Scrutiny of decommissioning rules heating up, Aberdeen law professor says

Aberdeen University professor John Paterson
Aberdeen University professor John Paterson

Oil industry bosses are more vigorously questioning whether current rules for leaving installations in the North Sea are fit for purpose, an Aberdeen academic said.

Professor John Paterson, from Aberdeen University’s law school, said more people are discussing whether the criteria are too restrictive.

He also said efforts to attract further investment to the UK North Sea could be enhanced if the government accepted liability for infrastructure in perpetuity.

Ospar, a pan-European body which was set up to protect the marine environment of the north-east Atlantic, requires companies to remove installations in their entirety once they reach the end of their production cycle.

But exceptions can be made if a company can prove that removing infrastructure would do more harm to the environment than leaving it at sea.

Fifteen countries have signed up to the Ospar Convention, including the UK.

Prof Paterson said there were “inconsistencies” in the current system and suggested that the development of a more coherent, scientific approach could result in more infrastructure being left behind.

He questioned whether it was reasonable to exclude the possibility of leaving installations in place as artificial reefs.

The presence of marine growth on subsea equipment is “not a relevant consideration for leaving in place” at present, he added.

Addressing guests at a business breakfast hosted by the university, he said leaving more oil infrastructure in the basin would increase the focus on the issue of liability.

The latest guidance from the UK Government states the “owner” of the infrastructure at the point of decommissioning is liable “in perpetuity”, Prof Paterson said.

He said the theme “exercised minds” in industry, but accepted that the positive response to recent UK offshore licensing rounds indicates companies are not unduly deterred by the spectre of perpetual liability.

Prof Paterson did say it made sense to plan for a situation where a company with liability had ceased to exist.

Adopting the Norwegian model, under which licensees can transfer liability to the state in exchange for financial compensation, could be a remedy.

“The state accepting liability would remove uncertainty as in 50 years some companies won’t exist anymore,” he said.

“It would also send a positive message to investors at an ultra-mature stage of the basin’s cycle.”

Prof Paterson also said the matter of ownership was less straightforward than it may appear.

The UK Government − though the Department for Business, Energy and Industrial Strategy, and the Oil and Gas Authority – dishes out licences for oil exploration and production, while the Crown Estate issues leases for offshore wind and carbon capture and storage projects.

Prof Paterson said the authorities “derive financial benefit” from the system and “exercise strong property rights”.

He said it was unclear whether companies could successfully argue that they have a “landlord” who should bear some responsibility.

In the absence of “definitive answers” in international law, that line of inquiry could be a “red herring”, Prof Paterson acknowledged.

Furthermore, in the event of a vessel colliding with residual infrastructure, for example, the owners of installations could argue they were not negligible if all the relevant boxes were ticked, he said.

Among other things, they would need to prove they had fulfilled the obligations under the Petroleum Act 1998, had kept up with monitoring, and that UK authorities had accepted their “close-out report”.

He stressed that the university was simply trying to “dig into some questions and open up conversions” so that current rules are scrutinised.