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noja

"Decommissioning the UK’s offshore oil and gas infrastructure will cost the taxpayer £24 billion"

errr... what?

Why is the entity that installed the platform there not responsible for that cost?

This article reads very much like a paid piece.

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It wasn't quite clear in the article, but the government isn't paying to remove the platforms, rather the cost of removing the platforms can be written off on taxes, so they (all the oil companies combined) would be paying 24bn less in taxes than they otherwise would have.

That sounds... fair? Like a normal expenditure (it doesn't sound like tax avoidance).

I think the better question is why it costs $24B...

I certainly think you are asking a fair question, but I also think it is understandable that such operations would be considerably expensive. The equipment to remove oil rigs is not cheap [0] and I would assume the demand for such ships is high. Also, I can imagine that a rushed decommission can lead to various ecological disasters that would then cost more to clean up than a proper decommission (+ the added environmental damage)

[0] https://www.youtube.com/watch?v=xsnW5CHrpQ8 - "How Do You Move an Oil Rig? With This Enormous $200M Ship"

I agree with the sentiment of your argument.

I also agree with OP that $24 billion is a ridiculous amount of money assuming it isn't mostly graft. If the oil company had to pay for this operation entirely with its own money, with bankruptcy-threatening fines for failure to comply with strict independent oversight, I bet they could do it for 10% of that cost.

This comment is purely speculation based on my loose understanding of corruption in the construction industry. I am not familiar with petroleum engineering and could be wrong as I am quite obviously guessing.

How does that $24bil compare to oil revenue? Big numbers aren't scary if they are contextualized by even bigger numbers.

You're missing the point. It's like the $10,000 toilet seat covers the US military paid for. I'm not saying they can't afford it. I'm saying it's graft.

https://www.washingtonpost.com/business/capitalbusiness/the-...

Paying $10k for one toilet seat might be graft. We have to ask what the engineering specs were. $10k for an ISS toilet seat might be reasonable. And that $10k might be buying something else they don't want on the budget, which is near enough to graft as makes no difference.

But paying $1mil for many toilet seats probably isn't graft if you run 10,000 profitable paid toilets.

Until someone can successfully decomission a fleet of oil rigs for way less than $24bil, we don't know if it's a good price or not, but especially if it's a small fraction of the overall lifetime value of the oil produced, it might not be a big deal.

I had no clue, but it seems to be in the ballpark of 8 years revenue for "the world's largest offshore drilling contractor".

So it sounds like a lot to me.

[Edit: if that was pounds not dollars, then more like 11 years]

Very fair. Perhaps I'm misunderstanding the math as well - my understanding was 24B was the cost to decommission 350 platforms which comes out to about 68M a piece. I can't claim to know enough to judge whether it could be done drastically cheaper, but yes I'm sure there is some inflation in costs

That's a small vessel in the grand scheme of things, and only works for floating platforms, which can be towed if time is not an issue. For fixed installations let me introduce you to the completely crazy Pioneering Spirit.

https://www.youtube.com/watch?v=D5xXmEHPFp8 - Dismantling a platform in the North Sea

https://en.wikipedia.org/wiki/Pioneering_Spirit_(ship)

Thank you for sharing!! I'm very fascinated by these huge engineering projects/machines.

£24 billion, or about $33 billion.

Actually, if we're really talking about a tax writeoff, the cost of removing the platforms would be much greater than 24B£ - specifically, if would be enough that, if the income used to pay for it were included in the company's taxable income, the marginal income tax alone would be 24B£.

Another thing that wasn't super clear was that this is the total tax relief for all oil rig decommissions for every company, not per oil rig.

That money isn't being thrown into the sea though - it's being paid to all sorts of salvage companies, offshore specialists etc. It's not like the government will suddenly have 24bn less than they would otherwise.

Privatize the gains (assets), socialize the losses (or the liability)

If its anything like how it works in most other oil and gas sectors, they transfer the well infrastructure to shell companies for next to nothing when they are at or near the end of their useful production life, that then promptly go bankrupt.

Now the big companies don't have to pay for clean up, magic.

That only works once. If the other side expects shenanigans, then the company can prepay the cleanup cost somehow, either as an ongoing tax, as upfront fee, or as an insurance pool that you pay into. There are probably hundreds of ways of structuring it.

Except there is zero political will to ensure such a fund is either extant, or properly funded.

This story has repeated itself a lot.

TIL: There's a million (or so) abandoned well heads in North America. Suggesting the trick happened more than once.

BP was owned by the British government up until 1987. Maybe it’s their rigs from back in the day?

Private companies are usually required to have insurance to cover decommissioning their assets in the event of bankruptcy. I’d be very surprised if Britain wasn’t directly involved in the operation of these.

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