‘Plug and abandon’

28 June 2024

‘Plug and abandon’

Is the oil company that polluted Poole Harbour now risking disaster in the North Sea?

Perenco, the UK’s largest operator of North Sea oil and gas infrastructure, repeatedly missed government deadlines to decommission its oil wells—in some cases by years

In April 2022 a fire broke out when gas leaked on an ageing oil platform 70 miles off the Norfolk coast. Nobody was hurt—but investigators were alarmed. There shouldn’t have been any flammable gas there at all.

The platform is owned by Perenco, the oil company that last year gained notoriety for polluting Poole harbour. Before the fire Perenco had declared it gas-free.

A SourceMaterial investigation has found that the accident was not isolated but part of a series of failures at the Anglo-French oil group. Documents obtained through a Freedom of Information request reveal that Perenco has repeatedly missed government deadlines to decommission its oil wells—in some cases by years.

Perenco’s apparent lapses heighten the risk of environmental disaster, said David Santillo, a marine scientist at Greenpeace Research Laboratories at the University of Exeter. 

“Damage to the integrity of structures could range from a slow but persistent spread of oil residues or other toxic chemicals to surrounding waters and sediments up to a more catastrophic blow-out,” he said. “Containment and clean-up would be practically impossible”. 

Decommissioning prevents methane, a greenhouse gas four times as potent as carbon dioxide, from leaking, and will have to speed up exponentially if the world is to limit global warming to 1.5 or even 2 degrees, scientists say. Perenco specialises in older oilfields, and as its 363 offshore wells reach the end of their life, now faces the cost of decommissioning them—at up to £8 million apiece.

“Things start getting pushed. Something has to give.”

Percenco is led by Francois Perrodo, a billionaire racing car driver whose family’s £9 billion fortune is reckoned to be the 17th largest in Britain. Since buying a handful of gas fields from BP in 2003, it has grown to become UK’s largest North Sea infrastructure owner with 45 offshore platforms and nearly 1,500 miles of pipelines. 

While Perrodo has splashed millions on a collection of 56 classic cars, his company has kept a tight rein on spending. Industry sources say that as Perenco squeezes the remaining profit from its dying fields, any potential attempt to reduce clean-up expenses could put workers and the environment at risk. 

In April, regulators fined the company a record £225,000 for discharging 59 tonnes of gas into the atmosphere at a plant on the North Sea Coast. 

“There are high maintenance costs and low production rates,” said one decommissioning engineer, speaking anonymously because he still works in the sector. “Things start getting pushed. Something has to give.”

In response, a Perenco spokesman said that the company is not a “low-cost operator”. 

“Each year we spend hundreds of millions of pounds diligently stewarding the assets under our care”, he said. “Perenco has an excellent track record of effective decommissioning in the UK North Sea, exercising diligent stewardship of one of the largest networks of owned and operated gas assets offshore UK.”

‘Plug and abandon’

The April 2022 fire at Perenco’s Indefatigable field was not a one-off. There was a similar accident at the company’s Pickerill field three years before, while another fire broke at the Amethyst field that August.

An analysis of the Health and Safety Executive’s database of penalties and enforcement notices shows that Perenco is responsible for 15 per cent of the North Sea’s breaches in the last five years despite accounting for about 2 per cent of production.

In late 2022 the North Sea Transition Authority, the government body that regulates decommissioning of wells, addressed Perenco officials at a meeting in Aberdeen.

“You agreed to come back to me with the steps Perenco has taken to prevent recurrence,” an NTSA official wrote to the company, complaining about a well in the Indefatigable field at which Perenco had not carried out the work it promised. 

Perenco replied that its plans had “changed in the late stage of the engineering phase”, and that it had overhauled its procedures to stop the problem recurring.

Perenco’s spokesman said that the company had also made changes following the fire on the Indefatigable platform: “Perenco has amended pipeline removal procedures to reduce the risk involved in decommissioning operations, mitigating the potential risk of small quantities of residual hydrocarbons remaining in pipelines that have been flushed out.”

Leak risk

Amid regulators’ growing worries about safety, Perenco has consistently missed deadlines to shut and clean up its defunct fields. Analysis of correspondence obtained under the Freedom of Information Act by SourceMaterial reveals 17 wells where Perenco has either requested a late extension to a decommissioning deadline or missed it entirely – in two cases by more than a decade.

One Perenco well, north of the Anglia field, was set to be sealed and abandoned in 2011 but had still not been fully decommissioned by July 2022. Another near the Indefatigable field was due to be abandoned by 2009 but was still not fully sealed and dismantled when the NSTA set a new deadline 11 years later. The work remains incomplete. Perenco said in a statement that it had now reached an agreement to abandon them by 2025.

Delays in decommissioning increase the risks of oil and gas leaks, experts say.

“The seabed is not static, even quite deep down”, said Santillo. “Any delay in plugging and abandoning makes the job more difficult, more complex. You’ve got to deal with the additional corrosion and the chances of a leak occurring.”

Perenco’s repeated requests to delay decommissioning work appear to have stretched the regulator’s patience, emails suggest. 

In 2022 a decommissioning deadline in the Amethyst gas field was postponed from July to September. But in August, days after a fire broke out at one of the platforms being decommissioned, Perenco told the NSTA that it needed to “maximise production right now to support the UK Economy” and did not have the available rigs to start decommissioning the remaining wells until “late 2024”.

“Given that this notice has been extended on more than one occasion already, it should be noted that no further extension will be permitted,” an NSTA official wrote.

The regulator later asked Perenco to confirm that it “clearly understood” its reporting requirements after an exchange in which the company showed confusion about whether an NSTA deadline was the date it should start decommissioning work or finish it. 

Perenco’s spokesman said that the company has spent more than £500 million on decommissioning since 2009.

“​​Perenco’s safety record in the North Sea has shown continuous and steady improvement,” he said.  “As a consequence, safety-related key performance indicators are all trending in the right direction.”

Perenco has a “good, open dialogue” with the regulator, he said, adding that sometimes decommissioning was reschedule to improve efficiency:

“On occasions, Perenco has disagreed with the regulator regarding the optimal scope and phasing of operations, and the regulator has exercised its right to enforce action.” 

‘Finance 101’

Questions about Perenco’s record on decommissioning the North Sea are a symptom of a broader problem. Operators decommissioned less than half of the subsea wells they were expected to in 2022, NSTA data shows.

In November the NSTA wrote to the 39 North Sea operators to express “concern at the number of deferrals of well decommissioning activities”. But the regulator has failed to force operators to act, said Santillo. 

“You’ve got an industry that has over the decades got used to light touch regulation”, he said. “It’s got used to dictating its terms.”

Companies like Perenco will always have an incentive to defer decommissioning if they can get away with it, said Anastasiya Ostrovnaya, a researcher at Imperial College’s Centre for Climate Finance & Investment.

“The time value of money tells you that I prefer to pay one pound in five years rather than a pound today”, she said. “That’s simple Finance 101.”

“In the end it’s about the industry doing the right thing” 

One solution could be to require companies to set aside decommissioning funds during an oilfield’s productive life. An alternative could be a US-style “idle iron” law obliging operators to remove any structures within five years of a well being plugged.

In failing to clean up after themselves, oil and gas companies are breaching not just their regulatory obligations but their implicit pact with society, said Santillo.

“It is part of the covenant that government and civil society has with the oil and gas industry: that they will clean up and remove their materials when they finish making their profits,” he said. “In the end it’s about the industry doing the right thing.” 

Headline picture: North Sea oil rig (Alamy)