Regulating the reuse and repurposing of oil and gas installations

 

 
A new publication from the NCCS project discusses the legal regime for reuse and repurposing of oil and gas installations in the context of decommissioning. It puts it in perspective with the ongoing energy system integration and discusses ways to create incentives and identify synergies within the decommissioning regime, including for enabling carbon capture and storage (CCS) projects. The publication makes a series of concrete recommendations on how to advance legislative reforms.

Drivers in reuse and repurposing

Reuse and repurposing is of increasing relevance in many decommissioning projects, although it may only be realised in a limited number of cases. This new focus is motivated by a series of factors.

• The first factor is decommissioning optimisation, where actors aim to ensure cost-efficiency. Reducing decommissioning costs does not only benefit licensees and owners, but also the society as a whole, as it reduces pressure on taxpayers.
• A second factor is the efficient management of energy projects by prolonging the lifetime of former oil and gas assets that can serve new purposes such as renewable energy generation or CCS projects. Reusing existing assets can also help reduce local opposition.
• A third factor is the opportunity to create synergies between sectors, both offshore and onshore. Offshore, reusing existing oil and gas infrastructures can enable maritime synergies across sectors and provide infrastructure for the blue economy. Onshore, it can support a rapid decarbonisation of various industries, buildings, transport and the economy in general.

The current initiatives around sector integration and sector coupling envisage the reuse of existing assets for new purposes such as hydrogen, carbon dioxide or biogas transport.

The need for revising decommissioning regulation

Although reuse and repurposing may bring valuable contribution to different policy objectives and industrial processes, it appears that it is not an obvious objective of decommissioning regulation. The international regulation on offshore decommissioning favours complete removal of fixed installations, and only as an exception allows partial removal or the reuse/repurposing, if duly substantiated. Taking the example of North Sea countries, it appears that reuse is often addressed for the first time when the draft decommissioning plan is elaborated, which leaves a relatively tight window of opportunity to find reuse or repurposing options, if not already envisaged by the licensees and the owners. Regional coordination could be further promoted as well as collaboration through hubs. Consequently, there is a need for a more coordinated and holistic approach to reuse as part of the decommissioning legislation and policy.

Recommendations for an improved reuse and repurposing legal regime

Reviewing policies and law for enabling reuse and repurposing of oil and gas installations is a highly necessary and strategic step for countries with maturing petroleum provinces and facing the energy transition. Promoting reuse and repurposing should not undermine the established decommissioning regime, which is often a complex architecture of check and balances. At the same time, the legislation must provide sufficient incentives to enable reuse projects.

For further enabling the reuse and repurposing of oil and gas installations as part of decommissioning processes, it is suggested that Governments should:

• better enshrine the waste hierarchy principles in their decommissioning legislation, with reference to circular economy principles;
• develop a consistent and holistic approach. Governments should elaborate national strategies on decommissioning and reuse, in close interaction with the development of low carbon energy systems;
• ensure that energy system integration which includes reuse of oil and gas installations, is planned at national and regional levels;
• establish meeting platforms for actors interested in decommissioning and reuse projects;
• develop guidance in the form of a list of public assessment criteria for assessment of re-use solutions to be used as part of the draft of the decommissioning plan;
• provide for financial incentives or compensation to keep in place installations that can be re-used. A fund system for reuse may even be established. One could also envisage temporary decommissioning of the disused facilities that do not preclude their later reuse;
• consider the need for a separate administrative reuse decision;
• define in law, or through standard agreements, the mandatory terms that a reuse decision or agreement should cover; and
• provide incentives for reuse by amending the liability regime for final decommissioning of oil and gas facilities, in particular the secondary liability regime applicable to former licensees.

 
Here is a recording of the book chapter presentation: