Open consultation

Derogation methodology under OSPAR Decision 98/3, and associated policy changes: assessment of financial impact (accessible webpage)

Published 5 September 2025

Introduction

For the decommissioning of offshore oil and gas installations, the UK Government has prepared draft supplementary guidance to provide clarity on how proposals for a derogation from OSPAR Decision 98/3 will be considered. The consultation invites stakeholders’ comments on this draft guidance. It also invites stakeholders’ comments on proposed policy changes with respect to the removal of offshore oil and gas steel jackets.

Following review with DESNZ’s Better Regulation Unit and Legal Counsel we have determined that the proposals we are consulting on are out of scope of the Government’s Better Regulation Framework (“the BRF”) as the guidance is not a regulatory provision, and as such do not require a formal stage impact assessment. Despite being out of scope of the BRF, for the purposes of transparency we have prepared this analysis.

The North Sea Transition Authority (NSTA) – as the regulator responsible for overseeing decommissioning costs – has provided DESNZ with analysis on the potential impact of the proposed guidance and policy change on current forecast cost of UKCS decommissioning. All financial data in this assessment has been provided by the NSTA (presented in 2023 prices), and DESNZ has assessed the potential impacts on businesses.

NSTA has used UK Stewardship Survey (UKSS) data, supplied by industry, as the basis for the cost of substructure removal.

Assessment of financial impact

Draft supplementary guidance on the methodology for considering derogations under OSPAR Decision 98/3

Under the current UK offshore oil and gas decommissioning regime, if an owner/operator has an installation that meets the criteria for a derogation from OSPAR Decision 98/3, they may choose to apply to OPRED for a permit to leave parts of the installation in situ (a derogation ^{[footnote 1]}).

Derogations are considered on a case-by-case basis. This has been the case since Decision 98/3 was made and will continue to be the case following the publication of the finalised guidance. The new draft supplementary guidance re-states OPRED’s presumption of full removal and sets out that applications to leave parts of installations in situ will only be considered if it is agreed that full removal is not reasonably achievable. We anticipate that the proposed guidance, as agreed by OSPAR Agreement 2024-04, may reduce the number of derogations. However, due to the case-by-case nature of derogation approvals, it is not possible to accurately identify which structures will be allowed to be left in situ and therefore the impact on the decommissioning cost estimate.

The NSTA’s decommissioning cost estimate of £44bn in 2024 prices ^{[footnote 2]}, which is the total forecast cost of fully decommissioning the remaining UK Continental Shelf, assumes all heavy steel jacket footings (derogation candidates) are permitted to be left in place (to -3m below seabed). Full removal of all those structures would cost an additional £1.55bn (class 5 estimate). For the reasons set out above, this figure does not represent the cost impact associated with this guidance.

The cost of the decommissioning proposals will be a factor taken into account when reaching a decision on whether full removal is reasonably achievable.

Cutting of steel jackets

UK and international policy on the decommissioning of installations is that they should be completely removed from the marine environment at the end of field life. For steel jackets, only a small number of legacy installations can be permitted for the footings to remain in situ under a derogation from OSPAR Decision 98/3. However, this consideration is on a case-by-case basis, and we are striving to drive forward the technology development to enable the removal of as much infrastructure as it is safe and technically feasible to do so.

The current policy on full removal of steel jackets is that they need to be removed at the level minus 3m below seabed. In this consultation we are assessing this policy and proposing cutting instead at the natural seabed level. This would still need to be considered on a case-by-case basis to ensure safety and mitigation of risk for other users of the sea, such as protruding infrastructure in mobile seabed conditions which can cause snagging hazards. The technological, contractual and personnel costs associated with excavations to minus 3m can be technically complex and costly.

The NSTA, as the regulator responsible for overseeing decommissioning costs, estimates that the cost of removing a steel jacket cut at the natural seabed is likely to be between 5% and 50% lower than removal when cut at minus 3m. There are many variables, and this percentage will be highly structure specific, hence the wide nature of this range. For the purposes of this exercise the NSTA have considered 20% to be a sensible central assumption. The figures below represent the savings associated at 5%, 20% and 50%.

All steel jackets, excluding the derogation candidates

The NSTA estimates that the cost of full removal down to -3m below the seabed of all UKCS steel jackets, excluding those which are a derogation candidate, is £1.4bn. The cost saving associated with severance at seabed level (0m) is estimated to be £290m (20% saving) but could be in the range £72m (5% saving) to £0.7bn (50% saving). This includes steel jackets in the Southern North Sea.

Steel jackets in the Southern North Sea

The seabed in the Southern North Sea (SNS) is particularly mobile, meaning structures can become exposed, creating hazards to other users of the sea. We are therefore considering retaining the requirement for structures in the SNS to be cut and removed to -3m below the seabed. Therefore, for completeness, we have included figures on them: the NSTA estimates that the cost saving associated with removing steel jackets in the SNS at seabed level rather than -3m below is £102m (20%) but could be in the range £26m (5%) to £260m (50%).

Heavy steel jacket derogation candidates

For the steel jackets weighing more than 10,000 Tonnes installed prior to OSPAR Decision 98/3 - i.e. the derogation candidates - the NSTA estimated cost of removing the lower jacket/footings to -3m below the seabed is expected to be circa £1.55bn. The cost saving associated with removal of lower jacket/footings at seabed level (0m) is estimated to be £310m (20%) but could be in the range £78m (5%) to £0.8bn (50%). 

Other business impacts

As set out above, any reduction in the number of derogations would lead to an increased cost to the operators responsible for decommissioning. However, the additional removals may represent a supply chain opportunity for UK companies and yards, and may represent opportunities for research and technology development. Future technology development itself may be costly for oil and gas operators, but it may allow overall cost savings in the long term with the deployment of new technology across the basin. The scope for technology development may encourage innovation and may increase market competition to develop, trial and implement technological advancements.

It is anticipated that there would be additional administrative requirements to prepare and submit the required full removal assessment.

Cutting at the seabed will be less costly than at -3m.

1. All steel jackets weighing more than 10,000 Tonnes installed prior to OSPAR Decision 98/3 are potential derogation candidates. Operator financial forecasting to date has been on the basis of derogations being approved. ↩

2. North Sea Transition Authority: UKCS Decommissioning Cost and Performance Update, published 10 July 2025. ↩