The world is moving away from oil.
What happens to all those oil rigs out there in the water?
Sabin Center for Climate Law Columbia University:
More than 12,000 offshore oil and gas installations straddle the globe, and industry analysts anticipate annual offshore oil and gas investments to reach USD 173 billion by 2024. A number of oil companies are expected to significantly expand their offshore drilling activities in the coming years.
At the same time, many jurisdictions face a growing need to decommission their offshore oil and gas infrastructure, whether because it is aging, the resources are depleted, or net-zero strategies require certain producing assets to be decommissioned earlier than expected. A 2021 forecast by IHS Markit estimated that global offshore decommissioning spending could cost nearly USD 100 billion between 2021 and 2030, a period that S&P Global Commodity Insights has described as a potential “decade of offshore decommissioning.” In the face of increasing demand for decommissioning, some have predicted that decommissioning costs may increase significantly.
Offshore oil and gas infrastructure also faces an existential threat: the increasingly pressing need to address the climate emergency. The Intergovernmental Panel on Climate Change (IPCC) projects that GHG emissions from existing and planned fossil fuel infrastructure will push global warming past the Paris Agreement’s 1.5°C threshold, and detailed regional projections estimate that “nearly 60 per cent of oil and fossil methane gas . . . must remain unextracted to keep within a 1.5 °C carbon budget.” Increased public focus on reducing GHG emissions, coupled with the global push for electrification and declining prices for renewable energy, may cause a rapid decline in oil and gas demand that forces the mass closure of offshore installations. Even without policy changes or concerted climate action, the increasing adoption of renewable energy systems and energy-efficient technologies is likely to depress demand for fossil fuels.
These combined dynamics may create serious risks for the public in a rapid phase-out scenario involving the widespread cessation of offshore oil and gas activities. Decommissioning offshore oil and gas infrastructure can be a laborious and expensive process. Most countries with significant offshore oil and gas resources have laws, regulations, and contracts that require private offshore oil companies to bear the cost of decommissioning their facilities. A formal assignment of legal liability, however, does not guarantee that decommissioning will occur or that funds will be available when decommissioning obligations arise. Governments often sit as the “decommissioner of last resort,” and if oil companies default in their decommissioning obligations, the public will be left footing the bill.
Not just Big Rigs. Texas Monthly has more.
There they spotted a rainbow sheen—about thirty feet wide and a couple of hundred feet long—stretching across the murky water, a telltale sign of a leaking oil well. They had seen and reported it before. Now the well appeared to be releasing petroleum into the bay at a faster rate.
So the Coast Guard again notified the state’s General Land Office, which contacted the Railroad Commission of Texas, a preposterously named institution that has nothing to do with railroads and everything to do with the oil business. A week later, last February, inspectors from both state agencies took a boat out to check on the leak. The metal grating around the well, from which it should have been accessible, had severely corroded, making it too dangerous to stand on. This dashed their hopes for a closer examination, and they settled for snapping a few photographs of the decrepit equipment before heading back to land.
There was no point in trying to get the well’s owner to fix it, because the company no longer existed. The oil spewing into the bay was the state’s problem now. An emergency $100,000 expenditure was approved, and the leak was stopped.
The stakes of such contamination are high. Trinity Bay is where the Trinity River finishes its seven-hundred-mile meander across Texas. The river carries nutrients and fresh water, which mix with the salty water that reaches the bay from the Gulf of Mexico. This fosters a fertile coastal-nursery ecosystem that, among other benefits, feeds seafood-loving Texans. The plants and zooplankton that thrive there provide sustenance for bay anchovy, drum fish, and mullet—parts of a robust food web that also supports populations of crab, flounder, oyster, sea trout, and shrimp.
Decommissioning expenditure will rise too. According to research firm IHS Markit, global decommissioning expenditure is expected to grow by 10% each year, reaching $12 billion by 2030, with $100 billion of cumulative spending over the decade. Regionally, the largest market is Europe, with its mature and complex infrastructure, which accounts for a third of spending, the Americas 30% and Asia Pacific 23%.
As demand increases through the decade, the key questions centre around supply. Are there enough drilling rigs, well service equipment, construction support vessels, port handling facilities and personnel to support decommissioning requirements? Perhaps. But it’s going to get tight. And tight markets mean low availability and higher, potentially much higher, prices.
On par with what’s going to happen to all those nuclear power-plant if we’re not around to service them. I’ve read there are 14,000 capped wells in the Gulf of Mexico alone, just waiting to start leaking. May well be, Horizon was a harbinger …