North Sea decom represents ‘very poor deal’, claims expert

Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.
Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.

North Sea decommissioning represents a “very poor deal” financially for UK taxpayers, according to an industry expert.

It comes after regulator the Oil and Gas Authority set an ambitious target of shaving £20billion off the total UK decommissioning bill.

According to the UKCS Decommissioning 2017 Cost Estimate Report, published last week, it will save the cash through a variety of measures.

In the document, the regulator said it has developed a “probabilistic” cost estimate which takes into account a “wide range of uncertainties”

But Tom Baxter, a senior lecturer in chemical engineering at Aberdeen University who has 40 years experience in the oil and gas industry, said decommissioning was just one available option.

He believes it may make more economic and environmental sense to keep subsea infrastructure in place.

Baxter said: “Whilst an aim of reducing costs by £20billion is laudable, offshore asset removal represents a very poor deal for the major decommissioning stakeholder – the UK taxpayer.

“The OGA should be offering the taxpayer a comparative sustainability assessment which compares the benefits for the nation of the current decommissioning plans against that of making assets safe and clean, leaving in place and using the money saved to fund green energy and emissions reduction projects.

“Investment in offshore architecture removal has little legacy – it is environmentally disruptive and by taking something to bits we create nothing of long term benefit for society or the environment.

“On the other hand, green energy will provide more long term jobs and, unlike decommissioning, will pay taxes providing for health, education, tackling poverty etc. Furthermore, and again unlike decommissioning, green energy will be providing society and the economy with an essential commodity – power for industry, electric transport and heat for homes.

“Before putting all this effort into reducing costs we should be challenging the need to do it in the first place.”

The OGA said the target of £39billion will remain fixed and improvements towards the target will be measured and reported on an annual basis.

The cost estimate has undergone external assurance by Rider Hunt International and has been reviewed by the MER UK Decommissioning Task Force’s cost team.

This includes representatives from industry, HM Treasury, OPRED and Oil & Gas UK.

Some of the possible cost saving measures include the use of metrics to focus on high cost elements, improving data collection, and increasing collaborative efforts.

Decom North Sea chief executive, Roger Esson said the £39billion target is a “significant opportunity” for the UK decommissioning supply chain.

HE added: “The real value of the report will lie in how industry uses this to inform and identify some of the real opportunities for cost saving.

“We believe that the achievement of the 35% plus reduction will come via three key areas: the sharing of knowledge and experience around best practices; the shaping and development of a supply chain that will be able to execute the scopes of work in the most appropriate and effective way possible, and finally, through the increased use of technology.

“Decom North Sea is at the forefront of facilitating knowledge share, is equally committed to helping create a robust supply chain and is working closely with industry stakeholders – including OGTC and OGIC – in the field of technological development.

“It is Decom North Sea’s mission to facilitate the achievement, and indeed betterment, of the OGA’s cost reduction target – a task we are already focused on.”