By Ava Rawson
Despite having been one of the most productive oil fields in the world, seven decades of drilling has left the North Sea oil supply depleted. Oil extraction peaked within the North Sea in January of 2000 at 5.34mn BOEPD. 20 years later, production rates had dropped to 1.32mn BOEPD. As the industry continues to decline, the megalithic infrastructure populating the North Sea floor created to extract the dwindling hydrocarbon resources sit bereft of their purpose, and are legally required to be removed.
Not including the 871 inactive installations held in ‘suspension’ (an industry term for describing a rig’s unproductive limbo where operators have stopped extraction in the hopes that technological interventions will make the sites profitable in the future) there are over 2,000 offshore oil and gas wells with submitted plans to be decommissioned by 2030. To accomplish this feat, an estimated £40bn is needed for operators and governments to cover the decommissioning costs of the remaining offshore production sites, transportation, operational, and processing infrastructure.
Decommissioning is rife with tensions. For example, decommissioning is simultaneously regarded as both an incredible fiscal burden for operators, while also being a burgeoning entrepreneurial opportunity for new industrial stakeholders, while a study of decommissioning also sheds light on the contrast between the immobility of offshore extractive infrastructure and the hypermobile corporate forms of global operators. The ‘death’ and ‘post-life’ of this infrastructure challenges the limits between notions of waste and assets, care and abandonment, and the dueling imaginaries of alarmist and utopian energy futures it carries. Conceptualisations of a decarbonised world must not only take into account the types of future we wish to build, but also a consideration of the infrastructure which endures.
One such answer as to how these legacies of a hydrocarbon/petro-modernity will exist in a decarbonised future, is to reappropriate petro-infrastructure as the material foundations for a net zero oceanscape. Technological interventions bring promises of repurposing offshore oil and gas rigs into sites for carbon capture and storage, geothermal and wave energy generation, and the utilisation of the vast network of pipelines for hydrogen transportation.
Based on ethnographic data collected in the summer of 2024, this research project was produced through fieldwork with the Society of Petroleum Engineers (SPE), oil and gas industry professionals, and National Decommissioning Centre academics. This blog series explores how the ‘death’ and ‘post-life’ of oceanic petro-infrastructure in the North Sea reveals the social work necessary in the production of capitalism. Through this blog post, I aim to explore the different methods oil and gas operators utilize to socially evacuate their legal fiscal liability to decommission redundant offshore structures. The accepted international legal custom for liability structuring within this context is the polluter pays principle, yet determining fiscal responsibility is not always so straightforward. Through examining the descriptors of decommissioning, the types of knowledge deemed suitable for decision making by operators, and ownership trends, we can gain a better understanding of the complexities of why installations may remain unplugged.
First, there will be an excavation of ‘the offshore’ as the imagined setting designed for the pursuit of a commodity chain free from what Ana Tsing entitled, ‘frictionless profit’. Second, within this context, the significance of a rig’s contractual form will be analysed as the means from which decommissioning can be peripheralized and sold. Capitalizing on this mobile form, industry trends of serial ownership, where operators buy and sell installations based on contrasting notions of profitability, further obscures a clear delineation of liability for the end of life processes. Lastly, the economisation of the rig further cements operators’ disentanglement from their legal responsibility to decommission.
The Offshore
Described as a ‘juridical-spatial regime that circumvents nation-state regulation’, ‘the offshore’ has been understood as placeless in its ubiquity, with the industrial structures situated there likewise severed from their historical, political, and socio-economic contexts. The invisibility of such extractive sites to the general public is actualised not only through geographic isolation, but made consciously opaque through regulations restricting access. Characterised by other measures of inaccessibility, environmental deregulation, and tax evasive maneuvers, offshore activities are often perceived as situated within a placeless capitalist frontier.
The North Sea and its underlying continental shelf carries its own mystified narrative of ‘the offshore’ entangled with oil extraction, with British playwright John McGrath claiming that the North Sea is fixed within British consciousness as ‘a productive environment of marine capitalism, synonymous with oil’. The international legal regime which commenced the demarcation of the seafloor into property—and the formal establishment of legal sovereignty over continental shelves globally—was the result of prospector’s desire to extract fossil fuels in the North Sea. The active institution of the international legal regime constituted the seafloor as not only property, but legitimised the notion that the ocean, and its subsurface materialities, are resources capable of being extracted.
Hanahh Appel’s excavations reveal this construction of ‘the offshore’ to be a fantasy. Appel does not attribute what has been characterised as the norms of the hydrocarbon industry—hypermobile globalised corporations, subcontracted labour regimes, rituals of risk avoidance, and the performance of safety—to capitalism. Offshore operators aim to disentangle themselves from social and local specificities to actualise a ‘frictionless’ commodity chain. Operating from the theoretical standpoint that capitalism is a project, such facets are identifiable not an instinctive drive towards expansion, but through their individual and conscious replication, the coherence of capitalism becomes recognisable.
Serial Ownership
The catch-all phrases of ‘well integrity management’ and ‘late life well management’ were used interchangeably to describe the myriad of offshore decommissioning and plugging and abandonment activities throughout the SPE’s Decommissioning Conference in the summer of 2024. Whether uttered while shaking hands, written in some variation of 9pt steel blue on a business card, or a reference to their company’s niche—these epithets were prolific. Their use indicated that decommissioning was entangled with the notion of ‘late-life’ rather than the more obvious metaphor, death. Using phrases of productivity to characterise a site acts to conceptually push back the rig’s death by decommissioning, despite material evidence of its decline.
Operators specialising within the ‘late life management’ of offshore wells are abundant within the North Sea, buying up the second, third, and fourth-time hand-me-downs from larger operators. One such ex-entrepreneur began their career working with one of the supermajors in the North Sea. Joining a small cohort of coworkers leaving Shell and starting their own company, they later purchased a mature asset [i.e. a rig with a history of extraction and declining productivity] their previous employer was selling. What was a burden to Shell, was an asset to the small company specialising in prolonging the life of ‘legacy fields’. After acquiring their first second-hand asset, a second grouping broke off from the original renegade collective, forming a company which was hired to decommission the installation once they determined the asset reached the end of its productive life.
Within this example, two operators perceived drastically different economic potentials from the same field. When questioning this dissonance with interlocutors, references were made to the scale of profits. Scale refers not only to the size of future profits, but also what operators are willing to spend to make them recoverable. Yet this justification does not adequately explain how opposite economic futures simultaneously stem from identical subsurface conditions.
Economisation of the Rig
“There is no profit in decommissioning, there is only expenses.”
Stated by an economist working with the National Decommissioning Centre, decommissioning conveys a somewhat obvious fallacy in the pursuit of frictionless profit in ‘the offshore’. It appears as the simplest factor disproving the image of the infinitely productive potential of offshore extractive enclaves; that materially, reserves are finite. The underlying assumption in the conceptualisation of decommissioning as ‘only expenses’ is revelatory of a wider value system. The characteristics which establish the rig as an economic object, or ‘economise’ a rig, have been widely studied through the speculation processes for the oil and gas sector. The use of fiscal lexicons through communicative future-making models, processes of ‘resource making’, and the prolific use of economic metrics, all function to actualise a rig as an economic object. It is through these layered processes where the project of capitalism becomes visible. Through the exercise of such metrics, the rig itself becomes ‘economised’, as their utilisation naturalises the exclusivity of financialised valuations for installations. Within the context of decommissioning then, how does a fiscally unproductive, un-economic, empty well and redundant rig function within this value system?
Corporate ownership and the responsibility to decommission an installation becomes alienated from operators through the sale of assets. Despite the nature of installations designed to be resilient against the harsh conditions of the North Sea, as an economic object confined to various excel sheets, a rig’s contractual forms are incredibly mobile. Disentanglement from the geological necessity of decommissioning—and its high associated costs for operators—utilises the rig’s contractual form. The transfer of ownership of thousands of pounds of metal is reduced to the exchange of assets between operators. Through this process, operators perform economic exercises of ‘cleaning the balance sheets’, where all of the assets of an operator’s portfolio are assessed, and sold off, based on their ability to contribute to a net positive income stream.
Decommissioning was so little thought of in the first era of exploration in the North Sea, that expiry dates were not included on licensing blocks until the third round. It wasn’t until after the 1998 Petroleum Act was ratified that one interlocutor claims ‘was when the industry realised they were on the hook for the cost’. Now that end-of-life planning is required within licensing and permitting as a contractual promise for the future, inaugural operators often perform the intention to decommission through their submission of plans to gain a license, despite anticipating leaving the installation prior to the end of its productive life. Preparations for decommissioning are performed through Decommissioning Security Agreements, bonds and other accounting strategies. As asset circulation amongst operators for legacy wells is motivated by the desire to increase profits—and avoid decommissioning costs—alternative futures concerning the potentiality of the infrastructure are likewise condensed into economic terms.
Disentanglement from Decommissioning Liabilities
The changes in ownership follows a pattern mimicking the perceived scale of available resources, and potential profits. Larger operators extract from the most productive fields. As the field yields less over time, they sell to smaller operators, until eventually the smallest operator is oftentimes left with the liability. This poses a problem, as tailend operators were described as being the least likely to possess the funds necessary for decommissioning. These comparatively small operators are also the most likely to go bankrupt at this stage, with patterns of serial ownership often ‘orphaning’ the wells.
Liability is further obscured with the impermanent corporate form of operators. For example, the company who bought the mature asset from Shell no longer exists. As operators are in a constant flux, interlocutors repeatedly claimed that dispersing liability amongst legacy owners was functionally impossible.
In the UK, you can have assets that have changed hands four or five times. More importantly, there are installations where the previous companies do not exist any more.
So you will go all, all, all, the way back up the hierarchy just to find that you don’t have anyone. So now the taxpayer needs to pay for the liability, right?
Despite the straightforward nature of the polluter pays principle, where the polluter is responsible for bearing the cost for the prevention, control, and remediation of pollution, serial ownership presents obstacles for the determination of which ‘polluter’ bears the full cost. Whether it be the reluctance of stakeholders to be grouped in with responsible payees, or the vanishing act operators have perfected, within the UK, the last operator tends to possess the decommissioning liability, despite there being multiple ‘polluters’ throughout the course of rigs’ lives.
Operators’ search to reduce cost has led to installations being run at a loss, and wells remaining in suspension past their agreements. While corporate ownership and the sale of mature assets is performed through immaterial processes, the tension it creates between the legal requirement to decommission and the operator’s desire to avoid the associated expenses has material consequences. In 2023, the North Sea Transition Authority’s Director of Supply Chain & Decommissioning released an open letter to licensees reminding them of their contractual obligations to comply with their decommissioning timescales.
This open letter was sent to licensees, as wells were remaining suspended longer than agreed upon timelines, with operator’s dismissing their contractual agreements and legal compliance with the NSTA Guidance and OSPAR Convention. As wells sit in suspension, the consequences of the managerial, political, and legal labour utilised within this project of disentanglement is made real. Understanding liability as something to be dispersed, and for responsibility to be flexible, is a construction produced and maintained by industry stakeholders which allows them to disentangle themselves from decommissioning costs. Yet the conceptual distance created as a result of the social and legal alienation of decommission liability conflicts with the material realities necessitating decommissioning within the North Sea.
Within decommissioning, hypermobile corporate forms, stratified layers of ownership, the im/mobility of infrastructure, and the economisation of liability are fragmentary projects that together display the value system which underlies decision making and contributes to the social construction of ‘the offshore’.
While the offshore is a fantasy, the values which aim to reify it—along with the fervent culture of cost avoidance—have substantial consequences in how some of the largest man-made structures in the world are treated when their productivity declines. This partial exposition of the decommissioning of offshore oil and gas platforms displayed how these piecemealed projects work to produce an intelligible and recognisable form, revelatory of the work necessary to create, produce, and maintain the project of capitalism.
Within the next post, attention will be paid to how offshore oil and gas stakeholders perceive safety over time, exploring a different facet of the infrastructure’s form within the modeling and data visualisations.
