End of a North Sea era: could the dismantling of the Brent field spark a decommissioning bonanza for Scotland?

Earlier this month Royal Dutch Shell set out plans to decommission three of the iconic Brent platforms in the oilfield north-east of Shetland which has produced about a tenth of all UK North Sea oil and gas since production began in 1976.

Although it will not be the first oil field in UK waters to be decommissioned, Brent - which gave its name to the international crude price benchmark - will be the largest North Sea decommissioning project so far and is being watched closely by those eyeing up future decommissioning opportunities.

WWF Scotland director Lang Banks said earlier this month that if the decommissioning of Brent Delta is carried out successfully, it could "open the door for Scotland to lead a new multi-billion pound, global decommissioning industry".

But Shell's decision to dismantle Delta in Teesside prompted Scottish Labour leader Jim Murphy last week to call on both the UK and Scottish Governments to do more to make sure Scotland benefits from what he called a "watershed moment in the history of Scotland's oil industry".

Subject to a 30-day public consultation period, the multi-billion pound project will be staggered over ten years and start with the dismantling of the Brent Delta platform, which last produced oil in 2011.

The nearby Brent Alpha and Bravo platforms ceased production in November while production continues through Brent Charlie. Shell is now in the early stages of drawing up decommissioning plans for the remaining parts of Brent infrastructure, including 140 wells and 28 pipelines.

Shell plans to use the world's largest double-hulled ship, the recently-built Pioneering Spirit, to take Delta's 23,500-tonne topside to Hartlepool where it will be broken up and much of it recycled into washing machine parts at the Able UK yard, where it is expected that 200 jobs will be created.

According to Shell, the operation to lift the topside onto the ship - scheduled for next year - will be the biggest offshore lift ever carried out. If successful, it could be used as a template for the dismantling of other North Sea platforms.

The Anglo-Dutch energy group claims that cutting off and lifting the entire topside for onshore demolition will reduce the risk, cost and environmental impact compared with the alternative of dismantling the platform piece by piece in the North Sea.

According to industry body Oil and Gas UK, around 470 installations, 10,000km of pipelines, 15 onshore terminals and 5,000 wells in the UK sector of the North Sea will require decommissioning over the next 30 to 40 years.

The trade body estimates that over the next decade decommissioning spending will be £14.6 billion, or just under £1.5bn a year. Meanwhile the 60 per cent plunge in the price of oil over the last seven months could lead oil companies to either mothball marginal fields or even accelerate the decommissioning of platforms.

A number of Scotland's east coast ports have the deep water and onshore capacity to take on the dismantling of large offshore modules. But many of the decommissioning contracts have gone to Norway, Denmark and England and, so far, only a small trickle of work has been awarded to yards in Scotland.

The onshore decommissioning work on the Delta platform might have come to Lerwick in Shetland if a joint bid by Veolia Environmental Services and the international energy logistics company Peterson had been successful.

With its large sheltered voe and its location between massive oil basins east and west of Shetland, Lerwick is ideally situated to pick up work from the northern North Sea.

So far, Lerwick is the Scottish port which has invested the most in establishing a reputation as a location for decommissioning. In recent years, quays have been strengthened, controlled discharge areas installed and a licensed decommissioning pad built.

Last week Lerwick Port Authority awarded a contract for a £12m project that will further expand the harbour's deep-water facilities for the oil and gas industry. The project, which is supported with £2.39 million of public money, will include extending a quay, providing deep-water and versatile berthing as well as increasing heavy load capacity to take an offshore structure in a single lift.

So far, the largest decommissioning projects at Lerwick have been the dismantling and processing of modules from the Frigg field and a long-term multi-field disposal contract for the onshore dismantling and processing of over 15,000 tonnes of sub-sea structures and pipelines.

Last year Veolia and Peterson won a major contract to dismantle and recycle subsea equipment in BP's Schiehallion and Loyal fields, to the west of Shetland.

James Johnson, the decommissioning manager at Peterson - which has been working to bring decommissioning work to Lerwick since 2005 - said that, so far, the flow of decommissioning contracts put out to tender by oil companies has been variable with "long fallow periods followed by occasional rushes of activity".

Patience is also needed, says Johnson, as oil firms are in no rush to decommission redundant infrastructure. For them, decommissioning is simply an expensive outlay with no return which they are happy to defer for as long as possible.

Since the publication last year of the Wood report on maximising the UK's remaining oil reserves, the focus for the industry has been to extend the life of North Sea fields.

In addition, the productive life of a number of fields has been extended by a deal between government and the oil companies that guarantees the certainty of tax relief on decommissioning costs.

In the northern North Sea, where the offshore platforms are often larger and more complex than in the southern sector, there is often a lag period of at least five years between production ceasing and decommissioning getting underway.

Johnson says that lessons were learned from the failure to win work from the decommissioning of Brent and, although there is a danger that future work will continue to go overseas, he is quietly optimistic that some of the decommissioning work expected to go out to tender over the next five to seven years - from the Miller and Murchison fields - will be carried out in Scotland.

The launch last year of the giant Pioneering Spirit, which is capable of picking up and moving entire oil rigs and platforms is, for Johnson, a "game-changer" that will encourage more oil companies to dismantle installations onshore rather than at sea.

A sign of market confidence is a joint investment by Peterson and Veolia to build a decommissioning base at Lutelandet in Norway where the two companies will dismantle Talisman's 14,000-tonne Yme platform in the Norwegian sector of the North Sea.

Iain MacGregor, the chief executive of Global Energy Group which operates the 240-acre Nigg yard in the Cromarty Firth, said that the amount of decommissioning work that will have to be carried out in the North Sea over the next thirty years or so is a "huge opportunity" for Scotland in general and for yards like Nigg in particular.

Scotland is, says MacGregor, well placed to take advantage of the decommissioning bonanza as many of the workforce skills acquired constructing and servicing the country's onshore and offshore oil industry over the past four decades are similar to the maritime engineering skills needed for decommissioning work.

"I think that people have until now been nervous about investing because they didn't know when decommissioning was really going to get going when the price of oil was high, but now the price has fallen that could change," he said.

"I believe that the oil companies will continue to invest in keeping the oil coming for as long as possible so that the two markets [exploration and production as well as decommissioning] will exist side by side for some time to come. It is not all doom and gloom by any means."

In the three years that it has owned the yard, Global has not so far tendered for any decommissioning work but expects to do so as the pace of work picks up.

Yards in Norway had "positioned themselves earlier" than those in the UK to take advantage of decommissioning. But the UK should be able to win a large chunk of decommissioning work in the years ahead by offering a price competitive advantage, through its lower construction costs and wages than countries such as the Netherlands and Norway.

Alex Kemp, Professor of Petroleum Economics at Aberdeen University, told the Sunday Herald that Norway has a natural advantage over many parts of the UK in that its deep coastal waters, particularly around the energy capital of Stavanger, are a prerequisite for most onshore decommissioning work.

Meanwhile, at the southern end of the North Sea, there is a good deal of engineering expertise in the Netherlands and Belgium, particularly when it comes to the essential heavy lifting vessels needed to bring installations to shore.

"This is a substantial opportunity for British industry and there is a lot at stake," Kemp said. "This will become a significant industry: it is growing now and will accelerate in the next few years but the oil companies are in no hurry to decommission, even with the low price of oil at the moment."

Among the issues that will have to be thrashed out will be how much of the subsea jackets in the North Sea will be allowed to remain in situ following decommissioning. Removing all sections of the platform legs and underwater oil storage tanks could involve having to remove tens of thousands of tonnes of steel and concrete and the work would in many cases be both difficult and dangerous.

Shell has not yet decided how much of the subsea sections of the Brent Delta platform will be removed. If Delta's 170-metre tall legs and contaminated concrete storage tanks are left in place they could take thousands of years to erode and Shell is keen to avoid any repeat of the environmental outcry which greeted its plans to dump the Brent Spar oil storage buoy in deep north Atlantic waters in 1995.

The OSPAR convention stipulates that operators have to remove all subsea parts of platforms but the UK's Department of Environment, Energy and Climate Change (DECC) could grant permission to allow some of the installations below the waterline to be left at sea. These would have to be continuously monitored to make sure they remained safe and did not threaten shipping.

The DECC could also grant permission to leave platform legs in place above the surface so long as navigation lights are installed to protect shipping.

For Alf Baird, professor of Maritime Business at Edinburgh Napier University, Scotland would be in a better position to compete for valuable decommissioning work with countries like Norway, Denmark and the Netherlands if the Scottish Government adopted a maritime policy that aimed to bring as much work as possible to Scotland's ports.

Norway's adoption of a targeted maritime policy, says Baird, means that shipping has become the country's second most important industry after oil and gas. The Netherlands, meanwhile, has built up huge industrial complexes, for example in the chemicals sector, around its ports.

"I think that is where those countries have the edge," Baird said. "They have maritime policies which make ports the engines of their economies.

"The problem we have in Scotland is that our port authorities, even the trust ports, are profit oriented. Ports in the Netherlands, Belgium, Germany and Norway are either publicly or municipally owned and those countries regard ports as strategic assets for economic growth whereas we regard our ports as any other business in the economy."

The decommissioning of the massive Brent oil field marks the closing of a chapter in Scotland's post-war industrial history. But the North Sea decommissioning industry is still in its infancy and could secure thousands of important highly-skilled and well-paid jobs for many years to come. If the expertise is developed in Scotland it could be exported to other parts of the world as offshore platforms from the Gulf of Mexico to the South China Sea will eventually also have to be decommissioned.