When a company signs a lease for offshore oil or gas exploration or production that initial agreement includes the process of decommissioning the well, that is, safely plugging the hole and disposing of the equipment used to support the production.
A recent study by IHS Markit predicts more than 600 decommissioning offshore projects will be completed over the next five years and estimates that spending on decommissioning projects will increase from $2.4 billion in 2015 to $13 billion per year by 2040.
Additionally, the study provides an analysis of the legal, regulatory, and financial requirements for decommissioning offshore projects in the UK, Norway, the US Gulf of Mexico, Indonesia, and Australia.
Researchers claim that another 2,000 offshore facilities will be decommissioned between 2021 and 2040. Europe will account for roughly 50% of the global decommissioning spending between 2017 and 2021 due to its projects in the North Sea.
Approximately 120 decommission projects worldwide are currently completed each year.
Despite the need for decommissioning services, there are no dominant decommissioning companies in the market, which makes it difficult for offshore E&P companies and offshore service companies to accurately predict decommissioning costs and risks. Operators may spend billions of dollars to remove offshore facilities, and projects can take years to complete.
Decommissioning offshore projects is critical for environmental protection after a well is drilled, utilized for production, then plugged and sealed when the well is exhausted. The process carries significant environmental and regulatory liabilities because it can have a direct effect on the marine ecosystem. Consequently, operators must ensure appropriate use and containment of hazardous substances and proper waste management, which adds to the complexity and costs associated with these projects.
The Gulf of Mexico boasts more than 5,000 oil and gas facilities and has been the largest region in terms of the number of platforms decommissioned (around 4,000). The Gulf of Mexico currently has the most facilities requiring decommission, although the European region has the largest amount of offshore decommissioning spending based on the size and volume of the structures being decommissioned in the North Sea.
Historically, costs associated with decommissioning in the Gulf of Mexico have been in the $0.5-million to $4-million range for shallow-water structures.
E&P companies and offshore service companies want to complete decommission projects as quickly as possible because they are expensive and do not generate any revenue for the company. Focused on the bottom line, companies often cut corners when it comes to worker safety and environmental regulations when completing these projects. If you have been injured due to employer negligence or if you have been retaliated against for reporting violations of environmental regulations, contact the attorneys at The Lambert Firm today to discuss your legal options.
If you have been injured due to employer negligence or if you have been retaliated against for reporting violations of environmental regulations, contact the New Orleans maritime attorneys at The Lambert Firm today to discuss your legal options.