Energy regulations must be fit for repurpose - Shirley Allen

Energy transition has been adopted by many of the world’s major hydrocarbon producers who have pledged to move towards a low or zero carbon future, while the UK Government last month announced ambitious targets to accelerate the timescales towards a net zero future.

Energy transition is coming

While much of the focus is on harnessing green energy and devising alternative production methods, there has been a dramatic shift in thinking around the decommissioning of certain oil and gas platforms, pipeline networks, and other assets which are reaching end-of-life.

Only 15 per cent of UK Continental Shelf infrastructure has been decommissioned to date and it is forecast UK expenditure on decommissioning over the next decade will be around £1.5 billion per annum, while the regulator, the Oil and Gas Authority (OGA), estimates the overall cost of infrastructure removal would top £50 billion.

However, there is a growing realisation that some obsolete infrastructure could instead be repurposed and used to generate, store or transport green energy sources, including wind, hydrogen and Carbon Capture Storage (CCS).

Shirley Allen, Partner and oil and gas specialist at Pinsent Masons

Repurposing existing assets would reduce the need to install new infrastructure and systems, reduce carbon emissions during the manufacturing, transportation and construction of new infrastructure, and could potentially reduce the pressure on corporate balance sheets.

This is commendable but there needs to be a concerted effort to examine the legal framework around decommissioning and to identify the enablers, and the blockers, in supporting asset repurposing.

Existing legislation states that whatever infrastructure asset owners put on the seabed, they are responsible for removing, subject to a couple of exemptions. Over the life of an oil and gas asset ownership will often changes hands, but the responsibility generally remains with the current stakeholders.

But if a third party renewable energy specialist wanted to take over all, or part of, an ageing asset, this would pose all sorts of questions as to the ongoing liability for the maintenance and eventual decommissioning of that asset.

Who will be responsible for the upkeep and maintenance of that asset until it can be repurposed, and how should the financial burden be shared? Will the former asset owner be held partly responsible for decommissioning 20 or 30 years later or relieved of all responsibility, and what happens to the security provided by the current owners to cover the cost of decommissioning?

It has been mooted there could be a case for establishing a completely new regulatory regime, which will lean on the lessons learned in the highly regulated oil and gas sector, while incorporating a framework better suited to the fast-moving and constantly changing renewables sector. We recently saw European energy ministers calling for a stable regulatory framework for hydrogen across the EU in order to create a predictable and competitive market and to attract investors. We need the same here in the UK.

In my 20 years working in the oil and gas space, I have never witnessed a more dynamic phase and the pace of change in driving forward energy transition is remarkable. Let’s hope the relevant parties and stakeholders can work collaboratively to formulate legislation and regulations which are truly fit-for-repurposing.

Shirley Allen, Partner and oil and gas specialist at Pinsent Masons