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A New Economic And Ecological Concept For Offshore Decommissioning

Fish stocks worldwide are under increasing stress due to raised levels of habitat degradation. State fisheries departments in many countries are undertaking habitat restoration projects to combat this phenomenon.

In conjunction, numerous offshore oil and gas installations, after many years of operation, are reaching the end of their productive lives, and the owners are required to decommission them in compliance with the rigorous decommissioning regulations that, as a base case, require removing everything from the seabed.

In the U.K. the international obligation on decommissioning is governed by the OSPAR Convention, which under the terms of Decision 98/3 prohibits leaving wholly or partly in situ the offshore installations. However, during their time in operation, which can last several decades, the submerged structures of these offshore installations have created effective and productive habitats for marine life, which would otherwise be destroyed once they were removed and taken out of service as requested by the rules.

Complete removal of offshore installations also has a significant impact on the decommissioning costs, which are estimated to be as high as tens of billions of dollars worldwide. The typical removal practice is to use a large crane vessel to lift the structure out of the water onto a barge after which it is then transported to a port, transferred ashore and scrapped.

This is a very expensive process that also poses significant safety and environmental challenges to operators and their contractors executing the decommissioning works.

In addition, the decommissioning activities are effectively subsidized by governments and local communities as the cost of removal is deemed to be a sunk cost, resulting in tax liability write-offs and reduced royalties to stakeholders.

The high cost is not the only issue when it comes to decommissioning old assets. Oil and gas operators’ reputations are at risk as certain cost-effective solutions may be perceived as shortcuts or attempts to pass liabilities onto taxpayers as well as causing environmental impacts that will affect future generations.

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