Decommissioning of upstream oil and gas facilities

offshore oil and gas installations in the United Kingdom continental shelf and
demonstrates that the oil and gas industry is moving into full-scale decommissioning
at least in the North Sea.

Decommissioning in the United Kingdom: Forecast Removal Dates

40
Large Steel and Concrete Other Steel Subsea Other

35
9

1
1
30
No. of Installations

5 7
4
3
25
1
18 4
6
20 7 2
2 3
3 3
4 4
15 4
23 5
8 4 4
7 3
6 19

10 2
16 8
17 2

8 11 14 13 2 14
4 8 11 5 10 3
2
5 9 8 10 9 11 1 7
1
2
4 4 1
1 4 3 3 5
4 4 2
1 3 3 3
2 2 2
0 1 1 1 1 1 1 1 1 1 1 1

2035+
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2033
2034
As to costs, Wood Mackenzie estimates that future decommissioning in the
North Sea will cost some US$42 billion (2007 prices) with the bulk of that to be spent
in Norway (48%) and the United Kingdom (40%).11 The International Marine
Contractors Association estimates that global expenditure on decommissioning will
exceed US$75 billion.12 It is therefore clear that the costs to be expended by the oil
industry (in many cases to be contributed to by host governments either directly or
indirectly through fiscal means) are sizeable. One question therefore is how the
various parties who are to bear the costs of decommissioning can arrange to do so in
a thorough manner. The issue of how to ensure that there are companies or corporate
entities available and able to meet the cost of eventual decommissioning, at the end
of a fields life, remains problematic in many jurisdictions. This is clearly unfinished
business.

4. Relevant and topical issues

4.1 Liabilities
Perhaps among the biggest legal challenges relating to decommissioning activities
are the issues of liability and responsibility for undertaking decommissioning and
removal. The issues and questions include:
Who is to undertake decommissioning activities?
Who is to bear the costs of the decommissioning?

11 Wood Mackenzie, as n 9.
12 International Marine Contractors Associations Press Release 09/06: http://www.imca-
int.com/core/imca/news/press/0609.html.

260