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The Pioneering Spirit, a catamaran the length of five jumbo jets, will next year sidle up to Royal Dutch Shell’s Brent Delta oil platform in the North Sea, 115 miles north-east of the Shetland Islands.

Its hulls will manoeuvre either side of the platform’s legs and it will grip on with 16 specially reinforced beams. Then in a single motion, it will lift the 24,000-tonne “topside” of the platform — accommodation block, helipad, drilling derrick and all — away from its legs, before carrying it back to shore to be dismantled.

In doing so, the ship will have undertaken the heaviest lift ever attempted in the North Sea. More significantly it will also have begun what is expected to be a wave of decommissioning across the North Sea, as oil companies struggling with low prices
shut down production and pack up one of the UK’s most successful industries of the past 50 years.

Between now and the mid-2050s, around 470 platforms, 5,000 wells, 10,000km of pipelines and 40,000 concrete blocks will have to be removed from the North Sea.

Decommissioning
takes place regularly in other mature basins such as the Gulf of Mexico but nowhere in the oil industry will such a major clean-up have happened in such a short time.

People who have spent their lives in the industry are going through what some call a “grieving process”.

Mal Hunter, who works on the Kittiwake platform east of Aberdeen, says: “We hear about platforms getting shut down, never to produce again and people get deflated. But it [decommissioning] offers continued employment, so those that stay in work are pretty happy.”

Many in the north of Scotland hope decommissioning can provide a lifeline for the local economy, which has been battered by the collapse in oil prices since mid-2014. It could even turn the area into a centre of excellence from where expertise and technology can be exported worldwide, say supporters. But if it goes badly, costs will escalate, vital pieces of infrastructure could be abandoned with oil left under the sea, and the UK taxpayer could be liable for tens of billions of pounds.

“Decommissioning is a bittersweet pill,” says Matt Betts, UK vice-president at Halliburton, the world’s largest oil services company. “Nobody wants to have to close down platforms, but it is inevitable that they will have to.”

Making a loss

For the first time, the British offshore oil and gas industry is plugging and abandoning more wells than it drills. Production, which has fallen two-thirds since its peak 16 years ago of 4.5m barrels of oil equivalent a day, will stop in more fields than are being started up.

“Decommissioning has happened before,” adds Mr Betts. “But we’ve never seen anything on the scale of what is about to happen in the North Sea.”

The industry has always known that it would have to decommission ageing platforms, but the process has been accelerated by an oil price that has crashed from $115 in the summer of 2014 to around $50. This has left half of the operators in the North Sea — the most expensive place in the world to drill for oil — running at a loss, according to figures from Company Watch, which monitors corporate financial risk.

These companies face a difficult decision:
should they
continue to produce oil and gas at a loss, hoping to make the money back if and when the price rebounds or do they pack up altogether, incurring millions of pounds of decommissioning costs in the process? It is prohibitively expensive to come back and start drilling once a well has been left, so any decision to leave is final.

Once a company decides to abandon a facility, the hard work begins. It must first make the reservoir safe, a process that involves removing tonnes of steel from the well and sealing it up to make sure no oil or gas escapes. Only then can a company think about how to remove the structures that sit above the well, the process that Shell is about to undertake at Brent Delta.

Companies calculate it will cost an average of £10m to plug and abandon a complex North Sea well. Removing the physical structures could be far more expensive. On Brent Delta it will cost several billion pounds, according to Shell, and take hundreds of workers years to complete.

Oil and Gas UK, the industry body, suggests it will cost nearly £17bn over the next 10 years to remove around 80 platforms and their associated infrastructure. The estimated cost to complete the entire job through to the 2050s ranges between £30bn and £60bn, a figure that has risen on several occasions as the scale of the task has become clear.

“We keep saying decommissioning spend is going to be higher and higher,” Davi Quintiere, a senior manager at Accenture’s energy practice, recently told a conference in Aberdeen. “We are terrible at forecasting and we will continue to be.”

Part of the problem is that few companies have attempted it, especially in conditions like those in the North Sea, where waves can swell to 40m high. “It is difficult to decommission a platform,” says Mr Betts. “It is very difficult to do so in water as deep and bouncy as the North Sea.”

Cost cutting

Shell was due to remove the topside at Brent Delta — which rises 160m above sea level — this year. But difficulties in building the reinforced beams caused a delay, highlighting that the decommissioning industry remains in its infancy.

Another brake on the process is the fact that companies make no financial return from taking apart a platform and so many are hesitant to make the decision. Operators are legally obliged to take down platforms at some stage but with the oil price fall putting pressure on balance sheets, many are delaying for as long as possible.

“The problem is that many companies are trying to decommission using the same expensive technology as they did to drill the wells in the first place,” says Duncan Anderson, chief executive at Gulf Marine Services, an oil services company.

Operators are looking at ways of trimming those costs. Some are investigating how to melt steel in the well, rather than remove it. Others are designing lasers that can be remotely controlled and cut through metal.

Some are working on cameras that can be sent down pipelines to check the integrity of sealed wells. Veolia, the French waste management company, which hopes to win nearly £120m worth of decommissioning work from the North Sea by 2018, recently bought a company that makes remote-controlled robots that can unscrew tiny metal pieces from a safe distance.

“There is no reason why we cannot use that technology offshore,” says Pat Gilroy, Veolia’s chief operating officer for industrial customers.

The hope in the industry is that the expertise gained in the North Sea will be exportable to other parts of the world, from Norway to Africa or Asia. In many of these places oil is still commercially extractable but decommissioning is likely to accelerate as countries move towards renewable industries.

Mark McAllister, chairman of The Decommissioning Company, a consultancy, says: “To date decommissioning
activity

in other parts of the world [especially the Gulf of Mexico] has been of very small platforms. There has been little or no activity elsewhere that is analogous to the large platforms of the UK and Norway.”

The UK government is keen to take advantage of the opportunity, and has pledged £250m for Aberdeen, in part to expand its harbour to prepare it for the decommissioning work that will also be undertaken by other towns and cities on the east coast of the UK.

However, some in the industry worry that this technological innovation risks repeating mistakes made during the boom years, when increasing specialisation drove costs in the North Sea higher than anywhere else in the world.

“There is a danger that you try and do very, very fancy things that do not add any value,” Mr McGregor says. “We need to think of this not as a major building project but as demolition.”

Escalating costs are not just a problem for the industry. Under UK rules, the taxpayer will foot half the total decommissioning bill through tax rebates, leaving ministers anxious over the costs they will eventually be asked to cover.

If it comes in at the top of the current range of estimates, decommissioning could end up costing British taxpayers £1,000 each over the course of the next few decades — as much as the controversial plan to renew Britain’s fleet of Trident nuclear submarines.

“The most common question I get from the Treasury is how much is this going to cost,” says Jim Christie, head of decommissioning at the Oil and Gas Authority. “The range is enormous and seems to change every day. I refuse to put a pound sign on what we will deliver decommissioning for.”

In the Gulf of Mexico, where decommissioning has been taking place, albeit at a much slower pace than what is expected for the North Sea, operators run a “rigs to reefs” programme. It means they can leave large parts of platforms under the sea to become habitats for marine life, a method which is technically barred under international rules that cover the north-east Atlantic.

But it is possible to secure an exemption from those rules, as Shell is likely to do with the Brent system. Sources close to the company say that it will apply to leave behind three concrete subsea structures, each the size of the Empire State Building.

Decommissioning experts are encouraging more companies to apply for such exemptions, and urging regulators and governments to be flexible in granting them. They argue that without such a move, costs for decommissioning are likely to rise.

If attempted on a wide scale this would likely incur the wrath of environmentalists, who worry that companies are trying to shirk their responsibilities. Shell’s Brent C platform, which weighs 36,000 tonnes excluding its underwater concrete jacket, is only the fourth heaviest in the area and Wood Mackenzie assumes that producers will apply for, and receive, exemptions for several other large ones.

Waste management

Doug Parr, chief scientist at Greenpeace, the campaign group, says that, while exemptions to international rules are sometimes warranted, there should be no blanket allowance for companies to leave structures in the sea. “Everyone has to get rid of their waste, why should North Sea oil giants be any different? The presumption needs to be that abandoned rigs should be brought ashore in the same way that we would expect any industry in the world to clean up after themselves,” he says.

Many in the industry worry about what will happen to shared pieces of equipment — from pipelines to gas terminals — if one or more of the companies that jointly fund them depart.

“If this isn’t planned properly, there could be a domino effect where you suddenly have entire networks all having to decommission at once,” warns Mr McGregor. For now, many of the largest operators are hoping that oil price rises will allow them to defer the costly job of having to pack away their platforms and pipelines. With two-thirds of available hydrocarbons under the North Sea thought to be already extracted, it can only be a stay of execution.

“This is still something that neither the industry nor the government is fully focused on,” says Brian Twomey, managing director at Reverse Engineering Services, a decommissioning specialist. “The industry has grossly underestimated the true cost of decommissioning and taxpayers are going to have to pay.”

Early mover: Taking away any trace

When Ian Sharp and David Peattie, the chairman and chief executive of Fairfield Energy, gathered together the few dozen staff in their Aberdeen offices last May, they broke the news that the company was to pump its final barrel of oil from wells connected to Dunlin, its only platform (right). The taps would be turned off and, over the next few years, the platform would be removed and dismantled until there was almost no sign that it had ever been there, they said. One year on Mr Sharp says: “Our staff went through the usual stages of grief: denial, anger, bargaining, depression and acceptance. It was very tough and many of them were in denial about what was happening.” But he says that he is glad his company made the clean break that other operators are reluctant to do. “Making that decision in a relatively short period of time was one of the most important things we did. Once we had made absolutely clear we were not going to go back on this, staff could begin to adjust.” The decision to go early, with the decommissioning industry in its infancy, means many are watching Fairfield to see whether the process can be completed for the costs companies expect. For Fairfield, it has not been without its problems. One of the stages of plugging the well was scheduled to take 10 days but turned out to be more complex and took 100. The redeployment of workers has also proved more difficult than had been anticipated. “One of our main priorities is to keep on and retrain as many of the staff who were involved in production and we have managed to keep all our key managers in place,” says Mr Sharp. “But there are limits to that. If you are knocking down a house, you are not going to go to the builder who built it and ask them to do it.”