North Sea: Transitioning Economic Activities

Introduction

In the era of globalization and rapid change in international regulations, legal experts are more inclined to understanding the complexities, challenges and opportunities involved in activities that enhance sustainability in the growth of economic activities win marine sectors – Blue growth. Today, the North Sea is a basin with a long history of economic oil & gas exploitation that is fast approaching stages of transition and this has become an important issue. Whereas the basin has been dominated by fishing, shipping and oil &gas industries, the stakeholders in and use of the basin are currently diversifying . For example, maritime surveillance, cruise tourism, offshore renewables and aquaculture are increasingly depending on the basin and setting up assets and putting up new developments in the basin. This has necessitated decommissioning of oil & gas infrastructure that have either become redundant or whose time economic lives are nearing an end. Decommissioning is defined as the dumping, removing, abandonment or uninstallation of equipment or materials that were previously in use. Therefore, in simple terms, decommissioning refers to the demolition and removal of offshore objects or structures previously installed and used for economic exploration of oil & gas.

The main aim of this study is to identify the challenges faced in offshore decommissioning of installation in the North Sea. The study is organized in five chapters. Chapter one gives an introduction and background as well as the aims and objectives of the study. Chapter two identifies and justifies the various research methodologies, approaches and techniques used in the research objectives. Next, chapter three presents the results of the study in form of a literature review. Chapter four discusses the results while chapter five concludes the study by giving a recap of what has been found as well as recommendations for future research and practice.

Background of the study

The process of decommissioning oil & gas capital projects involves a wide range of technical skills and resources and services such as offshore construction services, inspection, subsea dividing, legal and regulatory services and environmental impact services among others. It also involves considerable levels of risks such as high costs, project execution errors accidents and professional liability. Operators in decommissioning projects require high levels of knowledge in various technical standards, national and international regulations and operational efficiency.

Decommissioning also involve various technological resources and tools such as light detection gadgets, the ‘digital twin’ technology, and drones that are needed for enhancing the operational efficiencies of the project as well as safety of personnel. More importantly, tools are needed to facilitate the obedience of both national and international environmental regulations governing decommissioning.

Decommissioning projects must consider and maintain structural integrity and load removal safety measures that must be conceptualized through a details project plan and submitted to regulatory authorities for approval. It is through these plans that the project managers may foresee various challenges that might ensue prior to or during the project implementation stages. Nonetheless, it may still be hard to predict any other risks associated with such projects once they take off.

The North Sea basin is shares by Germany, France, Denmark, Belgium, the UK, Norway and Netherlands. The territorial sharing implies that there are certain complexities and policy issues associated with decommissioning of offshore installations including national laws and international conventions regarding removal and disposal of petroleum equipment, economic obligations accompanying the removal and disposal of those equipment, and the residual liabilities.

There are three main international conventions governing decommissioning of offshore installations as well as other non-binding guidelines that companies apply. The first convention is the Geneva Convention on the Continental Shelf of 1958, whose Article (5) obligates all signatories to totally remove all installations during decommissioning. The second convention is the London Dumping Convention of 1972, which defines dumping as the deliberate disposal of sea wastes and other wastes from aircraft, vessels and other manmade structures. The third and last major convention governing international decommissioning is the UN Law of the Sea established in 1982, whose Article 60 (3) specifically provides for the sea by obligating companies to ensure a safe removal of all disused or abandoned installations for safe sea navigation. Nonetheless, there are conflicting guidelines between the former and the latter conventions in the sense that whereas Article 5 (v) of the Geneva Convention require total removal of all disused installations, Article 60 (3) of the UN Law of the Sea requires just a ‘simple’ removal. However, all these obligations may be overridden by the laws of coastal states, even though this may not be considered detrimental so long as the countries obey international standards.

Apart from the three major international conventions, there are several other unbinding policies and guidelines within which offshore decommissioning of installation in the North Sea might operate. For instance, the International Maritime Organization’s (IMO) stipulates the general principle that all disused installations should be removed. Specifically, the IMO guidelines require that all disused installations in water masses of less that 75 meters of depth and weighing less than 4000 tones should be removes unless it would not be technically feasible to remove them due to extremely high costs and extremely high risk to marine life or personnel. However, it is important to note that these guidelines lack the status of international law and are therefore not binding to states. Furthermore, despite their non-obligating characteristics, they reinforce all the other international laws that require the total removal of disused installations. Apart from advocating for total removal, the IMO also advocates for a proper marking of all unremovable materials in the nautical charts to aid safe navigation. All the coastal states should ensure that all the unremovable installations are unambiguous and that there is a clear establishment of who is responsible for any future damages. That said, other regional and international set of rules that govern offshore decommissioning of installation in the North Sea include the OSCOM Guidelines of 1991, the OSPAR Guidelines of 1992 and the Oslo Convention of 1972.

At national level, the UK has various laws, regulations and guidelines that governs the decommissioning process. For instance, the Petroleum Act of 1987 requires that oil & gas companies must seek approval from the government before they abandon any plans while the Prevention of Oil Pollution Act of 1972 controls oil discharge into the water bodies. Similarly, the Control of Pollution Act of 1974 regulates the disposal of oil and gas as examples of special wastes. All decommissioning projects within the UK’s jurisdiction must adhere to these regulations, including the recent Brent Spar decommissioning project in the North Sea.

Decommissioning projects require personnel with high skill levels in various fields. A typical decommissioning project would require offshore operators, naval architects, and heavy machine operators among others. Apart from the skilled personnel, such projects require efficient equipment and infrastructure such as anchor handling tags, construction support vessels, transportation barges, and safety standby vessels among others. Existing data indicate that 83% of existing North Sea installations are made up of fixed steel that collectively weighs at least 4.4 million tones. This implies that during decommissioning, the structures and their respective topsides will have to be removed through different techniques including reverse float over, piece small, multiple lift and single lift techniques. Various pieces of research speculate that the removal process of such heavy equipment expose the personnel to various risks and challenges that must effectively be managed. Moreover, project managers of offshore decommissioning of installation must maintain a balance between safety safe operations and less environmental implications to keep within both national and international environmental conservation regulations. Therefore, there seems to be numerous risks and challenges involved in decommissioning projects. This study seeks to explore existing research evidences on the challenges facing offshore decommissioning of installation in the North Sea by conducting a secondary research i.e. literature review.

Research Aim

To identify the challenges facing offshore decommissioning of installation in the North Sea

Research Questions

What are the challenges facing offshore decommissioning of installation in the North Sea?

What are the strategies for dealing with challenges facing offshore decommissioning of installation in the North Sea?

Research methods

This chapter gives an overview of the research techniques, methods and approaches used by the researcher to achieve the research aims. Regrading this, the researcher conducted a literature review on offshore decommissioning of installation in the North Sea by identifying, appraising, analyzing and presenting research evidence from existing journal articles on decommissioning. offshore decommissioning of installation is a popular topic area that has been explored by many studies that have presented pieces of information that are material to the current study. Therefore, instead of conducting a primary study that would involve more time and resources, a secondary study (i.e. literature review) would also help in identifying, analyzing and presenting evidence on offshore decommissioning of installation challenges that companies might have been facing in the North Sea albeit with less time and resource consumption. This justifies the selection of literature review research methodology for this study.

Search Strategy

The author developed an elaborate search strategy with an intention of identifying and selecting the most recent and up to date journal articles on challenge facing offshore decommissioning of installation in the North Sea from online databases such as EBSCO, ProQuest and Google Scholar. The study preferred online search over physical search because the latter was considered inconvenient and less efficient. Online databases enable researchers to easily identify and select relevant literature material by use of search engine sand key words. Moreover, online databases were selected because they have an abundance of literature materials useful in conducting literature reviews.

The author adopted a systematic and rigorous process of selecting studies for review. This was primarily meant to ensure that only the most relevant, most useful and most reliable literature material were included in the study. Thus, the search process was primarily guided by inclusion/exclusion criteria which determined the characteristics that each study must have had to be included in the review. The first criterion was that only the studies published in English Language were selected for review specifically to ensure that language barrier did not affect the data interpretation process. Next, the study only included literature materials available in full text to facilitate a comprehensive analysis of data. Lastly, the study only included literature material that targeted the North Sea basin to maintain a focus on the research topic. Apart from ensuring quality of the selected literature materials, the inclusion/exclusion criteria also helped in developing the scope and relevance of the entire search process.

Search Terms

The search process relied on a variety of search terms to facilitate faster and effective search process. Some of the most used search terms were North Sea, offshore decommissioning, installation, structures, conventions, law, international law and challenges. The search terms were customized, combined and separated using Boolean operators: AND/OR. For instance, ‘OR’ was used to broaden the search by combining similar words while ‘AND’ was used to narrow the search by combining unrelated words.

Search results

When the search terms were applied to EBSCO, 345 journal articles were retrieved. However, when the retrieved articles were subjected to the inclusion/exclusion criteria, only one journal article satisfied the criteria and was selected for inclusion. The search terms were again use don ProQuest, from which 576 journal articles were retrieved. Nonetheless, only one journal article met the inclusion/exclusion criteria and was later included in the study. When the search terms were subjected to Google Scholar, 688 literature materials were retrieved, none of which satisfied the inclusion/exclusion criteria.

Chapter 4

Findings and discussions

The literature search process yielded journal articles that had strong evidence on the faced in offshore decommissioning of installation in the North Sea. Generally, the review process identified three major areas of challenges that are most likely to be experienced during the decommissioning process namely cost challenges, risk and experience, and scoping issues. The following section thematically discusses the respective challenges in depth: Cost was consistently identified by the reviewed studies as a major challenge involved in decommissioning processes. For example, studies by Ahiaga-Dagbui concluded that decommissioning projects are characterized by cost uncertainties and that a typical project would cost more 100%-200% less or more the budgeted cost.

Cost estimation is a crucial part of the project’s success because the size of estimated budget may influence decision regarding whether the decommissioning project should continue or extend the asset’s life. Moreover, the cost estimates are crucial in deciding the kind of decommissioning process sand method (i.e. small piece, single lift or reverse installation), the type of contracts and the types of contractors to be adopted for the projects. However, despite the importance of cost estimation to the project conceptualization and planning, decommissioning projects are often subjected to high levels of complexity and uncertainty as a result of inadequate information regarding the availability of removal tools, structural integrity, availability of qualified technicians and personnel, port capabilities and resale & reuse. Literature also indicate that while it is always easy for project managers to refer to previous projects’ data base and estimate costs of building assets, the same is not true for decommissioning projects because it is a whole new thing that has not been done before. Because of the uncertainty and complexity involved in cost estimations occasioned by lack of empirical data for producing cost estimates, most decommissioning projects often overrun their initial budgets.

Lack of decommissioning planning experience has also contributed to the const challenges associated with such projects. In the study by Ahiaga-Dagbui et al many interviewees complained on the use of pain/gain contract incentivization method instead of day-rate with an aim of reducing decommissioning costs. While this is a common complaint among workers involve din decommissioning projects, contractors in the study by (1) felt that this was not necessarily the best way to reduce costs because target costs would have to be readjusted severally.

In the recent past, there has been an increase in collaboration among oil & gas companies upon realizing the need to work closer and improve efficiency through cost sharing. However, these collaborations have been characterized by industry dilemma particularly with regards to the development of new decommissioning technological tools and equipment as well as issues of intellectual property ownership. However, as it seemed to have been fond in the study by (1), stakeholders in decommissioning have an unwavering support for collaboration to facilitate the development of much needed technology and innovation.

Uncertainty, experience and complexity

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As highlighted above, the complexity of decommissioning projects significantly contributes to a reliable cost estimation. The entire process sis so complex that the behavior of all cannot be deduced by understanding individual parts, meaning that while it is easier to know the effects that have contributed to the outcomes, it is difficult to tell how the latter relates to the former. This may be as a result of project complexity which contributes to the totality of project outcome that overruns the expected results from individual causes. When trying to understand these cost overruns, project managers analyze tow characteristics of systems namely: each system has important components that none of its parts would have and every part of the system loses a unique part when it is separated from the system. Therefore, separating a system contributes to a loss of its essential properties.

Against that backdrop, offshore decommissioning may present other challenge that can be categorized into four main areas. First, the projects are likely to face technical complexity, which is cause by the technicality in keeping track of and managing different dependent and independent activities. Secondly, the project is highly likely to be faced y technical complexity, which entail problems associated with the production of products that have never been produced before or with techniques that have not been tested before. Finally, the projects may be faced with the challenge of directional complexity which entail unclear objectives, agendas or goals because the project may have different stakeholders with different goals and objectives.

offshore decommissioning in the North Sea may experience high degrees of the challenges because of its novelty nature. North Sea offshore decommissioning was the first global decommissioning project of such a large magnitude and thus there are various products and processes that that lack precedents to be drawn on. For instance, the project involves a cell-content sampling of sediments drawn from the bottom of the concrete structures of the Brent Delta platform has never been conducted before. With such complexities and uncertainties characterized by lack of knowledge and inadequate information, the challenges become more eminent as the project matures. The uncertainties mean that the project managers must make assumptions about weather, schedules, safety, technical complexity and performance, all which have a significant variance with reality. For example, the harsh and changing weather conditions in the North Sea implies that the removal of installations must be completed during the summer months, and therefore the planning must consider the much unpredictable natural environment.

Conclusion

Many offshore installations in the North Sea are either approaching or have reached the end of their economic life and therefore must be decommissioned in line with the stringent national and international regulatory framework that govern the oil & gas investment. The decommissioning projects in the North Sea face various challenges that must be addressed to ensure a cost-effective and safe decommissioning that makes environmental safety considerations. This paper presents key challenge faced by offshore decommissioning project managers upon reviewing existing systematically selected literature material. The first challenge identified by this study is cost, whereby the complexities and uncertainties the projects case the projects to overrun their initial budgets. Secondly, the project faces the challenge of complexity of systems, lack of technical experience to try out new and untested products as well as the uncertainties associated with natural environment. These challenges call for the development of more sophisticated and reliable cist models that combine both expert and probabilistic models that are case based. This can help reduce the uncertainty associated with the complexity and nature of the projects. Furthermore, there is a need to develop system-based structured approaches that rely on case studies and simulate the complexities associated with decommissioning at the planning stage before implementation.

References

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