OPINION: Decommissioning Liabilities – an alternative

Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.
Tom Baxter, senior lecturer in chemical engineering at Aberdeen University.
Tom Baxter
Opinion by Tom BaxterSenior Lecturer, Chemical Engineering, Aberdeen University

Concerns surrounding decommissioning liabilities have been around for many years – particularly the angst caused by the phrase ‘liable in perpetuity’.

Consider the scenario where small operating company has decommissioned an asset and in 30-50 years time a well plug is breached and a leak is detected – what happens? What is the probability of company still being in existence – very small I would suggest. So who undertakes any required remedial works when there is no one around to take ownership? Lawyers pointing fingers and pontificating around responsibilities.

Inevitably it will fall onto the state (the taxpayer) to organise and fund the necessary works. So shouldn’t we face up to that scenario now and accept that ‘in perpetuity’ by default will in many instances fall to the state. There is though an opportunity here for the government. The government could accept the liability for a fee from the decommissioning company, thereby generating cash for the Treasury.

Clearly there are risks here for the Government, but like any other business, risks have to be quantified. What is the probability and consequence of a loss of containment and how much would it cost to fix? What might the leak look like?

Thoughts of a Macondo can be quickly dispelled. The reason the operator has abandoned the field will be a lack of energy to support production. Since there is little to no positive pressure in the abandoned well, a loss of containment is therefore likely to be a weep – not a gushing blowout.

Throughout their operational life many fields will be disposing of produced water to the sea. For a field producing 100,000 barrels per day of water (not unusual), that field will have been disposing of around 0.4 tonnes/day of oil to sea.

This is deemed an environmentally acceptable level. Will the weep be any worse than what we have been prepared to accept for the past 30 years? There are many other unanswered questions.

The government, though, has to face up to the inevitable and put this minefield to rest.