Understanding Decommissioning of Offshore Infrastructures: A Legal and Economic Appetizer

Abstract

Sea spaces have been vital for humankind. Thanks to technological development and ingenuity, we harvest, use, consume and exhaust resources located in the sea or the seabed. To do so, we make use of different man-made structures. These range from fish farms and simple buoys, to complex and large energy structures such as wind farms or oil and gas rigs, such as the Norwegian Troll A oil platform, the heaviest structure ever made at the time of its construction.

Oil and gas platforms and wind turbines have a finite life span. Their location at sea means that there is erosion, causing mechanical attrition and increasing the repair and maintenance costs. This makes wind farms become inefficient or no longer operative. The same applies to oil and gas platforms, with the added complication that as fields mature, fewer hydrocarbons remain, and they are either impossible to extract or it is not cost-effective to do so. In addition, there are structural factors that cause problems, such as the fact that offshore energy structures are typically built on the terms set by a government-granted license or permit. These authorizations are granted with time limits and upon their expiration, they request the operators and owners of the offshore structures to remove them from the sea. This process is known as decommissioning.

Our report takes a holistic approach to offshore energy decommissioning in the North Sea. We study the rules applicable to offshore oil and gas operations and offshore wind. This is a novel approach compared to that of existing literature. This will allow us to compare how decommissioning is conducted in different industries and answer whether oil and gas decommissioning rules can be readily applied to offshore wind. Furthermore, our research will identify challenges that these two sectors are facing in light of the need for further circularity and sustainability. Additionally, we adopt a legal and economic standpoint to study the governance of these activities in order to understand the incentives and challenges in decommissioning.

Keywords: Decommissioning, oil, gas, windfarms, circularity, suistanability, offshore energy, comparative law, environmental economics

JEL Classification: K32, K33, H2, Q00, Q25, Q4