Oil & Gas UK launches UKCS decommissioning options

Uchenna Izundu
International Editor

LONDON, Oct. 17 -- Trade association Oil & Gas UK (OGUK) has launched a new framework agreement to help operators clarify decommissioning liabilities for infrastructure on the UK continental shelf.

The Decommissioning Cost Provision Deed (DCPD) provides different options for joint venture partners to consider in setting up a decommissioning plan for offshore assets. DCPD would help reduce uncertainty over decommissioning responsibilities, as current provisions under UK law allow the government to call back previous licensees to pay decommissioning costs even if they have sold their interests to another party, said OGUK Operations Director Paul Dymond in London Oct. 16.

"These issues are hindering asset trading," Dymond said, adding that this could jeopardize maximum economic recovery from the UK North Sea. In reviewing joint operating agreements that companies are using to establish liabilities, OGUK found that many were inadequate because there were no explicit provisions to cover decommissioning.

The government is committed to review on a case-by-case basis DCPDs that buyers approve, and if it is satisfied, it will release sellers from being held responsible for decommissioning liabilities under Section 29 of the Petroleum Act 1998. In a recent decommissioning consultation with industry, the government declined to change Section 29, preferring to monitor the effectiveness of DCPDs and develop a transparent way to assess whether buyers can cover their decommissioning costs.

These costs are expected to fall between £15-20 billion, with uncertainties regarding technology, product costs, and timing possibly increasing estimates. Major projects have been delayed as high oil prices have improved the economic attractiveness of continuing production.

Improved technologies will help to decrease costs, but Dymond warned that technology companies are reluctant to invest because market signals are poor. "It would be good to see floating devices to work alongside lifting vessels as new technologies," Dymond said. "We have set up a working group . . . to better plan for the future to help develop technologies and capabilities," Dyson said.

Dymond told OGJ the success of DCPDs will be rated by the number of operators using them. However, Oil and Gas UK will not use targets, because it is a trade association and cannot compel companies to implement them. Out of the 400-500 fields on the UKCS, fewer than 100 have securities in place to cover decommissioning plans.

Dymond told reporters the association was also talking to government about changing the tax treatment of decommissioning costs. Presently companies acquire letters of credit from banks to show they are capable of handling the liabilities. "This form of financial security is problematic," Dymond said, pointing out that small companies find it difficult to secure the letters, especially if they have only the one asset.

"Oil and Gas UK are suggesting a sinking fund that companies could put funds into, but this would need to have a tax relief put up against it to make it work," he said. OGUK also is anxious to have the threat of inheritance tax removed from trust funds set up for decommissioning.

Contact Uchenna Izundu at uchennai@pennwell.com.

Related Articles

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

Gas-turbine units in transit to Vostochno-Messoyakhskoye field

01/28/2015 JSC Gazprom Neft reported that six gas-turbine power units are in transit to Vostochno-Messoyakhskoye field in the Yamalo-Nenetsk Autonomous Region.

Eni lets $2.54-billion contract for Ghana FPSO

01/28/2015 Eni SPA unit Eni Ghana Exploration & Production Ltd. has let a $2.54-billion contract to Malaysia’s Yinson Holdings Bhd. for the chartering, op...

Chevron, BP, ConocoPhillips join to explore, appraise Gulf of Mexico leases

01/28/2015 Chevron Corp. subsidiary Chevron USA Inc., BP PLC unit BP Exploration & Production Inc., and ConocoPhillips Co. have pledged to work together t...

Carrizo cuts drilling, completion spending by 35%

01/27/2015 Carrizo Oil & Gas Inc., Houston, is cutting its drilling and completion capital expenditure plan for the year by 35% to $450-470 million, but e...

Stone Energy lets pipe supply, installation contracts for Amethyst field

01/27/2015 Stone Energy Corp., Lafayette, La., has let flexible pipe supply and installation contracts to Technip SA for Amethyst field on Mississippi Canyon ...

Hess cuts capital budget by 16% to $4.7 billion

01/27/2015 Hess Corp. has set a capital budget of $4.7 billion for 2015, down 16% from $5.6 billion spent last year. The company at the beginning of 2014 repo...

OGUK: Push to ban fracing in UK ‘ill-informed’

01/26/2015 The House of Commons Environmental Audit Committee’s proposed amendment to the infrastructure bill that would introduce a moratorium on hydraulic f...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected