.uk/regulation/guidance/d ecommission.htm

4. Industry Concerns Addressed Licensees not liable if they have never been entitled to benefit from the field Act and guidance notes explain “benefit” A share of the oil or gas production Owners of host platform not liable for other owners’ tieback “Manager” is the operator

5. Financial guarantees Can now be required at any time New fields, licence transfers or other changes Reviews of financial positions, especially during credit shortage Will compare decom costs to net worth If over 50% - discuss security with company Legal notice requiring guarantee

6. Decommissioning Estimates £15 billions for UKCS at 2006 figures 20% inflation in 2007 and 2008 £22 billions at 2008 peak Costs falling back now? >5000 wells for £5 bn to £15 bn New study by consultants £20 billion? at current prices

7. No Activity Chart Operator predictions on 2P basis – pessimistic? In 2008, predictions for 39 fields changed by 5 or more years 25 fields extended,14 fields shortened Predictions cluster around licence expiry Also around 2015, 2020, 2025 Actuals don’t support predictions More uncertainties with smaller fields

8. Operators CoP Predictions 2006,7,8

9. What is DECC? Set up by the Prime Minister on 3 October Greater focus on solving twin challenges of climate change and energy supply Lead on UK responsibility for meeting climate change targets Develop policies on affordable, secure and sustainable energy supplies

10. DECC activity Setting up resources, systems and plans for a completely new organisation Three groups 1. Mobilise the transition to low carbon UK 2. Pursue international co-operation 3. Nuclear/Renewables/Clean fossil fuels

11. Impact on oil and gas - longer term UK to achieve 80% cut in emissions by 2050 ═ zero carbon electricity generation EU ETS covers operations on UKCS platforms Will CCS be essential to enable us to keep producing from UKCS? Will drive for low carbon bring forward decommissioning of older facilities? But still need to make the most of UK resources

12. What we are doing Encouraging projects tackling emissions and strengthening security of supply Energy Bill sets frameworks CCS projects regulated like oil and gas Unloading and storage of hydrocarbon gas Gives clarity for developers Supports re-use of oil and gas infrastructure

13. Impact on decommissioning - longer term Decommissioning activity will have to become low carbon Not an excuse to dump on the seabed Low carbon options preferred if key impacts are similar e.g. concrete structures and cuttings piles More attention to emissions data in EIAs

14. Low carbon decommissioning? Heavy lift Single lift Piece small Buoyancy float back Rig or vessel well abandonment DP or anchors Which options will cut emissions?

15. Tough Times Ahead? Short term Banks failing to provide credit and guarantees Company failures Oil prices and costs rising again, or falling? Longer term Drive for low carbon re-use of infrastructure Low carbon options for decommissioning