Shell decommissioning of the Brent Platform – haven’t we been here before?

In February 2017 Shell lodged plans to the Department for Business, Energy and Industrial Strategy (DBEIS) to undertake the decommissioning of offshore petroleum installations in the Brent Field, located in the North Sea, north east of the Shetland Islands. The Brent field is an iconic field, having commenced production in 1976, producing a sweet light crude oil that has been used as a benchmark crude, serving as a reference price against which other crudes are measured. However, given the decline of production from the Brent field, the Brent benchmark crude now comprises a mix of crudes from the Brent, Forties, Oseberg and Ekofisk Fields in the North Sea.

The Brent field is a giant field with installations to match: the topside of the 4 platforms being removed range between 16,000 and 31,000 tonnes. Three of the Brent installations (Bravo, Charlie and Delta) comprise concrete legs, known as ‘Gravity Based Structures’ (GBSs) (also known as Condeep Structures), which vary between 290,000 and 340,000 tonnes. In its detailed decommissioning plan that has been lodged with DBEIS, Shell recommends that the three GBSs remain in place, since they cannot be refloated or dismantled in one piece. This is seen as the best option based on technical, safety and cost grounds. Shell proposes to remove the top of the installations and seal the GBSs with concrete caps, and fit navigation aids. The decision to leave the GBSs in place has not been taken lightly. In its Decommissioning Plan, Shell outlines the reasons for leaving these structures in place. In particular, Shell stresses that these supports are made from very thick concrete with steel bars and solid ballast, and were anchored down during installation by flooding the legs with water. The GBSs were not intended to be removed once they had been placed on the seabed, and at the time these platforms were designed and installed, there was no requirement to remove such structures. These GBSs have been extensively used in the North Sea (both in the UK and Norwegian Sectors) as they provide the best stability in the rough North Sea, and have the added advantage of enabling oil to be stored in them if required.

It is Shell’s recommendation to leave the Brent GBSs in place that have united environmental groups to oppose the plan. This is not the first time that Shell, or the decommissioning of Brent Field installations, has come to the international attention. In 1995, after three years of evaluation of options, Shell was authorised by the UK Government and the OSPAR Convention (the Convention for the Protection of the Marine Environment of the North-East Atlantic) to dispose of the Brent Spar, an oil storage and tanker-loading buoy from the Brent Field, on the North Feni ridge, in over 7,000 feet of water. What followed was international outrage, with Greenpeace playing a lead role. At the heart of the opposition was the contention by Greenpeace that over 5,500 tons of oil remained in the Brent Spar, a figure countered by Shell who said only 50-100 tonnes remained. After a series of protests and boycotts in Germany and Northern Europe, Shell withdrew their plan to scuttle the Brent Spar in deepwater, with the Spar instead dismantled by Det Norsk Veritas in a Norwegian fjord. Soon after the withdrawal of the plan to scuttle the Brent Spar, the UK Energy Minister called the Greenpeace campaign ‘completely misleading’, leading to a public apology by Greenpeace for its mistake in the estimation of the amount of oil remaining in the Spar.

In the latest controversy to affect the Brent Field, environmental groups claim that the proposed decommissioning plan may be in breach of international law. The two main international law instruments related to the decommissioning and disposal of disused installations is the United Nations Convention of the Law of the Sea (UNCLOS) and the OSPAR Convention. Under UNCLOS, there are a number of general duties to protect the marine environment, particularly Articles 191 and 192. The primary law relating to the OSPAR convention is the decision of the OSPAR Commission after the Brent Spar incident, known as OSPAR Decision 98/3 on the Disposal of Disused Offshore Installations. Under this decision, the dumping or leaving in place (wholly or partly) of disused offshore petroleum installations is prohibited within the OSPAR maritime area (which covers the Brent Field). There are, however, exceptions to this prohibition, including:

  • steel installations weighing more than ten thousand tonnes in air;
  • gravity based concrete installations;
  • floating concrete installations;
  • any concrete anchor-base which results, or is likely to result, in interference with other legitimate uses of the sea.

Given the weight and nature of the structures, it is well within the OSPAR convention exceptions to leave the structures in place, in line with the ability to remove the GBSs, and whether it is safe to do so.

Indeed, it is important to realize that there are instances where the removal of a structure may well pose a greater threat than leaving it in place. Such a threat can be to the environment itself (such as the debate surrounding the rigs to reef program) and safety to those undertaking the removal of the installation. Indeed, in the 2000s the MCP-01 concrete platform, located in the North Sea, was decommissioned. The MCP-01 was also a GBS, containing 386,000 tonnes of ballast. After a consideration of all possibilities for removal, the decision was made to leave the subsea GBS structure in place, with as much of the equipment and materials as practicable removed from the concrete substructure and reused/recycled. The primary reason for this decision was the risk to workers, particularly those involved in demolition, marine operations and offshore diving operations.

Whatever decision the UK government makes regarding the decommissioning plan for the Brent Field, it is essential that considerations beyond environmental groups’ interest be considered. Such a decision on whether to leave the GBSs in place need to also consider the safety of those undertaking the removal and recycling, and whether more environmental harm will be caused by removing a 300,000 tonne structure that has been in place for over 40 years. Whatever happens, the ensuing debate regarding this issue is sure to be interesting.

Blog by Professor Tina Hunter


OPEC’s Decision to Cut Oil Production: Factual and Legal Background

This blog is by Constantinos Yiallourides, a Doctoral Candidate at the University of Aberdeen.  In this blog, he considers the most recent decision of OPEC to cut oil production and its potential implications.

On 30 November 2016 in Vienna, the Organization of the Petroleum Exporting Countries (known as OPEC, or Organization) reached a historic deal to cut-down on their current collective output, leaving behind the pump-at-will policy the Organization had adopted in 2014 at the instigation of Saudi Arabia. They decided, after eight years of continuous negotiations, to reduce production by about 1.2 million barrels a day. The new limit on total OPEC output will be 32.5 million barrel per day.

The agreement follows on from a plan sketched out in the 170th (Extraordinary) Meeting of the OPEC Conference in Algiers on 28 September 2016 where OPEC countries agreed to examine how to set up a production ceiling of between 32.5 Mb/d and 33.0 Mb/d. They also emphasised the need to bring leading non-OPEC producers into the process in an effort to stabilise the oil market and avoid the adverse impacts in the short and medium-term. While certainly significant, the Algiers failed to reach a consensus on how to distribute the cuts amongst its members. Further, OPEC’s push to implement the Algiers deal and boost oil prices shifted focus to major crude suppliers outside of OPEC such as Russia. Despite some positive signs, Russia appeared reluctant to curtail its current production rates, risking scuttling the whole deal.

With the 30 November decision, a more specific implementation framework has now been agreed and the actual cuts of each OPEC country have been determined. OPEC’s Secretary-General Mohammad Barkindo stated that this cooperation will be ‘the first time OPEC [and] non-OPEC will agree to a joint, binding supply-management agreement’ according to the Wall Street Journal. Over the coming 6 months, starting from 1 January 2017, Saudi Arabia shall cut its output by 486,000 barrels a day to 10.058 million a day. Iraq, OPEC’s second-largest producer, shall reduce by 210,000 barrels a day from October levels. The United Arab Emirates and Kuwait will reduce output by 139,000 barrels a day and 131,000 a day, respectively. Most crucially, Russia has agreed to cut output in the first half of 2017 by up to 300,000 barrels per day. As it turns out, this is the first time in 15 years that the non-OPEC oil-producing country Russia is officially participating in an OPEC production cut deal.

Factual and Legal Background

OPEC was created at the Baghdad Conference on September 10-14, 1960. Its current members, with years of membership, include: Algeria (1969-present), Angola (2007-present), Ecuador (1973-1992 and 2007-present), Gabon (1975-1994 and 2016-present), Indonesia (1962-2008 and 2016-present), Iran (1960-present), Iraq (1960-present), Kuwait (1960-present), Libya (1962-present), Nigeria (1971-present), Qatar (1961-present), Saudi Arabia (1960-present), United Arab Emirates (1967-present) and Venezuela (1960-present).

OPEC’s stated objective is to coordinate the petroleum policies of member countries and to determine the best means of safeguarding their interests. This includes devising ways for ensuring the stabilisation of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations. According to Article 10 of OPEC statute, the Conference is the supreme authority of the Organization. The Conference, which typically meets twice a year, consists of delegations representing all the member countries. A non-member country may be invited to attend a Conference as an observer, only if the Conference so decides. Article 15 of OPEC statute provides that the Conference shall ‘formulate the general policy of the Organization and determine the appropriate ways and means of its implementation’. That said, OPEC’s most recent Conference, after reviewing oil market developments since it last meeting in Algeria as well as the oil market outlook for the remainder of 2016 and 2017, found that it is in the interest of both OPEC and non-OPEC producing countries to bring stock levels down to normal levels in order ‘to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward’.

According to OPEC’s press release, its decision to implement a new OPEC-14 production target of 32.5 Mb/d, was based on the report of OPEC’s Secretary General’s, the recommendations made by the High-Level Committee that was set up following the Algiers framework agreement, the report of the Economic Commission Board and OPEC’s Long-Term Strategy (LTS) document. A common observation in all the documents above was that, because of the continuous oil price downfall due to oversupply, global spending on exploration and production investments has also been free-falling since 2014, and a third year of investment falls would be catastrophic. Thus, appropriate responses to bring forward the rebalancing of supply and demand, this returning sustainable stability to the market were deemed urgent.

Current and Future Implications

The recent decision of OPEC to cut production has already had a positive effect on global oil prices. At the time of writing this blog, only five days following OPEC’s decision, global oil prices have surged 15 percent with Brent crude rising from $46 per barrel up to $54.94 per barrel according to Bloomberg. Some commentators suggest that this may mark the beginning of the end of a two-year downfall in the global oil market, during which prices have plunged from $100 per barrel down to $40 and oil producing countries, such as Venezuela, have come close to financial collapse.

However, whether this upward trend is sustained, it will depend on a number of factors. First, the agreement depends on how closely the OPEC and non-OPEC countries, such as Russia, adhere to their promises to pump less, something they have not always done in the past. Indeed, there are still questions about how this deal will be monitored and enforced. For example, it is submitted that traders cannot fully monitor the implementation of Russia’s pledge to cut 300,000 b/d of production since much of its production moves via pipelines as opposed to oil tankers which are easier to monitor based on how many leave port. Thus, getting Russia to stick to this commitment may be a tougher sell than expected, according to energy analysts.

Third, there is the question about the potential implications of the shale energy revolution in the US. Indeed, if anyone is cheering the news of the OPEC deal it is US shale producers. Over the past year, with global oil prices low, the US oil production has been constrained to some extent. A likely rebound in oil prices, if OPEC members cut supplies, combined with a steep slide in drilling costs as a result of technological advances, could lead to a revival in US shale production. This scenario played out similarly in late September 2016 when oil prices increased shortly after the announcement of the Algiers deal. US shale producers swiftly put rigs back in operation sending prices right back down to where they were before the announcement. Undoubtedly, this could pose serious challenges to the Organization’s efforts to boost oil prices.

Finally, as always with oil, there is time and money at stake and the stakes are high: from what refiners, marketers, distributors, and retail station owners gain per gallon, to the future of the global oil market and the world economy as a whole. OPEC, it would appear, still has the power to shake global markets. If the OPEC agreement pushes oil above $60 a barrel in the next few weeks, as some optimistic estimates suggest, it will certainly allow some breathing space to big oil producers who have seen their profits halved since 2014. On the other hand, big oil consumers will have to move swiftly to protect themselves against soaring fuel prices. Airlines, for example, could scramble to hedge against rapidly increasing oil prices.

Averting an Australian ‘Deepwater Horizon’: the power of the people


This post is by Professor Tina Hunter, the co-Director of our Centre for Energy Law

Today some of us will go to the movies. A few of us will see the new action thriller called Deepwater Horizon. The movie is the ultimate action thriller, starring Mark Wahlberg as the action hero. However it is no Hollywood tale; rather it is a real-life story, and one that is not a thriller but a horror for those who were involved. Let me explain.

On the evening of 20 April 2010, only hours after executives from BP had visited the drilling rig Deepwater Horizon in the Macondo field of the Gulf of Mexico to celebrate seven years of work injury free, the rig was ripped apart by an explosion. The causes of the explosion and consequential oil spill are complex, but were essentially caused by a loss of control of the oil well below the rig. As the Presidential report noted, ‘the immediate causes of the Macondo well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry”. The impact of this accident is well known, with 11 men losing their lives, and the resulting oil spill the worst oil spill ever recorded in a single event.

The reason for the severity of the oil spill is the loss of control of the well. Unlike an oil spill from a ship, such as the Torrey Canyon disaster in 1967, where the volume of oil spilled is confined to the cargo, the spill from an out of control well just keeps going. And going. Until a well is stopped from leaking (capped), it will continue to leak. This is what happened in the case of Deepwater Horizon, where it took 87 days to cap the well and stop the flow of oil. In that time, approximately 4.9 million barrels of oil leaked into the rich fishing grounds of the Gulf. Such a spill caused a massive impact on fishing, severely impacting on the livelihood of those in the Gulf Region.

By now some readers will be thinking ‘so what – this was a long time ago?’ The reason for reopening the Deepwater Horizon wound is not because of the current film, but rather something much more important – the possibility that it could happen again in Australian waters.

In late 2010, as part of the annual petroleum licensing round, the Australian Government granted BP (yes, the same BP) a licence to explore for petroleum in the Great Australian Bight (GAB), over an area of almost 25,000km2, located approximately 500km off the coast of South Australia. The water depth in the license area ranges from 140m to approximately 4,600m. In comparison, the well in Deepwater Horizon was drilled at a depth of 1,500m.

So, to clarify – the Australian Government granted BP, who lost control of a well in 1,500m of water and caused the largest ever oil spill, the right to drill in waters up to 4,600m deep.

Furthermore, the physical environment in the GAB is not at all like the Mexican Gulf. Rather, it is part of the Southern Ocean, known for some of the most brutal weather on earth, causing the death of many sailors.

Normally the granting of an offshore petroleum license raises barely a response from the Australian public. At the time of the grant of license, there were some concerns. These were in fact attributable not to Deepwater Horizon, but to an earlier offshore oil spill in Australian Waters: the Montara Oil Spill. The spill was a result of the failure of the cementing of the well by Haliburton (yes, the same Haliburton that did the cementing for the Deepwater Horizon well), and the company with the license, PTTEP Australia. The following inquiry and report identified a number of causal factors, as well as major problems with the way that offshore petroleum activities are regulated.

At the time of the Montara Inquiry I expressed my concerns regarding the regulatory framework for Australian offshore petroleum activities. As a result of the Inquiry, the Australian Government undertook to reform the offshore regulation framework. However, the federalist structure created many difficulties, something I commented on in 2011. The Australian government pressed on with the reform, with a new system of regulation shifting regulation of offshore petroleum from the states to the Commonwealth, for the first time in the forty-year history of offshore petroleum extraction. In 2014 I analysed the legal changes that had occurred, concluding that the legislative changes, whilst going some way to addressing the problems, were not addressing the root cause of the well control accident of Montara.

In 2013, BP made an application for Commonwealth approval under the Environmental Protection and Biodiversity Conservation Act 1999 (EPBCA) the general-purpose act for environmental protection. This approval would allow drilling in an area that was a protected marine reserve, and the home of migratory whales and dolphins. BP was proud that even if an oil spill did occur, it would take 33 days to reach the shores of South Australia, so everything would be ok. Besides, BP stated, they had learned their lesson from Deepwater Horizon, and would not spill again. This is at a time when the Norwegian Petroleum Regulator (PTIL) requested BP to demonstrate why they should be allowed to continue on the Norwegian Continental Shelf after an oil leak in 2012. Although the EPBCA application was approved, many people (including me) made submissions to the government, stating that the BP Submission for approval was poor, and there were many flaws in the study. Unfortunately the public submissions in this instance were not released. The reasoning for the approval under the EPBCA was the government felt that the Regulator, the National Offshore Petroleum and Environmental Management Authority (NOPSEMA) would require greater controls under specific petroleum legislation.

Like many others, I did not have much hope in NOPSEMA. Although they had managed safety for over 10 years, they were effectively a newly formed agency for environmental management, regulating wells under the same criteria (Good Oilfield Practice- GOP) that had been in place when the Montara spill had occurred, and of which I have been quite scathing. Indeed, public momentum against BP drilling in the GAB was rising, with grassroots organisations such as the Great Australian Bight Alliance and others fighting to stop the drilling. This response was unprecedented in Australia. Never before had we seen such response to an activity that occurs far out to sea. Not even after Montara was such a response seen. Clearly, the public was concerned about BP’s track record, and its role in Deepwater Horizon.

Such public scrutiny on BP’s plan in the GAB placed the regulator NOPSEMA, under the spotlight. BP’s initial application to NOPSEMA in 2015 for approval to drill a well was rejected, with NOPSMEA requiring further information. The plan for approval was resubmitted in March 2016, and NOPSEMA again requested BP to modify the plan, to which BP submitted a second plan in August 2016. The result of the reassessment was due mid October October.

During this period, the Australian Senate’s Environment and Communications References Committee took the unprecedented step of launching an Inquiry into the potential environmental, social and economic impacts of BP’s planned exploratory oil drilling project, and any future oil or gas production in the Great Australian Bight, which I was privileged to be a part of. I have long written of deficiencies in the Australian offshore petroleum regulatory regime, and the capacity of the regulator, NOPSEMA. These concerns have now been expressed publicly, with Emeritus Professor Bob Bea, the founder of the Centre for Catastrophic Risk Management at Berkley University expressing major concern over the regulator’s role, with Professor Bea noting that ‘the current Australian regulatory approach to the BP drilling operations as “hope for the best”’. The secrecy within which NOPSEMA had undertaken the assessment, and failing to make public any of the conditions, meant the process lacked transparency, with the Australian Senate calling the regulator ‘weak and secretive’.

Before the approval to drill could be granted or rejected by NOPSEMA, BP announced, on 11 October 2016, its withdrawal from drilling in the GAB. This withdrawal was met with mixed reactions. Predictably, many from the community exhibited sheer elation. Quite possibly, the assessors in NOPSEMA are secretly wiping their brow and thinking ‘thank goodness – now we don’t have to make a decision’. But for a small minority of the population, there is disappointment. The Federal Resources Minister, Matt Canavan, expressed bitter disappointment about the BP decision not to proceed, and observed that the celebratory response to the announcement showed ‘the ugly side of green activism’. (But if the ugly side of green activism saves the lives of people and animals by preventing a result of a Deepwater Horizon-type incident, maybe it is not so ugly after all).

I applaud the decision of BP in withdrawing from the GAB. As far as I can see it is one of the more sensible decisions they have made in the last ten years. However, I applaud much more the tenacity of ordinary Australians that have worked tirelessly to stop this unnecessary drilling in a Marine Reserve where the only likely benefit will be 100 new jobs and some taxation. Tangentially, it can be noted that that tax system has been labelled, like the offshore petroleum regulator, as weak and lacking transparency.

Some nights, when I am up late working on an article related to offshore petroleum, the faces of the men who died on Deepwater Horizon still haunt me. We will never know what it was that caused the ignition of the gas that rushed up the well. What we do know is that whatever it was, it killed 11 people and caused environmental devastation on an unprecedented scale. Had the Australian petroleum regulator NOPSEMA and BP had their way, it could have been the faces of Australian men and women that might have tortured me, along with the vision of whales, dolphins, tuna, and other marine life gasping for life and struggling for warmth and buoyancy in the cold, dark Southern Ocean. For now, that will not happen. Such is the power of the Australian people in averting an Australian Deepwater Horizon.