Virus crisis threat to oil platform removal decommissioning

UK Oil and Gas has counted 1,630 wells set to be dismantled in the next decade in British waters, the equivalent of nearly one rig every two days. (AFP)
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Updated 09 July 2020

Virus crisis threat to oil platform removal decommissioning

  • Environmentalists fear that companies will seek to leave structures in place

LONDON: Oil companies are being forced to cut spending due to a fall in global oil prices, threatening funds earmarked to dismantle old off-shore rigs, despite environmental risks.

A drastic drop in revenue caused by the coronavirus outbreak has forced majors such as Total, Royal Dutch Shell and BP cutting or defering expenditure by billions of dollars.

Decommissioning platforms is not “one of their top priorities,” according to Sonya Boodoo, an analyst at Rystad Energy.

She told AFP the allocated budgets for such activities would likely decrease by at least 10 percent over the next two years.

Before the outbreak, the UK Oil and Gas industry association estimated that firms planned to dedicate £1.5 billion ($1.9 billion) per year up to 2027 on decommissioning infrastructure in the North Sea.

The bill would have been the largest for any country in the world, analysts note, as hundreds of installations will need attention in the coming decades.

“Many of the UK’s platforms were built and designed during the 1970s,” Romana Adamcikova, an analyst at Wood Mackenzie, said in a report earlier this year. “Little thought would have been given to how those structures would be removed at the end of their life.

“Now, the environmental impact of decommissioning has become a thorny issue.”

UK Oil and Gas has counted 1,630 wells set to be dismantled in the next decade in British waters — the equivalent of nearly one rig every two days and requiring more than 1.2 million tons of concrete and steel to be removed.

Since 1998, the Convention for the Protection of the Marine Environment of the North-East Atlantic, known as OSPAR, prohibits leaving in place — either wholly or in part — disused offshore installations.

But even after surface structures are removed, the seabed can still be littered with the industry’s detritus.

OSPAR also sets out a process for considering exemptions, known as “derogations,” to the prohibition which allows operators to ask to leave some structures in place in certain scenarios.

The aging Brent oil field, discovered in 1971 and located 180 kilometers northeast of the remote Shetland Islands, is a prime example of the controversy the issue can generate.

Brent is a benchmark for international crude oil prices that, after nearly 50 years of pumping, finds itself at the center of contention within OSPAR, which comprises 15 individual governments as well as the 27-member European Union.

Shell, who has exploited the field since 1976, has said it wants to leave in place parts of four decommissioned platforms, which would include 40,000 cubic meters of sediment containing about 11,000 tons of oil.

The firm said it had explored potential re-use options, such as carbon dioxide storage and wind farms, but did not consider them “credible” due to the age and distance from shore of the Eiffel Tower-sized platforms, OSPAR said.

The operator considered there to be minimal environmental and safety legacy risks from leaving them in place, it added.

But the plans provoked a furious reaction from environmental campaigners.

Greenpeace activists stormed two of the structures in October to display banners reading: “Clean up your mess, Shell!“

Meanwhile, Germany led an outcry at a special OSPAR meeting in the same month, branding the plan “absolutely unacceptable.”

It asked the company to at least set out proposals to clean the structures.

Greenpeace’s David Santillo, a University of Exeter honorary research fellow. said: “If you allow for the option to leave it in place, almost certainly it will stay in place.”


Bailout will keep Air France-KLM afloat for less than year: CEO

Updated 21 September 2020

Bailout will keep Air France-KLM afloat for less than year: CEO

  • ‘If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected’
  • Governments are coming under pressure to tie airline bailouts to environmental commitments

PARIS: Bailouts provided to Air France-KLM by the French and Dutch governments will keep the airline flying less than a year, its CEO Benjamin Smith said Monday and evoked the possibility of injecting new capital.
In an interview with the French daily l’Opinion, Smith also warned that calls for airlines to contribute more to fight climate change could be catastrophic for their survival which is already under threat due to the coronavirus pandemic.
When countries imposed lockdowns earlier this year to stem the spread of the coronavirus airlines faced steep drops in revenue that have claimed several carriers.
A number of countries stepped in with support, including France which provided $8.2 billion to Air France and the Netherlands which received a $2.9 billion package.
“This support will permit us to hold on less than 12 months,” said Smith.
The reason is that air traffic is picking up very slowly as many northern hemisphere countries are now fearing a second wave of infections.
“If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected,” according to Smith, who said when the bailout was put together the airline was expecting a return to 2019 levels only in 2024.
Smith said discussions were already underway with shareholders on shoring up the airline group, and steps would be taken before the next regular annual meeting in the second quarter of next year.
“One, three or five billion euros? It is too early to put a figure on a possible recapitalization,” he said.
The airline group had $12.12 billion in cash or available under credit lines.
Major shareholders include the French government with a 14.3 percent stake, the Dutch government at 14 percent, as well as Delta and China Eastern airlines which each hold an 8 percent stake.
Governments are coming under pressure to tie airline bailouts to environmental commitments.
One proposal that has come from a citizen’s convention convoked by President Emmanuel Macron would cost airlines an estimated $3.6 billion.
Smith said the imposition of environmental charges on the industry would be “irresponsible and catastrophic” for Air France-KLM.