Are UK ports ready to accept decommissioned rigs? Not yet, law firm says

Enhanced Government support and following through on Budget promises are needed if UK industry is to cash in on multi-billion-pound decommissioning projects in the North Sea, Pinsent Masons, a UK law firm says.

In a statement on Monday, the company said that Scottish ports were also at risk of losing out to European and Scandinavian competitors who are taking the lead in being ready to handle the massive rigs which will be decommissioned over the next three decades.

The company said those points will be debated by Pinsent Masons oil and gas specialists with industry leaders this week at the Offshore Decommissioning Conference in St Andrews (Nov 14-16) to flesh out how the UK capitalizes on an industry estimated to be worth up to £70 billion.

Pinsent Masons partner, Shirley Allen, said: “While the Oil and Gas Authority, Treasury and industry leaders have made progress in streamlining the process with fiscal incentives and a move towards a standardised contracting approach, the bottom line is opaque total costs, compounded by recent oil price volatility, has left producers in limbo on how and when late life assets should be taken offline.

“It’s a lengthy and expensive process at a time when cost control forms a critical part of boardroom discussions across North Sea businesses. Clear projections and visibility of cost will be the Holy Grail not just for E&P businesses, but for services companies exploring new opportunities in this sector of the oil and gas industry.”

Allen said the Chancellor needs to fulfil a commitment made during the Spring Budget to better encourage the transfer of late-life assets through tax reliefs in the upcoming Autumn Statement.

The Aberdeen-based lawyer added: “We need to ramp up efforts and build on the progress already made. While collaboration between Government and industry will play a crucial role in alleviating some of the concerns around decommissioning the question remains – is the UK ready to tackle the late-life process?

“More needs to be done to adapt ports across the UK to ensure they are equipped to manage an influx of large-scale rigs coming onshore. To put this into context, a number of Norwegian and Dutch ports will be ready as these countries tackle decommissioning in the coming years.

“We need to take the lead from our Norwegian and Dutch counterparts and garner the necessary investment to ensure our ports are ready and properly equipped to accept the decommissioned assets and also manage the environmental requirements as decommissioning begins to gather pace.”

According to Oil & Gas UK’s report issued earlier this year, over the next decade, some 80 platforms are forecast for removal across the UK Continental Shelf. This represents almost 17 percent of some 470 installations that will require decommissioning over the next 30 to 40 years.