SHELL
is being forced to spend $1 billion (£600
million) to renew ageing platforms and
infrastructure in the North Sea just to keep the
facilities fit for use over the coming decades.
The need for heavy investment emerges as
the offshore structures erected by the oil
industry in the 1970s reach the end of their
projected lifespans.
A huge asset renewal programme is under way
among all the leading North Sea operators to
combat wear and tear, rust and obsolescence.
Three decades of battering from North Sea
storms has taken its toll on the steel and
concrete hulks that keep Britain lit, warm and
moving. However, the largest spending burden is
falling on those companies, including Shell,
which cut investment levels sharply after the
oil-price collapse in 1998.
The need for a substantial hike in
expenditure and maintenance work in the North
Sea comes at a difficult time for Shell, which
has suffered significant cost overruns at its
Sakhalin Energy project in Russia and at Bonga,
a Nigerian offshore platform.
The effect of years of underspending by
oil companies emerged in investigations launched
in 2002 by the Health and Safety Executive into
the asset integrity of North Sea installations.
The HSE found no evidence of structures in
danger of collapse, but significant signs of
neglect of fabric maintenance — corrosion of
gratings, guard rails and pipework. “Gradually,
a picture emerged of a lot less effort going
into long-life issues. Some installations had
several thousand hours of maintenance backlog,”
Tony Blackmore, an HSE official, said.
The North Sea’s chronic need for new
investment also poses a headache for Gordon
Brown, the Chancellor, who is expected to signal
in his autumn statement on December 5 any plans
for extra North Sea taxation. He will have to
balance the temptation to dip into the
super-profits of the oil companies against the
worry that a windfall tax would deter badly
needed investment to extract the marginal
barrels from depleting North Sea reservoirs.
Shell declined to comment on the cost of
its asset-renewal programme. It said: “We firmly
believe in the integrity of our offshore
installations. However, we can never be
complacent. The North Sea is a mature basin and
requires different methods of working to those
used 25 years ago.”
Asset renewal carries extra sensitivity
for Shell because of an inquiry under way in
Aberdeen into the deaths of two workers on
September 11, 2003, at the Brent Bravo platform,
a facility built in the early 1970s. The two men
descended into one of the hollow concrete legs
of the structure to inspect a temporary rubber
patch to a piece of pipework and were overcome
by a sudden leakage of gas. Shell admitted in
April this year that it was responsible and paid
a £900,000 fine for violation of HSE
regulations. Brent Bravo suffered a second gas
leak last summer as a result of pipe corrosion.
The platform is closed for maintenance.
Industry experts reckon that the platforms
are capable of surviving another two decades of
production. However, a huge investment needs to
be made.
Michel Contie, head of exploration for
Total in the UK, says that operating expenditure
levels have risen by a fifth since 2000. The
French company invested £20 million renewing the
control system on just one of its platforms,
Alwyn. Half of the increased spending, he says,
relates to inflation and human resources.
