Elgin Highlights Decommissioning Risks, IEA Says

The International Energy Agency (IEA) has warned that other operators in the UK North Sea may face the same difficulties as Total have at the Elgin gas leak at matured gas fields in the medium-term future.

As the resources in the offshore area dwindles, the IEA says, further decommissioning may cause other companies the same issues as the French major has dealt with at the Elgin site.

"The problem that Total encountered as it decommissioned an old well at the field is likely to portend difficulties at other mature fields in the medium term," the agency's recent report on the oil market said.

A large number of fields in the UK will need to be decommissioned in the coming years as the fields become tapped out of any resources. Total's experience on the Elgin field, the IEA said, is likely to resonate with other operators.

"Other companies are sure to look towards Total’s experience as an indicator of problems that might occur when routine maintenance becomes problematic for an entire field complex," the report said.

Currently, the issues with the Elgin gas leak, which has been identified as originating from a G4 wellhead, are proving costly to Total, with reports estimating the cost at $2.5 million a day.

However, the leak may also prove to have another knock-on effect financially on other operators in the North Sea, owing to proposed EU legislation, the Fitch Ratings agency warned earlier this week. Such legislation would require operators to have financial resources of up to €10 billion to deal with the effects of accidents on the gas field.

"Such an approach could have negative rating consequences for even the highest investment-grade oil and gas companies operating in EU territorial waters," the agency cautioned. 

The Elgin platform has been leaking since the 25th of March and may be plugged using heavy mud or through the building of relief wells. Total says it expects the plugging operation to be completed by the end of this month.