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Transferring Ownership – An Alternative Approach to
Offshore Oil Platform Decommissioning
a report by
Salem Y Lakhal
Professor, Faculty of Business Administration, University of Moncton
Estimates illustrate that elevated oil and gas prices between 2003 and to remove it for deconstruction, recycling and disposal. If the platform
Engineering & Construction
2008 (see Figure 1) have delayed oil rig decommissioning by is technically efficient, re-using it at the same site or refurbishing it and
approximately two years.
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Some countries, such as the UK, are installing it at a new location could give new life to the platform. The
concerned with minimising the risk of liabilities falling on the public most influential factors in this decision include crude oil prices and steel
purse and have launched a consultation with industry on ways to and other metal prices. Additionally, the maintenance costs of the
improve the statutory decommissioning procedures. The oldest platform and the price of a new one would influence the decision.
offshore oil platforms are found in the UK North Sea. Approximately
470 installations, 10,000km of pipelines, 15 onshore terminals and Is the Company Ready to Assume the
5,000 wells are awaiting decommissioning. Cost estimates range from Risk of the Post-Closure Stage?
£15 billion to £20 billion (approximately US$21.6 billion to US$28.8 The post-closure stage frequently leads to decommissioning. By
billion). Considering economic and environmental factors, an analysing the scope of work in a decommissioning process, three main
alternative decommissioning approach is required. stages of work are seen: disconnection of the platform, deconstruction
and removal and recycling and disposal.
A Brief Historical Analysis
According to researchers,
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the first recorded offshore platform The disconnection activities are performed after carrying out a pre-
decommissioning was in the Gulf of Mexico’s Outer Continental Shelf survey. The purpose of the pre-survey is to establish the current
(OCS) in 1973. Since then, according to data from the US Department status of the buoys, risers, moorings, etc., to confirm that the task is
of the Interior’s Minerals Management Service,
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platforms have been as described on the available drawings and documents and to
removed from the OCS at a rate of roughly 100 per year. Perhaps the identify any anomalies that might affect the task. A review of the
most publicised decommissioning case is the Brent Spar case. Its owner, disconnection procedures is necessary in light of the pre-survey
Shell UK Exploration & Production, spent US$36 million in search of a findings, and an update could be required. Measures to ensure that
widely acceptable way to dispose of Brent Spar; it took two years the worksite is safe are necessary; these may include, for example,
(between 1995 and 1997) to come up with the principle ‘do not dump; providing safe access and means of escape and eliminating risks of
re-use or recycle’. falling. Particular attention is paid to any hazardous substances
found; these must be removed or made safe until removal is
The Post-closure Stage possible. Once this has been accomplished, the disconnection
When production falls below the break-even point, the closing stage of process will commence. The risks of the disconnection process
the platform’s life-cycle is reached (see Figure 2). This stage will be are rated according to a one-to-five scale: 1 = unlikely; 2 = rare;
delayed if the crude oil price covers the exploitation costs and maintains 3 = occasional; 4 = probable; 5 = frequent.
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a comfortable profit margin. During the closing stage, an important
decision must be made about the possible transfer of ownership. If The deconstruction and removal activities involve technical
the company decides to retain its ownership, it will assume the restrictions resulting from the original method of construction. Some
responsibilities and risks of the post-closure period and, possibly, platform parts may not have lift points for upending and lifting, and
the decommissioning activities. The platform’s owner has the the design of the structure may not provide for handling in a specific
competency to run the supply chain
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platform efficiently; however, it is way; for example, in the case of the Kittiwake loading buoy in the
unlikely that he/she has the ability or the resources to decommission it. North Sea, it was not feasible to proceed with a heavy lift solution.
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This undertaking is different from the oil extraction process. If the After deconstruction, the platform elements are transferred to shore
company transfers ownership, the new owner may re-use it or decide in order to be recycled. The techniques adopted will depend, to a
large extent, on the availability of suitable construction vessels and
the facilities on shore. The methods adopted will be specific to each
Salem Y Lakhal is a full Professor in the Faculty of
Business Administration at the University of Moncton.
platform, with the objective of minimising the number of heavy lifts
His research interests include the environmental
required to keep the risk as low as reasonably practicable. To achieve
dimensions of supply chain optimisation and
this, lifting activities should be avoided if possible and specialist
management. He is studying offshore platform
decommissioning, applying the concept of the machinery used as much as possible by cutting the facility into pieces
‘Olympic’ dreen supply chain developed in his
that can be easily and safely handled at ground level by machines.
previous research. Dr Lakhal holds a BSc in
electromechanical engineering, an MSc in operations
Hand-cutting is avoided or reduced; however, where this is required,
management and a PhD in operations management all necessary precautions should be taken to ensure the workplace is
and decision sciences.
safe and secure. As these activities are completely different from the
oil extraction process, a competent and experienced contractor
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© TOUCH BRIEFINGS 2009
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