Shell U.K. Exploration & Production last week was considering ways to dispose of the spar loading buoy from the U.K. North Sea's Brent oil field. The spar arrived July 11 in Norway's Erfjord, a temporary site until Shell decides on a means of permanent abandonment. Protests by environmentalists scuttled the company's plan to sink the unneeded structure at sea, even though the British government had issued a license for the earlier disposal method. Meanwhile, Wood Mackenzie Consultants Ltd., Edinburgh, calculated that onshore abandonment of giant steel platforms in fields off the U.K. would cost 2 billion ($3.2 billion) more than partial removal. A Shell official said the Brent spar buoy will remain in Erfjord until further disposal studies are complete. Mooring in Erfjord marks a complete cycle for the 460 ft high structure, originally assembled and tilted into a vertical position there in 1976. It is expected to take several months before Shell can apply once more to the U.K. Department of Trade & Industry for a new disposal license. The official said Shell had learned from the failed attempt to dispose of the structure in deep water off Northwest Britain. Next time around, the environmental activist Greenpeace group will be included in the disposal debate (OGJ, June 26, Newsletter).
PUBLIC FOCUS, SHELL COST
Wood Mackenzie pointed out that Shell's attempt to dump the Brent spar brought the issue of abandonment into public focus. The analyst sees the decision to abort dumping plans as influenced by corporate headquarters, particularly after boycotts of Shell service stations in Germany cut revenues. "Shell U.K. was finally pressured by Royal Dutch/Shell following the impact on Shell's public image, not to say the level of lost sales," Wood Mackenzie said. Wood Mackenzie figures Deutsche Shell alone could have lost 15-20 million deutschemarks ($11-15 million) from 1 month of reduced sales. The analyst reckons Shell's about-face because of consumer and political pressure from continental Europe could boost the cost of decommissioning other North Sea installations.INCREASED INDUSTRY EXPENSE
Wood Mackenzie warned that Shell's decision to forego tax allowances for costs incurred in addition to the original deepwater disposal plan could set an "uncomfortable" precedent. The firm said, "Government could arguably approve a low cost decommissioning plan on the basis that the companies' preferred options might have undue regard to a company's public image. In this manner, government could seek to reduce the tax rebate liabilities of the abandonment program." Wood Mackenzie calculates that 7.4 billion ($11.8 billion) in 1995 money, or 12.8 billion ($20.5 billion) in money of the day, must be spent to decommission U.K. fields on production and those yet to be developed. This estimate is based on application of International Maritime Organization rules, which require 55 m of clear water above any dumped structures. Of the U.K.'s 219 offshore platforms in place, Wood Mackenzie said 160 will have to be removed because they either lie in shallow water or weigh less than 4,000 metric tons. The remaining 59 platforms could be partially removed to allow 55 m of clearance with the substructure stump left in place. Ten of these platforms have concrete substructures.Wood Mackenzie said, "Applying an indicative incremental cost, for full rather than partial abandonment, of 40 million to each of the 49 large deepwater steel platforms could add 2 billion to costs imposed on upstream companies." Copyright 1995 Oil & Gas Journal. All Rights Reserved.
