Shell Oil Co. and Rig Dumping (SHELRIG)



  
          CASE NUMBER:        177
          CASE MNEMONIC:      SHELLRIG 
          CASE NAME:          Shell Oil Co. and Rig Dumping 
A.   IDENTIFICATION 
1.   The Issue 
     There are 416 offshore oil rigs in the North Sea. As oil
production in this area comes to a close, the issue of what should
be done with the production platforms must somehow be addressed.
One such example involves the Shell Oil Company and its platform
called the Brent Spar off the coast of Scotland. The company wanted
to sink the rig in deep water, but the question was what would the
impact of this action be on the environment. During the ensuing
controversy, Greenpeace mounted a campaign to prevent the deepsea
disposal.  Ultimately, Shell gave in and towed the rig to be
dismantled on shore. 
 
2.   Description 
     The discovery of oil in the North Sea led to the rapid
construction of offshore production facilities in the form of
drilling platforms and storage bouys. The Shell Oil Company was one
of the large oil companies to tap into the vast reserves of the
North Sea. In 1976, before the creation of a pipeline to the
mainland, Shell built an offshore loading facility near the Brent
field of the North Sea. The Brent Spar went on line in December of
that year as a facility where tankers could easily anchor and load
oil into their holds (Oil and Gas Journal, February 27, 1995, p.
27). 
     Following three years of success, the Brent Spar was put into 
standby status because of the completion of an oil pipeline to the 
mainland at Sullom Voe, Scotland (Oil and Gas Journal, February 27,

1995, p. 27). The Spar was kept in the event that any problems 
developed with the pipeline, which could then be reactivated to
store and load oil for tankers. However, the costs for maintaining
the Spar began to outweigh the benefits of keeping it available.
Shell commissioned a review in 1991 which determined that it would
be uneconomical to continue maintaining the Spar (Oil and Gas
Journal, February 27, 1995, p. 27). The question then became what
should be done with the Brent Spar. 
     Shell created six possible options to choose from in
determining the fate of the giant bouy. It could: 

1. continue to maintain the rig at a cost of nine million dollars
per year; 
2. refurbish and then reuse the bouy which would cost $135 million
over three years; 
3. dispose of the rig in the oil field, which Shell had already
ruled out;
4. sink the rig in deep water for $18 million; 
5. dismantle of the rig vertically (which required a deepwater
dismantling area) and dispose of it on shore, or; 
6. dismantle the rig horizontally (which required shallower 
water than the last option) and dispose of it on shore for $69
million. 

The most economical choice was to send the rig to the bottom of 
the ocean at a cost of $18 million (Knott, p. 32). 

     Shell then selected three possible sites for submerging the
rig on the ocean floor: the North Feni ridge, the Rockall Trough,
or the Maury Channel. The selection of the final site was to be
made by the British government, which also had to grant Shell a
license to dispose of the Brent Spar in this manner (Knott, p. 33). 
    In response to the environmental impact the dumping would have,
Greenpeace launched a massive campaign to prevent Shell from 
carrying out its plans and by following the ships towing the Brent 
Spar to drop two Greenpeace workers onto the Spar by helicopter. 
Shell responded by pointing water cannons at the helicopter in an 
attempt to keep it away from the convoy (ABC World News Sunday, 
June 18, 1995). Greenpeace's public relations campaign was so 
successful that sales of gasoline at some Shell stations in Germany
fell by fifty percent. The most extreme reaction was a firebombing
of one Shell station in Germany. 
     Shell maintained that the environmental impact of sinking the 
Spar would be minimal. The depth of the water where the bouy 
would be sunk was 6000 feet, a level with minimal life. The toxins 
remaining within the Spar would gradually seep out over time and 
not have a dramatic impact. [The toxins include sludge, oil, heavy 
metals, and some radioactive salts (The Economist, p. 76).] 
Scientists have documented deepsea hydrothermal vents which 
discharge many times the amount of heavy metals than the Spar, 
thus limiting the Spar's impact on the sea floor (Pearce, p. 15). 
     Greenpeace's concern, along with many scholars in the
scientific Community, was with the setting of a precedent by a
large multinational oil company. The campaign succeeded in forcing
Shell to change its plan and bring the rig ashore to be dismantled.
However, Shell cited thirty studies which indicated that the rig
could possibly fall apart while in transit in shallower waters,
creating a greater environmental problem than deepwater disposal
(National Public Radio, June 25, 1995). Shell must now seek a
different license from the United Kingdom in order to dismantle the
rig on land. However, the UK had strongly defended Shell's desires
for deepwater disposal only to be embarrassed when Shell changed
its decision. The UK could possibly refuse to issue a license in
reaction to this embarrassment (the Economist, p. 77). 
     Land disposal of these rigs creates a new set of problems.
Those employed in the demolition of the rig could be placed in
hazardous situations which might cause them serious injury or
death. The pollutants within the rig would then be sent to a
landfill only to cause greater harm than if in deep water The
Economist, p. 77). The costs of dismantling the rig would largely
be bourne by British taxpayers because the costs are tax
deductible. 
     The actions of Shell were completely legal by international 
standards. In 1989, the International Maritime Organization of the 
United Nations set a series of guidelines regarding the removal of 
offshore installations. Oil rigs which are in water less than 100
meters deep must be completely removed. Rigs in water deeper than
this may be partially removed but must have fifty-five meters of
clear water from the surface to its remnants (Pearce, p. 14). In
addition, the Oslo Convention on the Northeast Atlantic allows for
the deepsea dispoal of bulky waste with very few restrictions. 
     Sinking such a structure in the deep ocean could provide the 
foundation for future reefs where schools of fish could thrive in
the largely overfished North Sea. The threat of fishing nets
snagging on these structures might also prevent fishermen from
coming into certain areas and allowing stocks to recover. 
     As the North Sea oil fields near exhaustion, a set of
international guidelines regarding the disposal of oil rigs would
prevent future disagreement. Greenpeace hopes to lobby the European
Union to outlaw all offshore disposal of oil rigs. Currently, the
United Kingdom is developing a set of rules governing the disposal
of such structures. This will prove to be very important because
there are 416 rigs to be disposed of (National Public Radio, June
25, 1995). 
 
3.   Related Cases 
     Keyword Clusters 
     (1):Industry                  =    OILGAS (oil company) 
     (2):Bio-geography             =    OCEAN (Atlantic) 
     (3):Environmental Problem     =    POLS (sea pollution) 
 
4.   Draft Author:  William Macon 
 
B.   LEGAL clusters 
 
5.   Discourse and Status:    NA 
 
6.   Forum and Scope:    UK AND MULTI 
          This particular case focuses on the interaction between 
the government of the United Kingdom, Shell Oil Company, and 
the international environmental movement represented by 
Greenpeace. 
 
7.   Decision Breadth:   1 (UK) 
          Although the Brent Spar case is limited to the United 
Kingdom in its direct impact (whether on land or in the ocean), 
the result of the case could set a precedent for the 
international environmental movement and its relation to 
preventing disposal of waste at sea. 
 
8.   Legal Standing:     TREATY 
          The only documents governing the disposal of waste at 
sea, in the case of an oil rig, are the Oslo Convention on the 
Northeast Atlantic and the guidelines of the International Maritime
Organization of the United Nations. The former allows for the 
disposal of bulky objects in deep water and the latter sets 
particular rules for destruction of offshore oil rigs. 
 
C.   GEOGRAPHIC Clusters 
 
9.   Geographic Locations 
     a.   Geographic Domain:  EUROPE 
     b.   Geographic Site:    NORTH EUROPE 
     c.   Geographic Impact:  UK 
 
10.  Sub-National Factors:    NO 
 
11.  Type of Habitat:    OCEAN 
          As the North Sea oil fields produce less and less 
oil, more oil rigs will need to be disposed of. The North Sea 
borders on the northern part of Europe, more specifically, 
the United Kingdom and the Scandinavian countries. Most of 
the rigs belong to the British and the Dutch. These two 
countries will have to solve the dilemma of rig disposal. 
 
D.   TRADE Clusters 
 
12.  Type of Measure:    REGBAN 
          The solution for not only the United Kingdom and the 
Netherlands but the rest of the world is to create some sort 
of regulatory ban on the dumping of outdated/useless 
equipment into the ocean. 
 
13.  Direct vs. Indirect Impacts:  IND 
          The costs of rig disposal must be absorbed somewhere 
regardless of the method chosen. One possibility is passing 
on the cost of waste disposal to the consumer in the form of 
higher oil prices. This would represent an indirect impact 
on trade. 
 
14.  Relation of Measure to Environmental Impact 
     a.   Directly Related:   NO 
     b.   Indirectly Related: YES (food) 
     c.   Not Related:        NO 
     d.   Process Related:    YES (pollution of the sea) 
          The disposal of an offshore oil rig into the ocean could 
have a negative impact on the food chain. Waste material 
such as sludge which remains inside the vessel would seep 
out and kill living organisms from which other, larger fish may 
obtain their food. It is the process of dumping these rigs which 
could have such an impact. 
 
15.  Product Type: MANUFacture 
 
16.  Economic Data 
          The key economic data are presented above in the 
main description of the issue. According to David Knott, there 
were six options concerning how to dipose of the rig: 1) maintain 
the rig for nine million dollars per year; 2) refurbish and reuse 
the bouy at a cost of $135 million over three years; 3) dump the 
rig in the oil field (no true cost because it would pose a hazard 
for others operating in the area and subject Shell to possible 
litigation); 4) sink the rig in the deep ocean at a cost of $18
million; 5) dismantle the rig horizontally and dispose of it on
land, or; 6) dismantle the rig vertically and dispose of it on
land, either option at a cost of $69 million. Somewhere, this cost
will be absorbed, which is how the issue relates to international
trade. 
 
17.  Impact of Measure on Trade Competitiveness:  LOW 
 
18.  Industry Sector:    OILGAS 
          Oil rigs are clearly part of the oil and gas sector of
the mining category according to the Standard Industrial Code. 
 
19.  Exporter and Importer:   UK and MANY 
          The Brent Spar rig was located in British waters and is 
therefore considered British. This reason combined with the 
dumping of the rig in the ocean would indicate that the United 
Kingdom is an exporter of the pollution. The ocean currents 
can then move the pollution around the North Sea and into the 
Atlantic Ocean, which would affect many other nations (who 
could be considered importers of the waste). 
 
E.   ENVIRONMENT Clusters 
 
20.  Environmental Problem Type:   POLS 
          This case concerns the the pollution of the sea which 
is a sink problem as opposed to a source problem. 
 
21.  Name, Type, and Diversity of Species 

          Name:     NA 
          Type:     NA 
          Diversity:     NA 

 
22.  Impact and Effect:  LOW AND REGUL 
          Disposal of the Brent Spar would have a relatively low 
impact in terms of pollution. The solution, as mentioned above, 
is the establishment of a groups of regulations to govern the 
future of oil rigs.. 
 
23.  Urgency and Lifetime:    LOW and 100's of years 
          The deterioration of a metal oil rig would last hundreds 
of years only to affect the environment slowly over time. 
 
24.  Substitutes:   NO 
          There are no substitutes for the construction of offshore
oil rigs. The only options to consider in terms of their disposal
involve land-based removal which might then pollute landfills. 
 
VI.  OTHER Factors 
 
25.  Culture:  NO 
 
26.  Trans-Border:  NO 
 
27.  Rights:   NO 
          The Brent Spar case does not have a bearing on national 
cultures or human rights. The case also does not focus on an 
issue that would have an effect on the border between two nations. 
 
28.  Relevant Literature 
 
     ABC World News Sunday, June 18, 1995. 
 
     "Brent Field Spar to Be Abandoned in UK Deep Water." 
Oil and Gas Journal, 93 (February 27, 1995), 27. 
 
     Knott, David. "North Sea Operators Tackling Abandonment 
Problems." Oil and Gas Journal, 93 (March 20, 1995), 31-40. 
 
     National Public Radio, June 25, 1995. 
 
     "Oil Platforms: Hollow Shell." The Economist, 335 (June 24, 
1995), 76-77. 
 
     Pearce, Fred. "Breaking Up is Hard to Do." New Scientist, 
146 (June 24, 1995), 14-15. 
  

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