Virus crisis threat to oil platform removal decommissioning

UK Oil and Gas has counted 1,630 wells set to be dismantled in the next decade in British waters, the equivalent of nearly one rig every two days. (AFP)
Short Url
Updated 09 July 2020

Virus crisis threat to oil platform removal decommissioning

  • Environmentalists fear that companies will seek to leave structures in place

LONDON: Oil companies are being forced to cut spending due to a fall in global oil prices, threatening funds earmarked to dismantle old off-shore rigs, despite environmental risks.

A drastic drop in revenue caused by the coronavirus outbreak has forced majors such as Total, Royal Dutch Shell and BP cutting or defering expenditure by billions of dollars.

Decommissioning platforms is not “one of their top priorities,” according to Sonya Boodoo, an analyst at Rystad Energy.

She told AFP the allocated budgets for such activities would likely decrease by at least 10 percent over the next two years.

Before the outbreak, the UK Oil and Gas industry association estimated that firms planned to dedicate £1.5 billion ($1.9 billion) per year up to 2027 on decommissioning infrastructure in the North Sea.

The bill would have been the largest for any country in the world, analysts note, as hundreds of installations will need attention in the coming decades.

“Many of the UK’s platforms were built and designed during the 1970s,” Romana Adamcikova, an analyst at Wood Mackenzie, said in a report earlier this year. “Little thought would have been given to how those structures would be removed at the end of their life.

“Now, the environmental impact of decommissioning has become a thorny issue.”

UK Oil and Gas has counted 1,630 wells set to be dismantled in the next decade in British waters — the equivalent of nearly one rig every two days and requiring more than 1.2 million tons of concrete and steel to be removed.

Since 1998, the Convention for the Protection of the Marine Environment of the North-East Atlantic, known as OSPAR, prohibits leaving in place — either wholly or in part — disused offshore installations.

But even after surface structures are removed, the seabed can still be littered with the industry’s detritus.

OSPAR also sets out a process for considering exemptions, known as “derogations,” to the prohibition which allows operators to ask to leave some structures in place in certain scenarios.

The aging Brent oil field, discovered in 1971 and located 180 kilometers northeast of the remote Shetland Islands, is a prime example of the controversy the issue can generate.

Brent is a benchmark for international crude oil prices that, after nearly 50 years of pumping, finds itself at the center of contention within OSPAR, which comprises 15 individual governments as well as the 27-member European Union.

Shell, who has exploited the field since 1976, has said it wants to leave in place parts of four decommissioned platforms, which would include 40,000 cubic meters of sediment containing about 11,000 tons of oil.

The firm said it had explored potential re-use options, such as carbon dioxide storage and wind farms, but did not consider them “credible” due to the age and distance from shore of the Eiffel Tower-sized platforms, OSPAR said.

The operator considered there to be minimal environmental and safety legacy risks from leaving them in place, it added.

But the plans provoked a furious reaction from environmental campaigners.

Greenpeace activists stormed two of the structures in October to display banners reading: “Clean up your mess, Shell!“

Meanwhile, Germany led an outcry at a special OSPAR meeting in the same month, branding the plan “absolutely unacceptable.”

It asked the company to at least set out proposals to clean the structures.

Greenpeace’s David Santillo, a University of Exeter honorary research fellow. said: “If you allow for the option to leave it in place, almost certainly it will stay in place.”


Turkey on brink of recession as economy collapses

Updated 13 August 2020

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.