Repurposing Offshore Infrastructure for Clean Energy (ROICE) Vs. Decommissioning – Regulatory Considerations

The Gulf of Mexico (GOM) in the United States (US) has approximately 1,500 oil and gas structures that have reached or will soon reach the end of their oil and gas production phase and will need to be decommissioned within the next few decades. Decommissioning can be quite an involved and expensive process, but is required by both national and international law, and is also a required step in the U.S. federal offshore leasing process (30 CFR 250.1703). The decommissioning process includes plugging and abandoning of all wells, removal or preservation in place of all pipelines, removal of all oil and gas equipment, and disassembling supporting structures to bring back to shore which leads to the final step of site restoration. Costs for such decommissioning for individual assets can range from the tens to several hundreds of million dollars a. The P50 estimate for decommissioning of all current assets in the GOM is estimated to be between 34 to 48 B$ b, c. With the 1,500 asset assumption stated previously, this averages out to about 25M$ per asset in decommissioning costs. One potential mechanism to encourage decommissioning is to incentivize it through a repurposing initiative, known as Repurposing Offshore Infrastructure for Clean Energy (ROICE) projects. This has the potential to create a revenue stream from clean energy or other energy transition activities. The responsibility for conducting and financing the decommissioning portion of the leasing requirement is based on the "joint and several liability" principle, where all current and previous asset owners remain responsible for fulfilling the ARO (asset retirement obligation). It is estimated that ten percent of the cost of decommissioning structures is covered by surety bonds, with the rest dependent on the balance sheet of current or previous operators. This often results in individual asset decommissioning plans being delayed for years while the financial responsibility is determined, assigned, and accepted. An example of a ROICE project could involve fixed or floating wind turbines around an existing oil and gas platform, with the wind power exported to shore or used to generate green hydrogen (H2) through an electrolytic process on a repurposed platform. H2 generation by electrolysis will be supported by seawater desalination to provide a self-sufficient and constant fresh water supply. An alternative ROICE project scenario is to utilize a repurposed platform for carbon dioxide (CO2) injection and storage in saline reservoirs in the Gulf of Mexico, with a 45Q tax credit of $85 per ton. Of the different components of the oil and gas structures to be repurposed, it is likely the most cost-effective to reuse the jacket (main support structure) and the deck (flooring above the structure) for ROICE projects. In specific cases, utilities, cranes, and living quarters, among other things, may also be reusable with some refurbishments, The remaining equipment will need to be decommissioned as per normal practice and in compliance with the lease agreement.