The oil and gas industry worldwide is facing the daunting prospect of decommissioning its infrastructure. This is a global issue, affecting installations in Indonesia, the Gulf of Mexico and Europe. In respect of Europe this is especially so in the North Sea, where depressed prices, high maintenance costs and depleted natural reserves on the continental shelf signal the end of life for many ageing platforms. The United Kingdom, owing to the position of current sites on its side of the continental shelf, is set to dominate the necessary expenditure in this area. Present estimates suggest that costs could exceed US $43 to 50 billion, depending on the method of removal. The source of these costs include the approximately 146 oil platforms predicted to be removed between 2019 and 2026, accounting for just over half of the total platforms in UK waters.
Decommissioning each item of oil and gas infrastructure is a significant commercial and industrial project that requires substantial planning and expenditure. Industry players will need to be aware of the complex regulatory and legal path to decommissioning in the United Kingdom. However, beyond establishing and approving the plan itself, other legal questions will be relevant, from funding the decommissioning costs and liability under joint operating agreements to asset transfers, litigation risk with contractors, and the need to comply with international, EU, and domestic regulations on the environment.
In this bulletin, Members flag the principal legal issues that players in the oil and gas industry should consider when planning to decommission their infrastructure, when contracting with companies to implement the plan, and when limiting their exposure to relevant costs.
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