Regulations for shutdown and disposal
Cessation of petroleum activities and disposal of facilities are regulated by chapter 5 of the Petroleum Act. This specifies requirements for a decommissioning plan as well as rules on notifying termination of use, the disposal decision, liability, encumbrances and takeover by the state.
The decommissioning plan must describe future areas of application for a facility and provide the government with a basis for reaching a decision on disposal. It will not be subject to approval, and its proposals on a disposal solution are not binding on the government.
Disposal requirements are also determined by a decision under the Oslo-Paris convention (OSPAR) which came into force in 1999. This provides guidance and acceptable disposal options for various types of offshore facility. The following complete or partial installations must be shipped ashore for recycling or other forms of disposal:
- subsea installations – in other words, production facilities on the seabed
- floating steel installations
- small fixed installations (with a jacket weighing less than 10 000 tonnes)
- the uppermost part of large fixed steel structures (the topside and that part of the support structure above the piles in installations with a jacket weighing more than 10 000 tonnes)
- topsides on concrete platforms.
Exemptions can be issued for:
- the lower part of large fixed steel structures (jacket weighing more than 10 000 tonnes) installed before February 1999
- concrete gravity base structures (GBS) and anchor foundations
- any other installation when unusual or unforeseen circumstances caused by damage to the structure or deterioration, or other causes which involve corresponding difficulties, are identified.
The OSPAR decision does not cover pipelines, parts of the facility beneath the seabed or concrete anchor foundations which do not present an obstacle to fisheries. More details on the regulations for pipeline disposal are provided in Report no 49 (1999-2000) to the Storting (in Norwegian only).
In addition to the rules in the OSPAR convention, international guidelines have been issued by the International Maritime Organisation (IMO). Its MSC/Circ 490 guidelines of 4 May 1988 provide guidance and are primarily intended to meet shipping concerns.
Disposal duties and liability
The licensee and owner has an obligation to ensure that the disposal decision is implemented, unless the Ministry of Petroleum and Energy decides otherwise. Similarly, the licensee and owner is liable for damage or inconvenience caused wilfully or negligently in connection with disposal of the facility or other implementation of the decision. That also applies to future liability where the disposal decision means that the facility is to be abandoned on the field. Such liability applies regardless of whether the production licence or the permit for installation and operation has expired.
Section 10.8 of the Petroleum Act provides that the licensees are jointly and severally responsible to the state for financial obligations arising out of petroleum activities pursuant to the licence. This also applies to costs associated with implementing the disposal. Being jointly and severally responsible means that each licensee in the joint venture must meet its proportionate share of the disposal costs. It is also responsible to the Norwegian state for the total amount. Should any licensee default, the others are secondarily liable for meeting that licensee’s proportionate share of the cost.
Should all or part of a licence be transferred, the party transferring its interest will have a secondary financial liability to both the other licensees and the state for the cost of implementing the disposal decision. Put briefly, this means the liability arises if the new licensee defaults on its share of the obligation to meet the cost of implementing the disposal decision.
The ministry has noted that no difference should exist on this point whether part or all of an interest is sold. It has warned that an assessment will be made when considering its consent concerning a change of licensee company for a field on stream in order to determine whether conditions should be set in relation to the parent company’s secondary liability for disposal costs.
These responsibilities persist in the event of later transfers of the interest or parts of it. The claim will then be directed first to the company responsible for the most recent transfer. Liability is calculated on the size of the transferred interest, and limited to costs related to facilities which existed at the time of the transfer.
More details on responsibilities and liabilities can be found in sections 5-3, 5-4 and 10-8 of the Petroleum Act, as well as in section 45a of the petroleum regulations. The compensation rules in chapters 7 and 8 of the Act also apply.
Norway has clear regulations and division of responsibility (in Norwegian).
St.prp. nr. 8 (1998-99):
Decision on disposing of redundant offshore installations (PDF)
St.prp. nr. 8 (1998-99):
Decision on disposing of redundant offshore installations – appendix (PDF)
St.meld. nr. 47 (1999-2000):
Disposal of redundant pipelines and cables on the NCS