oil spill cost study - opol financial limits

Oil Spill Cost Study - OPOL Financial Limits

Joint study commissioned by OPOL and Oil & Gas UK

Oil Spill Cost Study – OPOL Financial Limits

February 2012

© The United Kingdom Offshore Oil and Gas Industry Association Limited (trading as Oil & Gas UK) and the

Offshore Pollution Liability Association Ltd (trading as OPOL), 2012.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or

transmitted in any form or by any means, including electronic, mechanical, photocopying, recording or

otherwise, without prior written permission of Oil & Gas UK and OPOL.

Any material within this study that has been used has been reproduced with the permission of its owners.

The data and analysis contained herein is given for information only. This report is not intended to replace

professional advice and is not deemed to be exhaustive or prescriptive in nature. Although the authors have

used reasonable endeavours to ensure the accuracy of this information neither Oil & Gas UK, OPOL nor

any of their members assume liability for any use made thereof. In addition, the report has been prepared

on the basis of practice within the UKCS and no guarantee is provided that it will be applicable for other

jurisdictions. All examples given are for illustrative purposes only and are not intended to represent

adequate coverage of liabilities that may be incurred in any real situation.

The cost predictions in this report are estimates only of certain types and amounts of costs and losses

which may arise as the result of specified well blowout scenarios in UK waters and are not intended to be,

and shall not be construed as, any admission or agreement on the part of any operator or of OPOL as to the

nature or amount of costs, losses or other damages in respect of which any person might be liable whether

under the OPOL Agreement, as a matter of law or otherwise as a result of any such scenarios or otherwise.

Where reference is made to a particular organisation for the provision of data or information, this does not

constitute in any form whatsoever an endorsement or recommendation of that organisation, or any model or

product that they may provide.

ISBN: 1 903 003 79 9

PUBLISHED BY OIL & GAS UK

London Office:

6th Floor East, Portland House, Bressenden Place, London, SW1E 5BH

Tel: 020 7802 2400 Fax: 020 7802 2401

Aberdeen Office:

Exchange 2, 3rd

Floor, 62 Market Street, Aberdeen, AB11 5PJ

Tel: 01224 577250 Fax: 01224 577251

Email: [email protected]

Website: www.oilandgasuk.co.uk

_______________________________________________________________________________________________________

February 2012 Page 1

Oil Spill Cost Study - OPOL Financial Limits

CONTENTS

1 EXECUTIVE SUMMARY ............................................................................................... 5

2 INTRODUCTION ........................................................................................................... 6

3 OPOL AGREEMENT FINANCIAL LIMITS ................................................................... 7

4 POTENTIAL OIL RELEASE SCENARIOS ................................................................... 8

4.1 NATURE OF A WELL BLOWOUT .................................................................................. 8 4.2 CONTROL OF WELL BLOWOUTS ................................................................................ 8 4.3 DEFINITION OF SCENARIOS USED FOR THIS REPORT .................................................. 9

5 BACKGROUND TO THE FATE OF OIL IN THE ENVIRONMENT ............................ 11

5.1 WEATHERING PROCESSES ..................................................................................... 11 5.2 TRANSPORT PROCESSES ....................................................................................... 12 5.3 RELEVANT CONSEQUENCES ............................................................................................ 13

6 MODELLING STUDIES USED TO INFORM THIS REPORT ..................................... 15

6.1 OVERVIEW ............................................................................................................ 15 6.2 MODELLING COMMISSIONED UNDER OSPRAG ....................................................... 15 6.2.1 Description of model used ............................................................................... 15 6.2.2 Model inputs .................................................................................................... 16 6.2.3 Modelling of surface oil .................................................................................... 17 6.2.4 Regional Summaries ....................................................................................... 19 6.2.5 Conclusions for shoreline oiling predictions .................................................... 24 6.3 OPERATOR MODELLING ......................................................................................... 25 6.3.1 Introduction ...................................................................................................... 25 6.3.2 Description of model used ............................................................................... 25 6.3.3 Model input data .............................................................................................. 25 6.3.4 Summary of results ......................................................................................... 26 6.3.5 Conclusions relating to oil predictions included in cost model ........................ 27

7 COST PREDICTIONS ................................................................................................. 28

7.1 METHODOLOGY ..................................................................................................... 28 7.2 BASIS OF COSTS RELATING TO REMEDIAL MEASURES ............................................. 28 7.2.1 Remedial Measures ........................................................................................ 28 7.2.2 Cost sources .................................................................................................... 29 7.2.3 Command Centre Costs .................................................................................. 29 7.2.4 Offshore dispersant spraying .......................................................................... 29 7.2.5 Offshore mechanical recovery ......................................................................... 29 7.2.6 Nearshore mechanical recovery ...................................................................... 30 7.2.7 Protective nearshore booming ........................................................................ 30 7.2.8 Shoreline Clean-up .......................................................................................... 30

_______________________________________________________________________________________________________


7.2.9 Wildlife clean-up costs ..................................................................................... 31 7.2.10 SCAT team, media liaison and surveillance. ................................................. 31 7.2.11 Disposal costs ............................................................................................... 31 7.3 BASIS OF COSTS RELATING TO ECONOMIC IMPACT .................................................. 33 7.3.1 Economic Impact ............................................................................................. 33 7.3.2 Summary of costs of impact on aquaculture ................................................... 33 7.3.3 Fish Farms ....................................................................................................... 33 7.3.4 Shellfish ........................................................................................................... 35 7.3.5 Fishing ............................................................................................................. 36 7.3.6 Tourism ............................................................................................................ 36 7.3.7 Other claims .................................................................................................... 37 7.4 SUMMARY OF COST ESTIMATE OUTPUTS ................................................................. 38 7.4.1 West of Shetland ............................................................................................. 39 7.4.2 Moray Firth ...................................................................................................... 40 7.4.3 Northern North Sea ......................................................................................... 41 7.4.4 Central North Sea ............................................................................................ 42

8 DISCUSSION............................................................................................................... 43

8.1 UNCERTAINTIES .................................................................................................... 43 8.1.1 Variability of blowout scenario ......................................................................... 43 8.1.2 Environmental data used in modelling ............................................................ 43 8.1.3 Techniques used in modelling predictions ...................................................... 43 8.1.4 Predictions of response measures .................................................................. 44 8.1.5 Predictions of Economic impacts .................................................................... 44 8.1.6 Cost bases ....................................................................................................... 44 8.2 COST COMPARISONS ............................................................................................. 44

9 CONCLUSIONS .......................................................................................................... 46

10 REFERENCES ............................................................................................................ 47

11 APPENDIX 1 – OPERATOR MODELLING USING OSCAR ...................................... 49

11.1 WEST OF SHETLAND ........................................................................................... 49 11.2 NORTHERN NORTH SEA ...................................................................................... 52 11.3 CENTRAL NORTH SEA ......................................................................................... 53 11.4 REFERENCES ...................................................................................................... 55

12 APPENDIX 2 – OIL SPILL METHODOLOGY FOR REMEDIAL MEASURES AND

ECONOMIC IMPACT .................................................................................................. 56

12.1 MODEL RESULTS ANALYSIS .................................................................................. 56 12.1.1 Shoreline substrate assessment ................................................................... 56 12.2 COST ASSESSMENT ............................................................................................. 58 12.2.1 Command Centre Cost Breakdown............................................................... 58 12.2.2 Offshore dispersant spraying costs ............................................................... 58 12.2.3 Offshore mechanical recovery ....................................................................... 59 12.2.4 Nearshore mechanical recovery .................................................................... 62 12.2.5 Protective near shore booming ..................................................................... 63 12.2.6 Shoreline Clean-up ........................................................................................ 65 12.2.7 Wildlife clean-up costs ................................................................................... 68 12.2.8 SCAT team, media liaison and surveillance .................................................. 69 12.2.9 Disposal costs ............................................................................................... 69 12.2.10 Economic Impact ......................................................................................... 71 12.3 REFERENCES ...................................................................................................... 77

_______________________________________________________________________________________________________


13 APPENDIX 3 – EXTRAPOLATION OF COST ESTIMATES TO A 90 DAY

BLOWOUT .................................................................................................................. 80

13.1 WEST OF SHETLAND ........................................................................................... 80 13.2 MORAY FIRTH ..................................................................................................... 81 13.3 NORTHERN NORTH SEA ...................................................................................... 82 13.4 CENTRAL NORTH SEA ......................................................................................... 83

14 APPENDIX 4 – BREAKDOWN OF COSTS FOR MAJOR EUROPEAN SHIPPING

INCIDENTS .................................................................................................................. 84

_______________________________________________________________________________________________________


_______________________________________________________________________________________________________


OPOL Financial Limits

1 Executive Summary

This report examines the potential financial impact resulting from well blowout scenarios in UK waters with a view to establishing whether the financial liability limit of US$250 million per incident in the OPOL Agreement is adequate. The OPOL Agreement has been in existence since 1975. Every operator of an offshore facility in UK waters used in connection with the exploration for or production of oil, gas or natural gas liquids is required to be a party to the OPOL Agreement. Signatories of this agreement are required to demonstrate financial responsibility for costs resulting from the remediation of an oil spill and third party compensation for pollution damage, up to a certain limit. The financial limit in the OPOL Agreement is reviewed regularly. It was last increased, to US$250m per incident, in October 2010 as part of the industry’s response to the Deepwater Horizon incident in the Gulf of Mexico. Following that increase, the boards of The Offshore Pollution Liability Association Limited (‘OPOL’) (which administers the OPOL Agreement) and of Oil & Gas UK (‘O&GUK’) commissioned BMT ARGOSS to undertake a study of the effects of well blowout scenarios with a view to establishing whether the increased limit is sufficient. This report contains the results of that study. It is important to note that the UK has a strong regulatory framework designed to prevent a well blowout incident and that the measures adopted by operators in the UK, such as the Safety Case regime and the Design and Construction Regulations, that include independent well examinations, are seen around the world as a model for robust management of blowout risks. It is also important to mention the work of the Oil Spill Response Advisory Group (‘OSPRAG’), which was set up to co-ordinate the UK’s response to the generic safety, environmental and commercial issues arising from the Deepwater Horizon incident in the Gulf of Mexico. An important outcome of the work of OSPRAG was the design, construction and successful testing of a subsea well capping device. Deployment of the capping device is estimated to take place within 30 days, and the spill scenarios used in this report therefore assume a 30 day release period before the well is capped. Computer modelling of well blowout scenarios for four representative locations around the UK has been undertaken for a release duration of 30 days, based on the use of a capping device. Cost estimates have been made of the oil spills resulting from these scenarios. Pessimistic assumptions around the blowout scenarios, the behaviour of oil and the associated consequences have been adopted. Cost estimates have also been undertaken for a 90-day period, a typical period to drill a relief well. These are referred to in Appendix 3 of this report. It is concluded from this work that the current financial responsibility limit of US$250 million per incident in the OPOL Agreement is adequate for the vast majority of UK well operations. For oil wells in the West of Shetland area the limit is calculated to be adequate in many cases, but the costs for higher production wells in this area may exceed the current limit. In the case of wells that match

_______________________________________________________________________________________________________


this scenario, the operator and DECC can consider whether additional financial responsibility above the OPOL limit is appropriate.

2 Introduction

This report has been produced on behalf of Oil and Gas UK (O&GUK) and the Offshore Pollution Liability Association Ltd. (OPOL) and stems from work undertaken under the Oil Spill Response Advisory Group (OSPRAG), which was set up to co-ordinate the UK’s response to the generic safety, environmental and commercial issues arising from the Deepwater Horizon incident in the Gulf of Mexico. The report examines the potential financial impacts resulting from a set of well blowout scenarios in UK waters, in terms of the costs of oil spill response and of third party loss or damage that might result. These costs are discussed in relation to the financial provision that exists in the UK via the OPOL Agreement, whereby there is an agreement amongst members of OPOL to meet claims relating to pollution damage and the cost of remedial measures up to a maximum of US$250million per incident. Within OSPRAG the Indemnity and Insurance Review Group was set up to assess the potential control, remediation and compensation costs associated with a large oil spill in the UKCS, to determine how these are provided for and whether the provisions the UK has in place require any additional changes. The Group recommended an increase in the maximum sum addressed by OPOL from US$120million to US$250million per incident – this increase was effected in October 2010. (The OPOL limit is reviewed regularly, the most recent reviews prior to 2011 having been undertaken in 1995, 2002 and 2006.) BMT ARGOSS have an oil spill model and had made previous cost assessments for OPOL so were commissioned to review a number of incident scenarios identified by the Indemnity and Insurance Review Group in order that the US$250million limit could be tested. In context, there have been no blowouts in UK waters for over 20 years, and the measures adopted by operators in the UK such as the Safety Case regime and the Design and Construction Regulations that include independent well examinations are seen around the world as a model for robust management of blowout risks. Nevertheless, the UK oil industry is committed to minimising risks and planning robust contingency measures. OSPRAG confirmed that national regulatory procedures drive the right health, safety and environmental behaviours, it provided the UK’s capping capability, it enhanced the industry’s preparedness and oil-spill response “tool kit” (testing it in a National Contingency Plan exercise) and established new forums to sustain progress. The work of OSPRAG is documented in its interim report, final report and report on the demonstration of the capping device (OSPRAG, 2011a, b and c), which are published on the Oil and Gas UK website www.oilandgasuk.co.uk. This report will be submitted to the Department of Energy and Climate Change who will peer review its conclusions to inform their requirements for financial responsibility as part of their well consenting processes.

http://www.oilandgasuk.co.uk/

_______________________________________________________________________________________________________


3 OPOL Agreement Financial Limits

The OPOL Agreement provides that if a discharge of oil occurs from an offshore facility, the operator of the facility must meet the cost of remedial measures and pay compensation for pollution damage up to an overall maximum of US$250 million per incident on a strict liability basis, subject to a limited number of usual exceptions (e.g. war and negligence of the claimant). Pursuant to the Agreement:

each operator agrees to be responsible on a strict liability basis for an aggregate amount of up to US$250million per incident in respect of remedial measures and pollution damage following a discharge of oil from one of its offshore facilities

each operator is required to provide financial assurance in respect of its ability to pay claims under the Agreement

in the unlikely event that an operator fails to satisfy its obligations to claimants under the Agreement, the other operators are required to contribute to enable payment to be made to claimants.

The following definitions are given in the OPOL Agreement: "Remedial Measures" means reasonable measures taken by any Party from any of whose Designated Offshore Facilities a Discharge of Oil occurs and by any Public Authority to prevent, mitigate or eliminate Pollution Damage following such Discharge of Oil or to remove or neutralise the Oil involved in such discharge, excluding however, well control measures and measures taken to protect, repair or replace any such Designated Offshore Facility. “Pollution Damage” means direct loss or damage (other than loss of or damage to any Offshore Facility involved) by contamination which results from a Discharge of Oil. This report therefore focuses on the costs of remedial measures and the amount of compensation for pollution damage (excluding well control so as to be consistent with the OPOL agreement) which could potentially result from a well blowout scenario in UK waters. Other costs and compensation in excess of the OPOL financial limit and/or outside the scope of OPOL may be recoverable by claimants as a matter of law. It is important to note that the OPOL Agreement does not act as a limit on the legal liability of operators. In this context it exists to provide a means of settling claims in an orderly and expeditious manner without recourse to the courts. It is important to note that operators make additional financial provision to meet these further liabilities, e.g. insurance. Further details about the OPOL Agreement (including the full text of the Agreement) and OPOL can be found at www.opol.org.uk.

http://www.opol.org.uk/

_______________________________________________________________________________________________________


4 Potential oil release scenarios

4.1 Nature of a well blowout

A well blowout can be defined as “An incident where formations fluid flows out of the well or between formation layers after all the predefined technical well barriers or the activation of the same have failed” (SINTEF, 2009). A blowout does not necessarily mean a release of oil to the environment, and most blowouts are arrested quickly; historically 94% of blowouts across the North Sea and the Gulf of Mexico have been arrested within 30 days (Scandpower, 2011). With the introduction of capping devices, the probability of the well flowing for more than 30 days has been further reduced. Nevertheless, robust planning for oil spill response and clean-up is essential. Multiple barriers must all fail for a blowout to occur, including the hydrostatic pressure being overcome and the blowout preventer (BOP) failing, or failing to be activated. The BOP itself includes multiple sealing devices including annular preventers and rams. In the UK, a BOP will always include at least one set of shear rams that can cut through drill pipe that may be present running through the BOP at the time. The flow rate from the well can be within a wide range depending on the amount of reservoir exposed inside the well; restrictions caused by equipment within the well and at the top of the well; and on the reservoir pressure, which is low in many existing produced fields in the UK reservoirs. There are several mechanisms by which a blowout is arrested, the main being an intervention by the crew on the facility and others including natural collapse of the rock formation within the well and a subsea intervention e.g. activation of the BOP using an underwater remotely operated vehicle (ROV). In a small minority of cases, these methods are unsuccessful and the blowout is arrested by a relief well being drilled, into which heavy drilling fluid and subsequently cement is pumped to ‘kill’ the well. Consequently a prolonged blowout at a high rate is an extremely rare occurrence. The consequences of a blowout are also very dependent on the location of the well, in terms of the water depth, the prevailing currents and winds, distance to shore and the environmental and socio-economic sensitivities present both at sea and along the shoreline. The location can also influence the type of oil present, for example with the Southern North Sea being predominantly gas fields with some very light condensate oil. Different oil types can have very different properties when released at sea. A blowout occurring from a production platform, or from a jackup rig, has the potential to flow directly onto the sea surface since there is a stable structure supporting the flow path to surface. A blowout from a subsea well via a semi-submersible rig or a drillship could begin with a release at the vessel and onto the sea surface, but will quickly become a subsea release as the vessel will activate an emergency disconnect procedure and move away for the safety of the crew.

4.2 Control of well blowouts

Through OSPRAG, a new pan-industry group, the Well Life Cycle Practices Forum (WLCPF) was created under the umbrella of Oil & Gas UK, to allow best practices in well blowout prevention and management to be shared across the industry. Members of the forum include drilling managers, well engineers and designers working closely with the HSE, other regulators and trade unions. The WLCPF will advance recommendations made by OSPRAG and facilitate the dissemination of lessons from Macondo and other similar events relating to blow-out preventer issues, well examination, verification, competency, behaviours and human factors, relief well planning requirements and well life cycle integrity guidance.

_______________________________________________________________________________________________________


Figure 4-1 OSPRAG well capping device

An important outcome of OSPRAG was the design, construction and successful testing of a subsea well capping device that is able to control the flow from the great majority of subsea oil wells in the UK, including up to 75,000 barrels per day of flow in water depths up to three kilometres (Figure 4-1). Deployment of the capping device is estimated to take up to 30 days considering mobilisation, weather and other allowances. It is therefore relevant to consider the costs associated with well blowout cases lasting up to 30 days. The cap can quickly be deployed:

At a wide range of wells and oil spill scenarios which could occur in the UKCS, including West of Shetland;

To various points of the subsea stack; At water depths of between 100 m and

3,048 m; In wave heights of up to 5m (16 ft)

depending on the vessel/rig used; From a wide variety of multi-service

vessels or drilling rigs; To wells flowing up to 1,034 bar

(15,000 psi) in pressure and 121°C; Even where there is a high content of

hydrogen sulphide present; On to a well flowing up to 75,000

barrels per day.

4.3 Definition of scenarios used for this report

As summarised above, there are many variables affecting the nature and scale of an incident and therefore the financial consequences. For the purposes of this report, the following assumptions have been made in relation to the effects of a blowout scenario. The possible variability in outcomes from some of these parameters is discussed further in Section 8.1 concerning uncertainties.

Assumptions used for defining the blowout scenarios for this study:

Four different geographic locations were considered: Moray Firth, Central North Sea (CNS), Northern North Sea (NNS) and West of Shetland (WoS);

A well blowout in each location lasting for 30 days commensurate with well control through use of a capping device;

A realistic flow rate representing a productive well, that does not diminish over time;

A representative oil type for the fields in each area;

While oil spill response measures were costed, their mitigating effects were ignored to give an assessment of the maximum impact;

Account is taken of the subsea nature of the release where appropriate. The prevailing reservoir geology in the Southern North Sea results in gas fields with small amounts of light condensate oil. In light of the results from examining the other areas of the North Sea, the potential impact from a blowout is clearly well within the current OPOL limits, and a Southern North Sea scenario was therefore not modelled or costed in detail. Fields in the Irish Sea (Liverpool Bay and Morecambe Bay areas) are either exploited oil fields that are now of low productivity or consist of gas prospects with relatively minor impacts. These are similarly considered to be within the current OPOL limits and are not modelled or costed in detail.

_______________________________________________________________________________________________________


A scenario involving an HP/HT well in the Central North Sea was initially modelled, but since the results showed negligible amounts of oil reaching the shore and very small persistence at sea, this scenario was judged to be of less impact than the oil well scenario in that region, so was therefore not considered further. This leads to the scenarios listed in Table 4-1 immediately below as being those scenarios identified by the IIRG that are considered in more detail in this report.

Location Oil Type Oil release rate (barrels per day)

WoS Schiehallion 31,000

Moray Firth Captain 18,000

NNS Magnus 58,000

CNS Forties 41,000

Table 4-1 Summary of scenarios examined in this report

_______________________________________________________________________________________________________


5 Background to the fate of oil in the environment

Processes involved in the weathering of crude oil include evaporation, emulsification, and dissolution, whereas chemical processes focus on oxidation, particularly photo-oxidation. The principal biological process that affects crude oil in the marine environment is microbial oxidation. As crude oil weathers, it may also undergo various transport processes including advection and spreading, dispersion and entrainment, sinking and sedimentation, overwashing, partitioning and bioavailability, and stranding. Predicting the behaviour of oil is central to planning an effective response and determining potential impacts, and therefore to estimating the potential costs of remedial measures and compensation for pollution damage. This section describes the main processes that control the behaviour of oil. The majority of these processes are key elements of the modelling methods that are described in Section 6. Where the available models make approximations to these processes, or where they do not include certain aspects, these generally result in a larger prediction of oil on the surface and on shorelines, which results in a conservative estimate of the associated costs, i.e. the results are conservative. Many variables are involved as described below, many of which are interactive and which depend to a large extent on the metocean conditions (currents, winds and temperatures) that are present. A probabilistic or ‘stochastic’ approach can be used to look at the same release scenario using many different combinations of metocean data, and stochastic simulations have been used in this report to identify the likelihood of a range of outcomes. Individual “worst-case” outcomes from the stochastic simulations can then be examined in more detail using a specific set of conditions (‘deterministic’ modelling). Overall, the results of any oil spill modelling should be considered indicative.

5.1 Weathering processes

Following an oil spill or any other event that releases crude oil or crude oil products into the marine environment, weathering processes begin immediately to transform the materials into substances with physical and chemical characteristics that differ from the original source material. Evaporation In many oil spills, evaporation is the most important process in terms of mass balance. Within a few days following a spill, light crude oils can lose up to 75 percent of their initial volume and medium crudes up to 40 percent. In contrast, heavy or residual oils will lose no more than 10 percent of their volume in the first few days following a spill. Emulsification Emulsification is the process of formation of various states of water in oil. These emulsions significantly change the properties and characteristics of spilled oil, and stable emulsions can contain between 60 and 85 percent water thus expanding the volume by three to five times the original volume of spilled material. Together with the associated increase in viscosity and density, emulsification has a great effect on the behaviour of oil spills at sea. Dissolution Dissolution is the chemical stabilization of oil components in water. Dissolution accounts for a small portion of oil loss, but it is still considered an important behaviour parameter because the soluble components of oil, particularly the smaller aromatic compounds, are more toxic to aquatic species than the aliphatic components.

_______________________________________________________________________________________________________


Oxidation Crude oil is a complex mixture of organic compounds, mostly hydrocarbons. Oxidation alters these mixtures by creating new compounds and by rearranging the distribution of residual compounds, based on their susceptibility to the oxidative process. The ultimate oxidative fate of all of the organic compounds, given an unrestricted supply of oxygen and time, is conversion to carbon dioxide and water. Oxidation can occur via light (photo-oxidation) or microbial processes. Photo-oxidation plays a role in altering the composition of the oil and its solubility, but is not significant from a mass-balance perspective. Microbial oxidation has been considered one of the principal removal mechanisms in the aquatic environment.

5.2 Transport processes

Spreading and advection Spreading of oil on the sea surface occurs through inertial, viscous, and surface tension forces, driving thick oil to spread into a thinner and larger layer. Advection is the transport of oil by the bulk movement of the water. This movement is characterized by residual currents, tidal currents and wind-induced surface currents. Empirical studies have established that oil slicks on a sea surface are transported with the surface current at 2.5 to 4 percent of the wind speed, and a value of 3% or 3.5% is often used a representative value. Wind-driven helix circulation patterns, known as ‘Langmuir cells’ are a common feature in the sea that create convergence and divergence zones on the sea surface running parallel to the wind. These cause local downwelling regions that can drag surface pollutants such as oil down into the water column and away from wind-induced currents. Dispersion and entrainment Dispersion is a mixing process caused by the turbulence in the ocean originating from eddy processes at various scales. Dispersion acts to decrease the concentration of oil on the surface or in the water column. Oil droplets on the sea surface of sizes less than about 100 μm will exhibit vertical dispersion and entrainment into the water column. This is a crucial aspect when considering a subsea blowout, and examined at length in the DEEPSPILL JIP experiments (Johansen, et al. 2001). An oil and gas mixture ejected from a narrow orifice forms a wide range of droplet sizes, many of which remain suspended in the water column where they are subject to physical, chemical and biological processes. Sinking and sedimentation Sinking is the mechanism by which oil masses that are denser than the receiving water are transported to the bottom. The oil itself may be denser than water, or it may have incorporated enough sediment to become denser than water. Sedimentation is the sorption of oil to suspended sediments that eventually settle out of the water column and accumulate on the seafloor. Overwashing Overwashing is the temporary submergence of oil below the water surface. The oil can be described as “floating” just below the water surface. The principal cause of overwashing is the action of waves and near-surface turbulence (Clark et al., 1987). Overwashed oil can resurface when the turbulence of the water surface ceases e.g. when the wind dies down and when the oil becomes stranded on a shoreline. Partitioning and bioavailability Partitioning processes include adsorption where the hydrocarbon attaches to a surface of a solid (such as seabed sediments) and absorption where the chemical partitions into the interior of a cell or detrital particle. The distribution of hydrocarbons between the dissolved phase and the variety of aquatic particles is important for determining the fate of hydrocarbons and their bioavailability.

_______________________________________________________________________________________________________


Organisms are not exposed to the total amount of hydrocarbons in the water and sediment because some portions of the chemical occur in forms not accessible to the organisms. Stranding Persistent oil residues have two major fates: shoreline stranding for spills near to shore and tarball formation for releases in offshore waters. Oil loading on a shoreline can be highly variable, and the amount of oil and the rate of natural removal drive the decision to conduct shoreline clean-up. Tarballs are typically coin-sized masses of weathered oil that are slowly biodegraded, and their fate is very dependent on entrained solids and density.

5.3 Relevant consequences

The impacts from an oil spill depend on a number of factors including the type and amount of oil and its behaviour once spilled; the physical characteristics of the affected area; weather conditions and season; the type and effectiveness of the clean-up response; the biological and economic characteristics of the area and their sensitivity to oil pollution (ITOPF, 2010). Described below are typical impacts from oil releases where there may be associated costs that are relevant to the OPOL financial limits, i.e. relating to remedial measures and pollution damage. Seabirds Seabirds are amongst the most vulnerable inhabitants of open waters since they are easily harmed by floating oil. Species that dive for their food or which congregate on the sea surface are particularly at risk. Although oil ingested by birds during attempts to clean themselves by preening may be lethal, the most common cause of death is from drowning, starvation and loss of body heat following fouling of plumage by oil. Cleaning and rehabilitation after oiling is often attempted, but it is rare for more than a fraction of oiled birds to survive. Shallow Coastal Waters Spill damage in shallow waters is most often caused by oil becoming mixed into the sea by wave action or by dispersant chemicals used inappropriately. In many circumstances the dilution capacity is sufficient to keep oil concentrations in the water below harmful levels, but there are examples where significant impacts on marine organisms such as shellfish have occurred. Post-spill studies reveal that recovery has taken place in a relatively short timescale. Shorelines Shorelines are at risk from the accumulation of oil. The dynamic nature of the shoreline means that many shoreline species are relatively tolerant to a range of stresses and recovery can be swift. Rocky and sandy shores exposed to wave action and the scouring effects of tidal currents may self-clean quite rapidly. In some circumstances, subtle changes to rocky shore communities can be triggered by a spill that can subsequently be detected for ten or more years although the functioning, diversity and productivity of the ecosystem may be restored. Soft sediment shores that are sheltered from wave action tend to be highly biologically productive and oil can become incorporated in fine sediments.

Amenity Contamination of coastal amenity areas is a common feature of many oil spills, leading to interference with recreational activities such as bathing, boating, angling and diving. Hotel and restaurant owners and others who gain their livelihood from the tourist trade can also suffer temporary losses. A return to normal requires an effective clean-up programme and the restoration of public confidence.

_______________________________________________________________________________________________________


Fisheries and Mariculture An oil spill can directly damage the boats and gear used for catching or cultivating marine species. Floating equipment and fixed traps extending above the sea surface are more likely to become contaminated by floating oil. Submerged nets, pots, lines and bottom trawls are usually well protected provided they are not lifted through an oily sea surface, although they may sometimes be affected by oil beneath the surface. Mortality of stock, caused by physical contamination or close contact with freshly spilled oil in shallow waters with poor water exchange, is rare. A common cause of economic loss to fishermen is interruption to their activities by the presence of oil or the performance of clean-up operations. Sometimes this results from a precautionary ban on the catching and sale of fish and shellfish from the area, both to maintain market confidence and to protect fishing gear and catches from contamination. Cultivated stocks are more at risk from an oil spill. Coastal industries Industries that rely on seawater for their normal operation can also be adversely affected by oil spills. Power stations and desalination plants which draw large quantities of seawater can be particularly at risk, especially if their water intakes are located close to the sea surface, thereby increasing the possibility of drawing in floating oil. The normal operations of other coastal industries, such as shipyards, ports and harbours, can also be disrupted by oil spills and clean-up operations.

_______________________________________________________________________________________________________


6 Modelling studies used to inform this report

6.1 Overview

Several different oil spill modelling applications are available internationally that incorporate different aspects of the weathering, transport and impact factors described above. The techniques for predicting the fate of oil that have become common in any particular area of oil and gas activity have generally been developed over time through dialogues with industry, regulators and response agencies and have substantive bodies of research, development and experience to support them. Often, these oil spill modelling techniques are used for both oil industry spill planning and response, and also for spills from shipping, since the risks can be similar, and historically the risks from shipping have proved to more significant. In the UK, two models are currently used to assess and plan for oil industry risks OSIS (developed by BMT ARGOSS), and OSCAR (developed by SINTEF), and information from both is incorporated in this report. The use of specific models is not prescribed by the regulator. Through OSPRAG, O&GUK and OPOL commissioned BMT ARGOSS to undertake oil spill trajectory and weathering modelling for the blowout scenarios identified above to directly inform the costing calculations in this report. The work was then focussed on four main regional scenarios where oil well drilling takes place in the Moray Firth, Central North Sea, Northern North Sea and West of Shetland. This was a combination of stochastic (i.e. probabilistic) modelling of a 10-day release, and then examining the results to identify a particular scenario (i.e. combination of metocean conditions) that was examined in more detail by deterministic modelling over a period of 30 days, relating to the time to deploy a capping device. The modelling was undertaken using the program Oil Spill Information System (OSIS), which is on a consistent basis with earlier evaluations done for OPOL. The scenarios chosen were considered to be representative pessimistic scenarios for each geographic location that would be considered “worst-case” for the vast majority of wells in that region. This report is not intended to cover all possibilities and there may be circumstances where a well falls outside the scope of this modelling.

6.2 Modelling commissioned under OSPRAG

6.2.1 Description of model used

Modelling was carried out by BMT ARGOSS and this section explains the results and methodology used in carrying out this work. All figures and tables come from their report. OSIS (the Oil Spill Information System) is a particle-tracking model that can simulate the fate and dispersion of surface oil slicks. It can be used to run deterministic model scenarios, considering a specific scenario, which provides results of slick trajectory, and sea surface, evaporated, dispersed and beached volumes and, in addition, it can be used to run probabilistic or stochastic model scenarios. In this case, the oil spill scenario is run several tens of times using random sections from a time-series of metocean (meteorological and oceanographic) data covering a period of typically a year or more. The results indicate areas with the highest probability of oiling from the spill scenario, allowing that it may occur at any time of year. The probabilistic outputs also summarise the results of the individual runs, enabling “worst-case” runs to be re-conducted in the deterministic model for further analysis. The OSIS system has been developed, enhanced and validated through a number of R&D programs in close collaboration with the oil and gas industry. It has been used in numerous studies into the dispersion and fate of offshore oil spills and is used world-wide by oil companies for oil spill contingency purposes. Validation of the OSIS model has comprised:

_______________________________________________________________________________________________________


Comparison with 18 separate at-sea releases of 10 different crude oil types (including Forties, Flotta, Ekofisk and Arabian Light) and wind speeds ranging from 1 – 12 ms-1 (Beaufort scale force 1 – 6). Early comparisons focussed on the behaviour of the oil over the initial 24 hour period, and the 1997 sea trials provided data for validation against a 3-day period.

Use in the Sea Empress incident of 1996, when approximately 70,000 tonnes of crude oil was spilled on the coast of Pembrokeshire.

Hindcast comparisons against the Rosebay tanker spill in the English Channel (1,100 tonnes of crude oil) in 1990.

6.2.2 Model inputs

Hydrocarbon release data The locations of the release points for the four scenarios considered in detail are shown in Figure 6-1.

Figure 6-1 Locations of spill scenarios considered

_______________________________________________________________________________________________________


Hydrocarbon releases of Schiehallion, Captain, Magnus and Forties crude oil were modelled using weathering data from AEA Technology contained in the OSIS database. Details of the release conditions are given in Table 6-1. All releases are assumed to take place on the sea surface.

Location Lat\ Long Oil Type Release

Duration (days)

Release rate

(barrels per day)

Model run duration

(days)

ITOPF group classification

Weathering report ref.

WoS 60° 25’ N,

4° 6’ W Schiehallion 10 31,000 10 Group 3

AEA/CS/16309304/R/001 Issue 1

Moray Firth

58° 5’ N, 1° 42’ W Captain 10 18,000 10 Group 3

AEA/WMES/24411000/R/001 Issue 1

NNS 61° 35’ N,

1° 18’ E Magnus 10 58,000 10 Group 2 WSL CR-3698

CNS 57° 45’ N,

0° 54 E Forties 10 41,000 10 Group 2 WSL CR-3698

Table 6-1 Summary of scenarios modelled

Meteorological data The meteorological data (wind speed and direction, air and sea surface temperature, and sea state) used within the model was supplied by BMT ARGOSS in the form of a three year time series from 1st January 2008 – 31st December 2010 for each location. Hydrodynamic data Residual and tidal surface currents for the extended North West Europe region were taken from the Proudman Oceanographic Laboratory (POL) CS20 database, residual currents from the HYCOM model, and tidal currents from the BMT ARGOSS in-house tidal information model.

6.2.3 Modelling of surface oil

6.2.3.1 Approach

The overall approach to determining the areas affected by oil and the maximum amount of oil that might reach shorelines is as follows for each geographical region:

A probabilistic analysis of a continuous blowout release of 10 days was undertaken, which determined the set of conditions that resulted in the “worst-case” of oil reaching shorelines;

A deterministic analysis was undertaken of the “worst-case” scenario identified above for a continuous blowout release over a period of 30 days;

An allowance was made for the amount of oil that would be entrained in the water column as a result of the subsea nature of the release;

A projection of the results to a period of 90 days was undertaken using overlapping and consecutive 30 day model runs. These results are set out in Appendix 3 to this report.

Probabilistic modelling was conducted based on 100 model runs using random sections of metocean data covering a 2-year period. Metocean data was specific to each location. The model was executed for a period of 10 days in each scenario. The results were used to identify the areas with highest probability of being affected by each of the spills, together with statistics regarding the volumes involved. The highest beaching volume seen in the individual runs making up each probabilistic case was from West of Shetland. The contour plots presented in the following sections demonstrate probability of surface oiling, and do not indicate the extent of a single spill. At a single point in time, a real slick would present itself as a thin ribbon of oil within the areas identified in the plots.

_______________________________________________________________________________________________________


In order to provide scenarios against which response and compensation costs could be estimated, deterministic modelling was conducted using OSIS. Of the 100 runs conducted in the probabilistic scenarios, the model run (start time and date) which gave the “worst-case” shoreline oiling after 10 days was selected for deterministic modelling. The total volume of oil beaching at the end of the entire model runs was calculated, and adjusted to allow for any likely entrainment. The full adjusted values for the 30-day prediction of oil reaching shorelines are given in the following Section 6.2.4.

6.2.3.2 Adjustment for entrainment and intervention

OSIS is a surface oil spill model that includes emulsification, evaporation and wave-induced natural dispersion but does not consider any other subsurface processes or transport. Oil released from a subsea blowout is very likely to become entrained in the water column and not reach the surface. In order to assess the affect of entrainment, a literature review was conducted and the results used to adjust the volumes applied in the OSIS modelling. Because of uncertainties in the scenario a range of values for entrainment in the water column were considered. Between 16% and 67% of oil was assumed to remain entrained in the water column for the West of Shetland scenario after consideration of the depth observed at the location. Between 0% and 40% of oil was assumed to remain entrained in the water column for the remaining scenarios (Moray Firth, Northern North Sea and Central North Sea), where a lower degree of entrainment would be expected as a result of the water depths. The upper and lower percentages are within the range reported in actual spills or other empirical results.

_______________________________________________________________________________________________________


6.2.4 Regional Summaries

6.2.4.1 West of Shetland

Figure 6-2 shows the probability of sea surface oiling after a 10-day continuous spill in the West of Shetland region.

Figure 6-2 Probability of sea surface oiling 240 hours after onset of spill for the West of Shetland scenario

The following points summarise the results of the West of Shetland probabilistic model run:

The shortest time to beaching was predicted to be 58 hours.

Western Shetland was predicted to experience between 10 and 20% probability of

shoreline oiling. North Orkney and part of the North Scottish mainland had a greater

than 5% probability of oiling. South Faroes and parts of the Norwegian coast also

demonstrated low probabilities of oiling within 10 days.

There was a total 35% probability of beaching occurring within 240 hours of the

onset of the oil spill.

Deterministic modelling was then undertaken on the worst conditions identified for shoreline oiling. Figure 6-3 shows the extent of beaching in the West of Shetland deterministic scenario. Oil beaching occurs on the coasts of northern Scotland, Orkney, Shetland and Northern Norway. After adjusting for entrainment in the water column, the total mass expected to beach is 25,700 – 65,300 m3.

_______________________________________________________________________________________________________


Figure 6-3 Summary of shoreline oiling sites for the West of Shetland scenario

6.2.4.2 Moray Firth

Figure 6-4 shows the probability of sea surface oiling after a 10-day continuous spill in the Moray Firth region.

Figure 6-4 Probability of sea surface oiling 240 hours after onset of spill for the Moray Firth scenario

The following points summarise the results of the Moray Firth probabilistic model run:

The shortest time to beaching was predicted to be 46 hours.

North-east Scotland and east Orkney had a greater than 5% probability of shoreline

oiling after 10 days. The coastline north of Peterhead had a probability of

experiencing oiling greater than 20%.

_______________________________________________________________________________________________________


There was a 29% probability of beaching occurring within 240 hours of the onset of

the oil spill.

Deterministic modelling was then undertaken on the worst conditions identified for shoreline oiling. Figure 6-5 shows the extent of beaching in the Moray Firth deterministic scenario. Oil beaches on the north-east of Scotland, Orkney, Shetland and southern Norway. After adjusting for entrainment in the water column, the total mass expected to beach is 38,591 – 65,021 m3.

Figure 6-5 Summary of shoreline oiling sites for the Moray Firth scenario

6.2.4.3 Northern North Sea

Figure 6-6 shows the probability of sea surface oiling after a 10-day continuous spill in the Northern North Sea region.

Figure 6-6 Probability of sea surface oiling 240 hours after onset of spill for the Northern North Sea scenario The following points summarise the results of the Northern North Sea probabilistic model run:

_______________________________________________________________________________________________________


The shortest predicted time to beaching is 126 hours.

Parts of the Norwegian coast have a probability of shoreline oiling of up to 5-10%.

Northern and eastern Shetland has a probability of shoreline oiling of 1-2% after 10

days.

There is a 10% probability of beaching occurring within 240 hours of the onset of the

oil spill.

Deterministic modelling was then undertaken on the worst conditions identified for shoreline oiling. Figure 6-7 shows that the Norwegian coastline receives all the oil beaching observed in the Northern North Sea scenario. No beaching occurs along the UK coast. After adjusting for entrainment in the water column, the total mass expected to beach is 9,867 – 16,445 m3.

Figure 6-7 Summary of shoreline oiling sites for the Northern North Sea scenario

_______________________________________________________________________________________________________


6.2.4.4 Central North Sea

Figure 6-8 shows the probability of sea surface oiling after a 10-day continuous spill in the Central North Sea region.

Figure 6-8 Probability of sea surface oiling 240 hours after onset of spill for the Central North Sea scenario

The following points summarise the results of the Central North Sea probabilistic model run:

The shortest predicted time to beaching is178 hours.

Parts of the Norwegian coast are predicted to have a 1-2% probability of shoreline

oiling.

There is a 2% probability of beaching occurring within 240 hours of the onset of the

release.

Deterministic modelling was then undertaken on the worst conditions identified for shoreline oiling. Figure 6-9 shows that oil beaches on the Norwegian coastline in the Central North Sea scenarios. No beaching occurs along the UK coast. After adjusting for entrainment in the water column, the total mass expected to beach is 3,292 – 5,487 m3.

_______________________________________________________________________________________________________


Figure 6-9 Summary of shoreline oiling sites for the Central North Sea scenario

6.2.5 Conclusions for shoreline oiling predictions

The resulting shoreline (emulsified) oil volumes for the upper and lower estimates of the range of outcomes are summarised in Table 6-2.

Volume (m3) West of Shetland Moray Firth Northern North

Sea Central North Sea

Shetland 18,350 – 46,700 457 - 770 0 0

Orkney 2,700 – 6,800 4,101 – 6,910 0 0

Norway 2,150 – 5,500 921 – 1,552 9,867 – 16,445 3,292 – 5,487

North Scotland 2,500 – 6,300 33,112 – 55,789 0 0

Total 25,700 – 65,300 38,591 – 65,021 9,867 – 16,445 3,292 – 5,487

Table 6-2 Estimated shoreline oiling volumes excluding consideration of intervention operations

_______________________________________________________________________________________________________


6.3 Operator modelling

6.3.1 Introduction

In parallel with the work undertaken under OSPRAG, operators reconsidered their oil spill planning in the light of the Deepwater Horizon incident and Government guidance, and documented their oil spill predictions in Environmental Statement submissions and Oil Pollution Emergency Plans. These predictions are another source of data on the potential effects of blowouts. A number of these projects used an alternative modelling program known as Oil Spill Contingency and Response (OSCAR) developed by SINTEF, which uses different algorithms and which includes the behaviour of oil in the water column and sediments with specific near-field plume dynamics for representing a subsea blowout. This is provided here to give a source of complementary data to enable comparison with the modelling commissioned by Oil & Gas UK and OPOL. Since these relate to specific projects, the scenarios inevitably differ from those considered by Oil & Gas UK and OPOL, but overall, suggest that the results from the OSIS model can be considered conservative in its estimation of beached volumes. The results of this modelling are summarised here and further extracts are provided in Appendix 1.

6.3.2 Description of model used

The examples described below have used the OSCAR model to predict the fate of oil from a blowout, the majority of which have been modelled as subsea releases. These results are presented by way of comparison using data that is in the public domain.

The OSCAR model has significant scientific research and validation, e.g. Reed et al. (1995a and b) and Johansen et al. (2001). The model incorporates years of research into the behaviour of underwater blowouts including the DEEPSPILL Joint Industry project in 2000 funded by several major operators and the US Minerals Management Service whereby experiments were undertaken simulating underwater blowouts in the Norwegian Sea. Several deliberate releases of oil and gas were undertaken in around 900m water depth to observe the formation of the underwater plume and to understand its movement, together with sophisticated detection techniques for droplet sizes, rise times and oil properties. This research showed for example that in deepwater blowouts, a significant proportion of the oil remains in the water column in fine droplets with neutral or low buoyancy. The model is regularly upgraded with new information and analysis, and recently the model was used in the Deepwater Horizon incident.

OSCAR calculates and records the distribution (as mass and concentrations) of contaminants on the water surface, on shorelines, in the water column and in sediments, recorded in three physical dimensions plus time. The model allows multiple release sites, each with a specified beginning and end to the release. For subsurface releases (e.g. blowouts or pipeline leaks), the near field part of the simulation is conducted with a multi-component integral plume model that is embedded in the OSCAR model. The near field model accounts for buoyancy effects of oil and gas, as well as effects of ambient stratification and cross flow on the dilution and rise time of the plume. Response measures can be modelled including aerial dispersant spraying and booming and recovery and the results have been validated in the field in numerous experiments, e.g. Reed et al. (1995a) and in response to actual spills such as the Statfjord tanker offloading incident in 2007 where around 4,000 tonnes of oil was released.

6.3.3 Model input data

The OSCAR model uses 3-dimensional current data along with 2-dimensional wind data and bathymetry. Current data from 1990 and 1991 was used, which is supplied by SINTEF for modelling in the North Sea and northeast Atlantic areas, was used, derived from Norwegian Meteorological

_______________________________________________________________________________________________________


Institute predictions, covering 16 depth layers in the water column. The data is provided at intervals of 2 hours and reflects local and regional variations along with diurnal, monthly and annual variations. A database of sea and air temperatures is applied for stochastic modelling purposes. This dataset covers the North Sea and West of Shetland up to near the coast of Faroes and also up to approximately 63ºN - 66ºN along the Norwegian coast, which covers the main predicted concentrations of oil relating to Shetland, Orkney, the Scottish mainland, Denmark and the nearest parts of the Norwegian coast. Bathymetry data used in the OSCAR model is based on the Sea Topo 8.2 and IBCAO databases. The model takes account of varying density and temperature effects as the oil travels through the water column, and it also takes account of the weathering of oil prior to reaching the surface. For the WoS scenario, representative conductivity (salinity), temperature and depth profile (CTD profile) was applied in the model based on available measurements from the Faroe-Shetland Channel. Oil weathering data is taken from databases within the model that are populated mainly by analyses of oil types from SINTEF’s IKU oil weathering laboratory, which includes many UK oil types.

6.3.4 Summary of results

A summary of projects in which modelling using OSCAR has been undertaken is given in Table 6-3. These are described in more detail using one example each for WoS, NNS and CNS. There is to date no published comparative well that is representative for the Moray Firth. While the mass of oil reaching shore is noted, data is also generated on water column concentrations and sediment concentrations, and it is noted for example that 30% of oil from the Braer incident was ultimately deposited in sediments both at the Shetland coastline and in offshore areas (Davies and Topping, 1997).

Project name Operator Location Hydrocarbon type

Blowout rate* and duration considered

Mass of oil predicted to

reach shore**

Cambo 4 Hess WoS Oil 88,000 bpd (declining) over 79

days

6,800 tonnes

North Uist BP WoS Oil 75,000 bpd over 140 days

10,000 tonnes

Clair Ridge BP WoS Oil 20,000 bpd over 90 days

21,000 tonnes

Quad 204 BP WoS Oil 20,000 bpd over 90 days

11,900 tonnes

Western Isles Development

Dana Petroleum

NNS Oil 15,000 bpd (declining) over 60

days

7,200 tonnes

Flyndre and Cawdor

Maersk CNS Gas/ condensate

37,000 bpd over 90 days

None

Goldeneye CCS Shell CNS Gas/ condensate


< 1 tonne

Arran Dana Petroleum

CNS Gas/ condensate


None

* of liquid hydrocarbons, excluding gas ** including the water content of the oil emulsion Table 6-3 Summary of model outputs using OSCAR

_______________________________________________________________________________________________________


6.3.5 Conclusions relating to oil predictions included in cost model

The model outputs differ in units, OSIS being presented in cubic metres and OSCAR in tonnes. In practice, the density of an oil emulsion will normally be near to one. Of more importance are differences in the scenarios modelled in each region, reflecting different flow rates, durations and discharge depths. Coupled with the different modelling approaches, when comparing different scenarios within the same region, inferences should only be drawn at a high conceptual level. The results for shoreline oiling compare as follows:

West of Shetland: the scenarios modelling in OSCAR predicted shoreline oiling of 6,800 – 21,000 tonnes of oil emulsion, versus 25,700 – 65,300 m3 predicted in OSIS.

Moray Firth: no similar example was found using an alternative model to compare with 38,591 – 65,021 tonnes of oil emulsion predicted in OSIS. It is noted, however, that the oil type used in this scenario is very persistent and therefore gives a conservative representation of the risks from this region as a whole.

Northern North Sea: the scenario modelled in OSCAR predicted shoreline oiling of 7,200 tonnes versus 9,867 – 16445 m3 predicted in OSIS.

Central North Sea: the scenario modelled in OSCAR predicted no shoreline oiling, versus 3,292 – 5,487 m3 predicted in OSIS.

What is consistent is that the figures from the OSIS modelling adopted for the cost estimation in this report are in all cases higher than those predicted by the alternative modelling in OSCAR. This suggests that the predictions used in this report are conservative.

_______________________________________________________________________________________________________


7 Cost predictions

7.1 Methodology

The costs that are relevant to the OPOL Agreement are those relating to remedial measures and pollution damage as referred to in Section 3. As mentioned in that section, the OPOL Agreement does not apply to well control and consequently activities such as capping of the well, drilling of relief wells or other well-head engineering interventions are not included in this report. However DECC requires that these costs are addressed separately, and that evidence of financial responsibility to meet these expenses is provided to DECC. Cost estimates for remedial measures and pollution damage were undertaken by BMT ARGOSS , with the detailed methodology for calculating costs given in Appendix 2. The tables in Appendix 2 provide an illustration of the cost calculations using example data. An adjustment factor was applied to the data in the tables to reflect the specific circumstances of each scenario. As noted, the scenarios examined here are for well blowouts of 30 days due to the deployment of a capping device. These results have also been extrapolated to a period of 90 days and the 90-day results are summarised in Appendix 3 to this report.

7.2 Basis of costs relating to Remedial Measures

7.2.1 Remedial Measures

The following definition is given in the OPOL Agreement: "Remedial Measures" means reasonable measures taken by any Party from any of whose Designated Offshore Facilities a Discharge of Oil occurs and by any Public Authority to prevent, mitigate or eliminate Pollution Damage following such Discharge of Oil or to remove or neutralise the Oil involved in such discharge, excluding however, well control measures and measures taken to protect, repair or replace any such Designated Offshore Facility. It is assumed that all currently acceptable and available response and clean-up techniques would be utilized in response to the relevant spill scenario. These techniques would include:

The setup of a command centre in each region affected by the spill

Offshore dispersant spraying to reduce the amount of the spill on the sea surface

Offshore and nearshore mechanical recovery of oil using skimmers

Shoreline protection booming of sensitive areas

Shoreline oil clean-up including assessment of shorelines with high and low levels of

oiling, and consideration of different substrate types

Cleaning of affected wildlife

Liaison with media

Shoreline clean-up assessment (SCAT teams) and surveillance

Oil and oily waste disposal

For each activity, the resources required in the activity were defined according to a suitable metric e.g. resources per day or per defined section of coastline, and these were scaled up to the full number of days or length of shoreline under consideration. Such an approach may over-estimate the resources (and therefore costs) concerned, as it does not always allow for economies of scale, but this is conservative in terms of estimating liabilities..

_______________________________________________________________________________________________________


Actual current costs for the calculated resources were obtained as far as possible. Estimates have been made where it was not practical or possible to obtain information.

7.2.2 Cost sources

Determination of the resources required for response to the spill has largely drawn on the expert knowledge of UK oil spill responders This included SEACOR Environmental Services, Inc. and specialists with several years of oil spill response experience, and a workshop held with MCA, DECC, OPOL and O&GUK to review the approach, costs and resources. The following sources were used for costing information:

Costs estimates build on the knowledge developed through previous OPOL updates including uplifts for inflation.

Oil Spill Response Limited’s 2010 Yearbook has been used for specialist oil spill equipment and human resource costs. Member rates have been applied.

Manufacturer’s prices have been applied for items such as dispersants.

Intertanko has been used for tanker and vessel hire rates (www.intertanko.com). These can vary according to market conditions and upper values have been applied, assuming that these would generally be applied in an emergency situation.

The Internet has been used for several items such as plant hire rates, equipment rates, command centre venue and services rates.

The Maritime and Coastguard Agency has provided rates for its equipment. Uplift has been applied for costs relating to Norway. This has been determined using Comparative Price Level data from Eurostat, which collects national statistics from all European states (the Eurostat website address is given in the references).

7.2.3 Command Centre Costs

Based on the modelling results, two to three command centres were costed to permit localised co-ordination of clean-up efforts. One or two would be in the UK, where the spill originates (North Scotland and/or Shetland), with one in Norway.

7.2.4 Offshore dispersant spraying

Metocean conditions will limit the number of days available to spray dispersants using aircraft and boats. An assessment of this availability was made by analysing meteorological data for the West of Shetland and Moray Firth locations. Using experience of dispersant spraying, it was assumed that spraying would only be performed in wind speeds of 30 knots or less. Such conditions were determined to occur 75% and 77.5% of the time respectively, during the “worst-case” month (i.e. usually winds were less than 30 knots for a greater period of the time). For the remainder of the time, equipment and vessels were costed as being on standby (this used a typical industry rate of 50% of the operational daily rate). This level of operational activity has led to an estimate of approximately 20 - 35% of the oil released being moved from the sea surface and dispersed into the water column.

7.2.5 Offshore mechanical recovery

The cost breakdown for offshore mechanical recovery includes 4 systems and 1 region. Standby and mobilisation costs were also included.

_______________________________________________________________________________________________________


As with spraying, metocean conditions are the limiting factor for mechanical recovery. In this case, wind speeds of 20 knots or less are considered necessary for effective booming and recovery. Analysis of the meteorological dataset indicated that these conditions occur 23 - 25% of the time in the “worst-case” month, and the number of days for mechanical recovery has been adjusted accordingly.

7.2.6 Nearshore mechanical recovery

Nearshore booming and recovery has been assumed to be conducted to help to protect coastal sensitive areas. It is likely to be an effective response measure in nearshore and coastal waters. Multiple nearshore systems deployed across a number of regions have been costed, and this is dependent on the spill extents resulting from the modelling. As a conservative assumption, no consideration has been made of oil mass balance reduction from near shore booming.

7.2.7 Protective nearshore booming

Protective booms are typically deployed to protect sensitive areas on the shoreline, such as fish farms or wildlife habitats. In this study, such areas have been determined as inlets or “voes” with a width of 500m or less. This is the maximum practical distance to boom. Such inlets often have sensitive beaches or marshes at their head. It is not generally practical or effective to boom more exposed sensitive shorelines.

7.2.8 Shoreline Clean-up

The adopted shoreline clean up involves dividing the shoreline into 7 substrate types. Each substrate requires a different approach and different resourcing requirements in its clean-up. These have been determined for shorelines with heavy and light shoreline oiling for each type, corresponding to the high and low shoreline volumes due to the assumptions applied for entrainment. In the case of West of Shetland, Northern North Sea and Central North Sea, the coastlines involved broadly comprise Atlantic-facing “exposed” shores but there are also numerous small sheltered inlets, fjords and (leeward shores of) islands which may not be as “exposed”. It has proved difficult to separate these out, partly because of the difficulty of determining the local wave conditions in these areas. It is generally agreed by oil clean-up specialists that cleaning of rocky shorelines is not required where they are able to “self-clean” under wave action or where they are not safely accessible (confirmed through personal communication with ITOPF, January 2011); in these instances any cleaning costs would not be considered “reasonable” for reimbursement. For areas where some sheltering may occur, and the shores are accessible, a cost for cleaning these has been determined. It is estimated that up to 50% of the shore may be within this category. The figures shown in the clean-up tables for this category relate to these costs. In the case of the West of Shetland, the approach taken to calculate shoreline clean-up costs – that of determining equipment for a 10km section and multiplying this across the full section of affected shoreline – has resulted in high, possibly unrealistic, quantities for certain items of plant, such as cranes. The figures have been adjusted to allow for this by capping this equipment at a reasonable quantity for supply in this region. This reduces the overall figure by £4 million for the high shoreline oiling case only. In the low shoreline oiling case, the required equipment fell below the capping level.

_______________________________________________________________________________________________________


7.2.9 Wildlife clean-up costs

The wildlife cleaning costs have taken account of the costs of establishing a centre, employing vets and support staff. It is assumed that other staff will be volunteers, which is often the case during a spill incident. A relatively high rental and services value has been included to allow for costs of large amounts of water and other services, as well as subsistence for volunteers whilst on site. Costs are also included for rescue and recovery teams and their vehicles. A cost per animal cleaned is included to allow for consumables. This is a high estimate only: it is probably a relatively high figure per animal but is relatively small when totalled and compared with the overall costs.

7.2.10 SCAT team, media liaison and surveillance.

Shoreline clean-up assessment teams (SCAT) are specialist experts who categorize the shoreline oiling and develop clean-up plans. A team of media responders and community liaison offers has been included to reflect the recognised need to keep media and public informed, maintain information websites, information lines etc. For pollution surveillance activities, general use aircraft will be required to provide daily surveillance flights to give real time information on the spill location and to assist in shoreline categorization duties. Personnel have been assumed to be on site for 50 to 60 days. It is assumed that all media and SCAT is to be initiated and conducted predominantly from the UK, therefore no uplift has been included.

7.2.11 Disposal costs

Large volumes of oily waste can be produced from a major marine oil spill following shoreline clean-up and recovery of oil at sea. The oil and gas industry has a significant logistics resource already in place that deals with the transportation, storage and treatment of oils and oily wastes, which would be brought to bear in the event of a major incident. Nevertheless, for the purposes of a robust cost estimate, it is assumed that the potential waste collected during oil spill clean-up resulting from the examined scenarios may exceed available storage sites. Temporary storage sites can help solve this problem as they allow disposal to be approached in stages. In the event of a major spill, multiple waste management strategies will be required to deal with the quantities of oil and contaminated material (DBI, 2010). This is expected to require temporary storage in lined pits, barges and skips. In addition to storage requirements the oily waste will need to be transported from the area of impact to sites, which can temporarily store or process and dispose of the waste. The transport of waste from recovery sites to storage sites would typically be undertaken by suitable vehicles, e.g. tankers for liquid waste and sealed trucks for solid waste. In an emergency a variety of vehicles not normally used for oil transport may be utilised. For the purposes of cost calculations, an assumption was made that the majority of the waste would be transported from clean-up and temporary storage sites on Shetland and Orkney via skips on barges and then by road to the disposal site. It was assumed that the waste from north Scotland and Norway would be transported by road only (IPIECA/Energy Institute/Cedre, 2004). Material contaminated from an oil spill incident is classified as hazardous or special waste. Since 16 July 2003 no landfill site in Scotland has been able to accept hazardous/ special waste under the Landfill (Scotland) Regulations 2003 (as amended) and the number of such sites elsewhere in the UK

_______________________________________________________________________________________________________


is now limited. However, other disposal methods exist, for example reprocessing and incineration. With this in mind, disposal costs were estimated at £500 per tonne followed discussions with a large waste disposal company, with a cost adjustment for Norway. The estimated volumes for disposal of shoreline wastes are shown in Table 7-1.

Scenario

Exp

ose

d r

ock

y h

ead

lan

ds

and

wav

e-c

ut

pla

tfo

rms

Man

-mad

e s

olid

str

uct

ure

s an

d

bo

uld

er

be

ach

es

Fin

e t

o m

ed

ium

gra

ine

d s

and

be

ach

es

Co

arse

-gra

ine

d s

and

be

ach

es

Pe

bb

le/g

rave

l/co

bb

le b

ea

che

s

Tid

al m

ud

fla

ts

Ve

geta

ted

tid

al f

lats

Tota

l was

te

WoS High shoreline

volume 684 721 32,210 6,037 41,440 1 5 81,097

Low shoreline

volume 37 40 1,765 331 2,271 0 0 4,444

Moray Firth

High shoreline volume

318 65,647 37,003 0 3,035 0 34 106,037

Low shoreline

volume 47 9,745 5,493 0 451 0 5 15,741

NNS High shoreline

volume 242 9,841 0 0 0 0 16 10,098

Low shoreline

volume 127 5,149 0 0 0 0 8 5,284

CNS High shoreline

volume 76 2,061 0 0 0 0 5 2,142

Low shoreline

volume 37 997 0 0 0 0 2 1,036

Table 7-1 West of Shetland - Waste Tonnages per Shoreline Type

A total of 45,000 m3 of oil has been assumed to be recoverable from offshore operations. This equates to approximately 40,600 tonnes using an unweathered density of a typical West of Shetland oil of 902 kg/m3, or 41,535 tonnes using a typical Moray Firth oil density of 923 kg/m3. For the Northern North Sea and Central North Sea, Moray Firth offshore waste disposal costs have been assumed.

_______________________________________________________________________________________________________


7.3 Basis of costs relating to Economic Impact

Under the OPOL Agreement, claims may be made for pollution damage. Pollution damage is defined as: “Pollution Damage” means direct loss or damage (other than loss of or damage to any Offshore Facility involved) by contamination which results from a Discharge of Oil.” The industries that might be significantly affected by a release are summarised as:

Shellfish farms

Fish farms (primarily salmon)

Commercial (wild) fisheries

Tourism

Other sectors have been considered but it was determined that either these would not be affected in the scenarios modelled, or the level of compensation that may be claimed is not significant compared to the total or too remote. These sectors include agriculture, ferries, power plants, renewable energy operations and research (see section 7.3.7 below).

7.3.1 Economic Impact

The most widely available economic data regarding businesses in these sectors is industry gross revenue, which is generally available through industry or government statistics. This is the data used in the following sections. The total revenue can be combined with other statistics to determine revenue for different activities, or to give average revenue per business. Given that the estimates for the economic impact of a spill scenario in this section 7.3 are based on industry gross revenues and do not take account of any steps that may be taken by claimants to mitigate their losses, it is likely that these amounts materially overestimate any pollution damage compensation recoverable under the OPOL Agreement or at law. In addition a full analysis of the compensation payable to any claimant would need to include a context specific analysis. Such an analysis is outside of the scope of this report.

7.3.2 Summary of costs of impact on aquaculture

Major impacts of oil spills on aquaculture are the smearing of nets and fish cages and the tainting of fish and shellfish, rendering them unfit for marketing. The cost of an oil spill on the aquaculture industry would result in loss of profit, cleaning of equipment and loss of stock. Costs relating to aquaculture (fish and shellfish) were assessed for the West of Shetland Scenario and the Moray Firth Scenario. Aquaculture costs for the other two scenarios (central North Sea, northern North Sea) were not considered, as the oiling is likely to only impact the Norwegian coastline. Based on the volumes and time to reach the Norwegian coastline the oil would be weathered and dispersed and unlikely to spread far enough up the fjords to impact the salmon or shellfish farms in Norway.

7.3.3 Fish Farms

Salmon farms impacted along the coast of Shetland as a result of the Braer oil spill lost two years of production in one year and resulted in the 1991 and 1992 fish stock being destroyed (Perry, 1993). This is because salmon typically take two years in seawater to mature to marketable size. The

_______________________________________________________________________________________________________


compensation for the loss of the 1991 and 1992 stock was US$11million and US$14 million, respectively (Jacobsson, 1993). In this report, two years loss of salmon has also been assumed. It was assumed that no compensation would be given for the northern North Sea and central North Sea as the oiling is likely to only affect the Norwegian coastline and it is unlikely that the oil would spread far enough up the fjords to impact the salmon farms in Norway. The Moray Firth’s compensation value for salmon farm losses is much less than the West of Shetland due to the spatial extent of the oil spill and because the east coast of northern Scotland has fewer fish farms than the west coast of northern Scotland (Table 7-2, Table 7-3 and Figure 7-1).

Shetland Orkney North Scotland Total affected

Salmon produced per area (Tonnes)

22,664 (all affected)


9,583 (of which 532 affected)

26,869

Number of active salmon farms

92 (all affected) 24 (all affected) 54 (of which 3 affected)

119

Source: Marine Scotland, 2010a Table 7-2 Number of salmon farms impacted by the West of Shetland oil spill scenario.

Shetland Orkney Scotland Total affected

Salmon produced per area (Tonnes)

22,664 (of which 11,332 affected)


9,583 (of which 532 affected)

15,537

Number of active salmon farms

92 (of which 46 affected)

24 (all affected) 54 (of which 3 affected)

73

Source: Marine Scotland, 2010a Table 7-3 Number of salmon farms impacted by the Moray Firth oil spill scenario

_______________________________________________________________________________________________________


Source: Marine Scotland, 2010a Figure 7-1 The distribution of active salmon farms in the UK

7.3.4 Shellfish

A range of compensation values were considered for shellfish farms based on their retail value of shellfish from 2007 – 2009. To calculate the affected area, the distribution for shellfish activity shown in Figure 7-2 was used. It was assumed that no compensation would be given for the Central North Sea and Northern North Sea Scenarios as no oil is predicted to beach on the Scottish coasts and the spill is not considered to reach the shellfish farms in Norway. The Moray Firth’s compensation value for shellfish farms is less than the West of Shetland’s compensation value due to the spatial extent of the oil spill and because the east coast of northern Scotland has fewer shellfish farms than the west coast of northern Scotland (Figure 7-2). It is difficult to predict the length of time for which shellfish farms would be affected and not all affected farms would be closed for the same period depending on the density of shoreline oiling. For the purposes of this study one year’s economic impact is be factored.

_______________________________________________________________________________________________________


Figure 7-2 Regional distribution of active shellfish sites in 2009 (number producing given in brackets) and number of producing businesses by area/species (Marine Scotland, 2010).

7.3.5 Fishing

Claims for the cost of the impact on fishing were calculated primarily on the basis of the value of the fishing ground likely to be affected together with the type of catch. Compensation to fisherman was based on a closure of the fishing grounds for 3 months based on discussions with Marine Scotland and reflecting the restrictions that were put in place following the Braer incident in Shetland. The West of Shetland scenario has the highest compensation value. The main reason for the compensation value being so high is because it covers a significant area of valuable pelagic fishing grounds. The central North Sea and the northern North Sea scenario compensation values are significantly lower, mainly due to the smaller area of fishing grounds that would be affected. The compensation values have been discussed with the Scottish Fisherman’s Federation who consider this to be a reasonable level of compensation for the impacts of a spill similar to the scenarios considered in this study.

7.3.6 Tourism

A potential economic impact on tourism was reviewed for the West of Shetland and Moray Firth Scenarios only. The other two scenarios impacted the Norwegian coastline only and it has been assumed for all four scenarios that Norway’s tourism will not be impacted as oiling will be scattered and the majority of the affected shoreline will be rocky cliffs that are inaccessible to tourists.

_______________________________________________________________________________________________________


The potential economic impact on tourism is relatively low compared with fisheries and was not considered in the broader assessment conducted on the Central and Northern North Sea.

7.3.6.1 West of Shetland Scenario

The tourism areas that may be affected are the whole of Shetland, Orkney and parts of Caithness and Sutherland. The total expenditure by tourists has been used to estimate the possible economic impact due to the loss of tourism due to the oil spill. The total loss to these areas would be offset by revenue from oil spill response personnel who would be staying in the region during the oil spill clean-up. Therefore, the total compensation for tourism has been limited to one month’s compensation as an estimate of the net impact of several months spill duration, and, as no tourism loss was compensated during the Braer oil spill, it was considered to possibly provide an overestimate.

7.3.6.2 Moray Firth Scenario

The tourism areas that may be affected are the southern half of Shetland, Orkney and the north east regions of Scotland (Caithness, Sutherland, Moray, Banff and Aberdeenshire, not including Aberdeen). The total expenditure by tourists has been used to estimate the possible economic impact due to the loss of tourism due to the oil spill.

The Moray Firth’s tourism compensation value is larger than the West of Shetland scenario as it impacts the north east coast of Scotland, which has higher tourism revenues than the north west coast of Scotland.

7.3.7 Other claims

Other industries have also been considered but are not included in the costing for the following reasons:

Renewables. There are renewable energy R&D activities ongoing in Shetland and Orkney, which could be affected by an oil spill in this location. However, discussion with representatives from these organisations indicated that impact would be minor and that the devices would be removed if they were likely to be adversely affected. A trial installation of two wind turbines has taken place in the Moray Firth, but again the impacts are considered minor. Plans for major offshore windfarms are underway around the UK, and this aspect may be relevant in future reviews of OPOL financial provision.

Water abstraction. Seawater may be abstracted for cooling purposes by the power industry. However, there are no sites in this region that are likely to be adversely affected.

Ferries. Ferries have been considered during assessment of tourism costs. During the Braer oil spill, a claim of approximately £1m was submitted by ferry operators for loss of income but was not upheld. This was because it could not be proved that losses were as a direct consequence of the spill and because of lack of proximity of the ferry route to the spill extents (IOPC, 2000). For this reason, such costs have not been included in this report.

Farmers. £3.6m in compensation was paid to farmers for damages to farmland and assets during the Braer incident (IOPC, 2009a). The damage resulted from seaspray contaminated with oil. A similar situation could occur in the scenarios considered in this report, although the spill locations are much further offshore and oil may not be as concentrated in the coastal region as that of the Braer.

_______________________________________________________________________________________________________


7.4 Summary of cost estimate outputs

The process, assumptions and calculations described above leads to an overall estimate of the likely costs arising for an oil release that is stopped within 30 days. The following sections summarise the cost outputs for each scenario. In tables 7-4 to 7-7, the costs for remedial measures and economic impact have been rounded to two significant figures. The totals, however, were calculated using the unrounded costs which accounts for the difference between the totals and the costs stated for remedial measures and economic impact. Note that the results for remedial measures are presented for ‘low volume’ and ‘high volume’ cases. The low volume case is where a high degree of oil entrainment in the water column is assumed, and a lower volume of oil moves towards the shoreline. The high volume case is where a low degree of oil entrainment in the water column is assumed and a higher volume of oil moves towards the shoreline.

_______________________________________________________________________________________________________


7.4.1 West of Shetland

An estimation of the total cost for the West of Shetland scenario indicates that this scenario may exceed the OPOL limit. In particular, this may not be the case for wells with an expected lower rate of oil production, which may fall within this limit.

Remedial measures Low shoreline volume cost

High shoreline volume cost

Shoreline clean-up £16m £55m

Offshore dispersant spraying £13m £13m

Offshore mechanical recovery

£15m £15m

Protective nearshore booming

£8.7m £8.7m

Command centre £5.3m £5.3m

Media and SCAT £1.8m £1.8m

Wildlife response £1.3m £1.3m

Disposal £8.7m £42m

Total £69m £140m

Economic Impact

Shellfish £2.3m

Salmon Farms £62m

Fisheries £78m

Tourism £1.0m

Total £140m

Low High

TOTAL (GBP) £210m £280m

TOTAL (USD) $340m $450m

A rate of £1: $1.6 has been used. Table 7-4 Summary of cost estimates for West of Shetland scenario

_______________________________________________________________________________________________________


7.4.2 Moray Firth

An estimation of the total cost for the Moray Firth scenario indicates that this scenario would generally be expected to fall below the OPOL limit. Given that the cost estimates in this report are likely to overestimate the level of costs recoverable under OPOL, the fact that the high shoreline volume case exceeds the OPOL limit is not considered to be problematic.






£14m £14m


£13m £13m





Total Remedial Measures £77m £140m

Economic Impact

Shellfish £2.9m

Salmon Farms £11m

Fisheries £20m

Tourism £1.9m

Total £35m

Low High



A rate of £1: $1.6 has been used. Table 7-5 Summary of cost estimates for Moray Firth scenario

_______________________________________________________________________________________________________


7.4.3 Northern North Sea

An estimation of the total cost for the Northern North Sea scenario indicates that both the low and high volume cases for this scenario fall well below the OPOL limit.



Shoreline clean-up £3.2m £11m



£19m £19m


£19m £19m






Economic Impact

Shellfish 0

Salmon Farms 0

Fisheries £2.8m

Tourism 0

Total £2.8m

Low High



A rate of £1: $1.6 has been used. Table 7-6 Summary of cost estimates for Northern North Sea scenario

_______________________________________________________________________________________________________


7.4.4 Central North Sea

An estimation of the total cost for the central North Sea scenario indicates that both the low and high volume cases for this scenario fall well below the OPOL limit.



Shoreline clean-up £1.1m £3.7m



£19m £19m


£19m £19m




Disposal £7.0m £7.0m


Economic Impact

Shellfish 0

Salmon Farms 0

Fisheries £8.7m

Tourism 0

Total £8.7m

Low High



A rate of £1: $1.6 has been used. Table 7-7 Summary of cost estimates for Central North Sea scenario

_______________________________________________________________________________________________________


8 Discussion

8.1 Uncertainties

8.1.1 Variability of blowout scenario

The blowout scenarios examined for this report encompass the vast majority of conceivable outcomes. Historically, 94% of blowouts in the North Sea and Gulf of Mexico are arrested in 30 days, and for the UK this aspect is significantly strengthened by the OSPRAG cap that can be deployed in 30 days and by the underlying regulatory regime that exists in the UK. Oil types chosen are representative of the geographic regions and flow rates represent conservative estimates, with the exception of the West of Shetland (see below). For already developed fields, these estimates will in most cases be much higher than the rates the fields can currently maintain, and wells in many existing fields will not support any flow un-aided. Well flow rates decline over time, whereas the modelling commissioned by Oil & Gas UK and OPOL considered a constant flow rate, which is conservative. Given the large amount of exploration in the West of Shetland area, it is possible that larger oil releases than those considered in the Oil & Gas UK and OPOL modelling could occur (see table 6-3). In situations where the spill cost impact potential exceeds the OPOL limit, the remedial and financial provisions can be a specific matter for discussion between the operator and the regulator.

8.1.2 Environmental data used in modelling

Realistic metocean data involving a combination of regional circulation, tidal and wind-driven currents has been used for a 2-year period to identify the conditions that lead to the worst shoreline impacts. The datasets used for the modelling commissioned by OPOL and Oil & Gas UK are from different sources to those used by the operator modelling, yet both show similar trajectories for surface oil. Both approaches use varying sea surface, air temperatures and sea state, and the operator modelling uses water column temperature profiling and accepted bathymetry data. There is no reason to doubt that the underlying metocean data, drawn from reputable sources, is representative and encompasses a wide range of conditions.

8.1.3 Techniques used in modelling predictions

The modelling commissioned by OPOL and Oil & Gas UK examined the fate of oil on the sea surface and applied a factor to take account of the dispersion of oil into the water column when a blowout occurs subsea. Operator modelling that considers water column dispersion, sediment deposition and decay processes, identifies these aspects as being significant in limiting the amount of oil reaching shorelines. It can be concluded that the costs calculated are therefore a conservative assumption with respect to oil on the surface and shoreline. The costs of impacts relating to water column and sediment contamination, principally commercial fishing and aquaculture, have been drawn from incidents such as the Braer rather than from modelling predictions. The increasing availability of water column and sediment predictions that are specific to blowout incidents means that these estimates can be refined in future. The modelling techniques do not incorporate some aspects of oil fate such as photo-oxidation or tarball formation. Since model results have been correlated with field observations, these are not thought to be aspects that would significantly affect the cost estimates. Overall, there are opportunities to reduce the uncertainties present in the cost estimates by improving aspects of the modelling such as taking more account of the subsea nature of many release scenarios and the length of potential “worst-case” scenarios. These factors bring into

_______________________________________________________________________________________________________


importance the subsea dispersion and movement of oil, the entrainment into the water column and re-surfacing of oil over long periods, and decay processes that significantly reduce the amount of oil reaching shorelines.

8.1.4 Predictions of response measures

It is clear that response measures can significantly mitigate shoreline oiling and this is evidenced in both observations during incidents and from experimental data. Nevertheless there is inevitably much uncertainty in predictions of oil spill response effectiveness since these are targeted and reactive to the conditions in the field which may be rapidly changing.

8.1.5 Predictions of Economic impacts

Socio-economic impacts rely on many factors, but there is an empirical dataset of actual oil pollution incidents that allow a degree of confidence to be assumed, including incidents around the UK coastline.

8.1.6 Cost bases

The cost bases used are transparent and have been developed over many years, with additional review and input for this assessment from recognised industry experts. Costs at the time of an incident may be influenced by the incident itself, such as pressure on waste disposal outlets, but where this is recognised a correspondingly high estimate has been used. Fishery and aquaculture costs have been derived in consultation with experts in the field and are based on many years’ data. Cost differences for operations in Norway have been derived on a simple but conservative basis.

8.2 Cost comparisons

Given the variables relating to the impacts of an oil spill discussed in Section 5, the cost of oil spills varies widely from one incident to another and is not linearly correlated with the volume of oil released (ITOPF, 2010). A summary of costs associated with some significant oil spills is shown in Table 8-1. Since blowouts are so infrequent, there is no comparable data available for the United Kingdom. Examples are therefore examined from shipping incidents and many of the cost bases used for estimates in this report are drawn from the responses to these incidents. Overall, it should be noted that the financial regimes for compensation from shipping incidents which are generally limited by international convention are different to those that apply to the oil and gas industry. It is important to note the order of magnitude difference between costs calculated in this report compared with actual and expected costs relating to the Exxon Valdez and Deepwater Horizon incidents. There are important differences between these scenarios, perhaps the most important difference relating to headline costs is the different system for the determination of compensatory and punitive damages in the United States. Taken with a widely applied contingency fee system of remuneration for plaintiffs’ legal counsel, the propensity for class actions and assuming no limitation of an operator’s liability, the damages awarded by US courts to civil action claimants or as may be agreed in out of court settlements can be multiples of the equivalent amounts recoverable at law in European jurisdictions. Furthermore punitive damages awards for bodily injury and property damage claims are a uniquely US concept and at the court’s discretion a multiplier to the quantum of proven loss will be applied. This report does not address fines which in the US can be levied against operators through the Oil Pollution and Clean Water Acts, or other costs that are directly incurred by the operator in a blow out scenario e.g. control of well and redrilling costs. While robust financial provision for legal liabilities is addressed by DECC and operators via the Petroleum Act and the licensing systems that operate in the UK, the costs that are relevant to the provision of financial responsibility under OPOL relate to remedial measures and pollution damage as defined in the OPOL Agreement.

_______________________________________________________________________________________________________


A more detailed breakdown of the costs relating to the European incidents is shown in Appendix 4, largely drawn from IOPC (2009a and 2009b). These all relate to spills from shipping, since there are no recent examples of major spills to draw on from the upstream oil and gas industry in Europe.

Incident Mass (tonnes) Total cost Currency

Braer 84,000 51.9m GBP

Sea Empress 72,360 36.8m GBP

Erika 19,800 129.7m Euros

Prestige 63,272 164.0m* Euros

* Value of claims (IOPC, 2009a). This total excludes Spanish Government claims. A large proportion of the claims are expected to be inadmissible. Table 8-1 Spill volume and associated costs for various incidents.

As a United Kingdom example, the cost breakdown relating to the Braer incident in 1993 is of relevance to the scenarios considered in this study. The Braer grounded on the southern tip of Shetland in January 1993 and affected part of the regions considered in this study. Much of the oil was washed offshore in severe weather and only about 1% came ashore (Perry, 1993). However, fish farms were adversely affected, fisheries closed and impacts on coastal land and property occurred. Much of the oil deposited in sediments resulting in the closure of shell-fisheries for some time. The Braer incident has been used to inform the approach taken when assessing compensation in this study. In both the Braer and Sea Empress incidents, the highest proportions of compensation claims (other than clean-up measures) fall into the fishery-related category. The Prestige incident occurred offshore in deep water. The oil type and source were quite different from the scenario considered in this study, being cold, heavy fuel oil from a tanker rather than gassy crude at relatively high temperature which is much more dispersible. The majority of claims are from countries within a similar distance to that considered in this report. The costs of these European incidents are well below the sum that is in place for relevant liabilities covered by the OPOL Agreement for remedial measures and pollution damage.

_______________________________________________________________________________________________________


9 Conclusions

The industry has put in place robust preventative and response measures and the financial liabilities relevant to the OPOL Agreement have been predicted for well blowout scenarios in UK waters in that context. The results are summarised below in table 9-1. The current financial liability limit of US$250 million per incident in the OPOL Agreement is adequate for the vast majority of UK well operations. For oil wells in the West of Shetland area, the limit is calculated to be adequate in many cases, but the costs for higher production wells in the area may exceed the OPOL limit. In the case of wells that match this scenario, the operator and DECC can consider whether additional financial responsibility above the OPOL limit is appropriate.

West of Shetland Moray Firth Northern North Sea

Central North Sea

Estimated Total (GBP)

£210-280m £110-180m £75-86m £77-80m

Estimated Total (USD)

$340-450 $180-280m $120-140m $120-130m

Table 9-1 Summary of costs as noted in section 7. (costs have been rounded to two significant figures)

_______________________________________________________________________________________________________


10 References

Clark, B., Parsons, J., Yen, C., Ahier, J.A. and Mackay, D. (1987) A study of factors influencing oil submergence.

Davies, J.M. and Topping, G. (editors) (1997). The impact of an oil spill in turbulent waters: The Braer. Proceedings of a symposium held at the Royal Society of Edinburgh, 7-8 September 1995. Stationery Office, Edinburgh, UK DBI Alisa (2010). Oil spill waste minimisation and management plan. Shetland., DBI Ailsa and BP Sullom Voe terminal. http://www.shetland.gov.uk/ports/contingencyplans/documents/ OilSpillWasteMinimisationandManagementPlan.pdf. Accessed December 2010. IOPC (2000) Incidents Involving The 1971 Fund – Braer. IOPC Executive Committee, 63rd Session. International Oil Pollution Compensation Funds, London, UK. Available online at http://www.iopcfund-docs.org/ds/pdf/71exc63-3_e.pdf (Accessed December 2010) IOPC (2004). International oil pollution compensation funds annual report 2004. Report on the activities of the international oil pollution compensation funds in 2004. http://www.iopcfund.org/npdf/AR09_E.pdf. Accessed December 2010. IOPC (2009a) Annual Report 2008. International Oil Pollution Compensation Funds, London, UK IOPC (2009b) Incidents Involving the IOPC Funds October 2009. International Oil Pollution Compensation Funds, London, UK.

IPIECA/Energy Institute/Cedre (2004) International Petroleum Industry Environmental Conservation Association 5th Floor, 209–215 Blackfriars Road, London, SE1 8NL, United Kingdom. www.ipieca.org/system/files/publications/Vol12_WasteManagement.pdf. Accessed December 2010. ITOPF (2010) Environmental Impact, from website (http://www.itopf.com/marine-spills/effects/environmental-impact/) Jacobsson, M. (1993). The Braer, Legal aspects of a major oil spill. International Oil Pollution Compensation Fund. London Johansen, O., Rye, H., Melbye, A.G., Jensen, H.V., Serigstad, B. and Knutseet, T. (2001). Deep Spill JIP - Experimental Discharges of Gas and Oil at Helland Hansen – June 2000. Final Technical Report. Marine Scotland Science (2010b) Scottish shellfish farm production survey. 2009 Report. The Scottish Government. OSPRAG (2011a) EN020 - OSPRAG Second Interim Report OSPRAG (2011b) EN022 - Final Report of the UK Oil Spill Prevention and Response Advisory Group OSPRAG (2011c) EN023 - Demonstrating the UK’s Oil Spill Response Capability Perry, R., (1993) The Braer oil spill. Proceedings of the 1995 International Oil Spill Conference, Long Beach, California. Available at http://www.iosc.org/papers/00193.pdf (viewed December 2010).

http://www.itopf.com/marine-spills/effects/environmental-impact/

http://www.itopf.com/marine-spills/effects/environmental-impact/

_______________________________________________________________________________________________________


Reed, M., O. M., Aamo O. M. & P. S. Daling (1995a). Quantitative analysis of alternate oil spill response strategies using OSCAR. Spill Science and Technology, Pergamon Press 2(1): 67-74. Reed, M., French, D., Rines, H., & Rye, H. (1995b): A three-dimensional oil and chemical spill model for environmental impact assessment. Proceedings of the 1995 International Oil Spill Conference, pp.61-66. Scandpower (2011) Blowout and well release frequencies based on SINTEF offshore blowout database 2010 (revised). Report No. 19.101.001-3009/2011/R3. SINTEF (2009) Blowout and well release characteristics and frequencies, 2009. Sintef report no. F1380.

_______________________________________________________________________________________________________


11 APPENDIX 1 – Operator modelling using OSCAR

11.1 West of Shetland

Results shown here are taken from BP (2011a), relating to a subsea blowout of 75,000 barrels per day from the North Uist exploration well lasting 140 days, modelled over a period of 170 days. A relatively persistent Clair oil type analysed by SINTEF was used as the anticipated oil type. Figure 11-1 and Figure 11-2 show the probability of oil being present on the sea surface and shoreline respectively, at some point in the 170 day period modelled, in the event of an uncontrolled blowout for 140 days. It should be emphasised that the contours appearing in the figure do not represent the size of a slick. At any one time, the visible surface oil will cover a small area relative to these contours. The area of slick or sheen is predicted to be an average of 2,800 km2 over the period modelled, approximately 0.5% of the area north and east of the release point. In this “worst-case” scenario, there is over 90% probability of oil entering Norwegian waters and greater than 70% probability of oil entering Faroese waters. A visible surface sheen is not predicted in the waters of any other country, nor is beaching predicted in any country other than parts of the UK (Shetland Islands) and Norway.

Figure 11-1 Probability of oil being present at a thickness of >0.04 microns at any time over the 170 day model period

_______________________________________________________________________________________________________


Figure 11-2 Probability of shoreline oiling following a 140 day blowout

Figure 11-3 Water column concentrations of oil, 30 days after start of blowout

A mass balance representation of the behaviour of the hydrocarbons is shown in Figure 9-6. The modelling predicts that the majority of oil is dispersed into the water column, where it biodegrades over time. Approximately 10-20% reaches the surface and the majority of this evaporates, leaving around 5% at most as oil on the water surface, dependent heavily on prevailing weather conditions. When the weather is calm, oil droplets near the surface are able to rise and form a sheen, whereas in modest or high wind speeds the action of wind and waves acts to disperse the surface sheen into the water column. Less than 0.3% of the oil is ultimately predicted to end up either on the shoreline. In a “worst-case” scenario a minimum of 14 tonnes of oil and a maximum of approximately 3,200 tonnes of oil is predicted to beach. These masses will be emulsified and, including the entrained water, total maximum “worst-case” scenario mass of emulsion is likely to be around 10,000 tonnes.

_______________________________________________________________________________________________________


Figure 11-4 Fate of oil from 140 day blowout

Oiling on the northwest of the Shetland Islands is not predicted in all scenarios, although shoreline oiling in Norway is much more likely, where the oil will be in much more dispersed form. The time taken to reach shore is between 14 days and 120 days based on the range of metocean conditions used in the simulations. The oil in the water column steadily biodegrades, and at the end of the release at day 140, approximately 30% of the oil is predicted to have biodegraded, with 50% dispersed in the water column and 20% having evaporated. Sixteen days after a release has ended, water column concentrations are predicted to have reduced to below 50 ppb and therefore are not expected to constitute a significant environmental risk. Slight contamination of the seabed sediments around the coast of the Shetland Islands and Norway is predicted at around the locations where shoreline oiling is predicted. The concentrations predicted are a maximum of 2g/m2 with typical values of 200 mg/m2. Response modeling Response modeling was undertaken for this project within OSCAR (BP, 2011b) assuming the OSR Hercules and Cessna aerial dispersant vehicles and a single booming and recovery operation. The model incorporated restrictions on response actions resulting from wind speed for aerial dispersant, and wave height of 3m for booming and recovery, where wave heights are calculated from an in-built fetch calculation based on the two-dimensional winds acting over the model area. Response actions were deemed. This indicated that masses of oil reaching Shetland could be reduced by 1,300 tonnes (around 4,000 tonnes of emulsion). This figure could be increased by applying more resources, which would be certain in a real incident. While this is less than 0.1% of the total oil budget, it represents around 10% of typical surface oil mass, and the response would be targeted at oil predicted to reach Shetland rather than oil predicted to remain offshore. Dispersant spraying increases the mass of oil in the water column and sediments and may worsen the financial consequences relating to some aspects of fishing.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

7

13

2

0

27

3

3

40

4

7

53

6

0

67

7

3

80

8

7

93

1

00

1

07

1

13

1

20

1

27

1

33

1

40

1

47

1

53

1

60

1

67

Mas

s b

alan

ce

Time (days)

Evaporated

Surface

Dispersed

Cleaned

Sediment

Stranded

Decayed

_______________________________________________________________________________________________________


Figure 11-5 Response modeling outcomes

11.2 Northern North Sea

Results shown here relate to modelling undertaken for the Western Isles Development project (Dana Petroleum, 2011), involving a release rate of 15,000 barrels per day for 60 days. A declining flow rate was modelled to reflect loss of reservoir pressure over time. An initial release of 2 days to the sea surface was modelled followed by 58 days of a subsea release. Figure 11-6 Probability of surface slick

Figure 11-7 Probability of shoreline oiling

0°00'E

0°00'E

5°00'E

5°00'E

58°0

0'N

58°0

0'N

60°0

0'N

60°0

0'N

62°0

0'N

62°0

0'N

100 km

Statistical Map: Surface: Probability of contamination [%]

_______________________________________________________________________________________________________


Figure 11-8 Shoreline oiling probability

The first shoreline oiling takes place on days 40-50 and thereafter, there is transport of oil along the coast as it is washed off and re-deposited. The total amount predicted to beach is 1,434 tonnes (up to 7,200 tonnes of emulsion) and all the oil beached is in Norway. Decay processes are ultimately the main endpoint for oil, and towards the end of the simulation the amount depositing in sediments increases as oil transfers from the water column.

Figure 11-9 Fate of oil over time

11.3 Central North Sea

Results presented here relate to the Flyndre and Cawdor project (Maersk Oil North Sea, 2011). 37,000 barrels per day for 90 days was modelled over a model period of 120 days.

0°00'E

0°00'E

5°00'E

5°00'E

58°0

0'N

58°0

0'N

60°0

0'N

60°0

0'N

62°0

0'N

62°0

0'N

100 km

Statistical Map: Shoreline: Probability of contamination [%]

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 3 5 8 10 13 15 18 20 23 25 28 30 33 35 38 40 43 45 48 50 53 55 58 60 63 65 68 70 73 75 78 80 83 85 88 90

Mas

s b

alan

ce

Time (days)

WIDP

Evaporated

Surface

Dispersed

Cleaned

Sediment

Stranded

Decayed

Outside Grid

_______________________________________________________________________________________________________


The fate of the oil at any one time during the release is illustrated in Figures X and Y. By day 20 approximately 40% of the hydrocarbons from both wells will have either decayed or evaporated. By this time <1% of oil remains on the surface with the remainder being found either dispersed in the water column or on the seabed. By day 120 i.e. 30 days after the flow has been stopped approximately 60% of the oil in both cases has either decayed or evaporated, <0.1% remains on the surface, 1‐2% remaining in the water column while 35 – 38% enters the sediment. No oil is predicted to reach the shoreline in this scenario.

Figure 11-10 Probability of a surface slick

Figure 11-11 Water column concentrations at release site

_______________________________________________________________________________________________________


Figure 11-12 Fate of oil over time

11.4 References

BP (2011a) North Uist Exploration Well Environmental Statement. BP (2011b) North Uist Exploration Well Oil Pollution Emergency Plan. Dana Petroleum (2011) Western Isled Development Project Environmental Statement. Maersk Oil North Sea (2011) Flyndre and Cawdor Development Environmental Statement.

_______________________________________________________________________________________________________


12 APPENDIX 2 – Oil Spill Methodology for Remedial Measures and Economic Impact

12.1 Model results analysis

This section explains the methodology used by BMT ARGOSS in carrying out the costing of the scenarios. Values in the tables illustrate the figures which were used to carry out the cost calculations described earlier in the report, but do not reflect any particular scenario as the data was adjusted depending on the fate of oil and the receiving environment for each specific case.

12.1.1 Shoreline substrate assessment

Assessment of the shoreline clean-up costs requires information regarding the shoreline substrate type likely to be oiled. This affects the clean-up approach, duration and oily waste disposal costs. The results from the deterministic modelling were used to indicate the sections of shoreline predicted to be affected by oiling in each region. Broad sections of shoreline oiling were determined; i.e. the entire length within a predicted oiled section was assumed to have been affected, rather than the specific shores where individual model oil particles had stranded. Shoreline substrate types were classified using seven groupings. GIS software packages and local 1:50,000 Ordnance Survey topographical maps were used to determine and measure the length of the different types for the UK (Scotland, Orkney, and Shetland etc). For Norway’s coast, satellite imagery within Google Earth™ was applied together with statistical land use data from Statistics Norway (2008). An example of the shoreline classification for a small island, Papa Stour, off the coast of Shetland is shown in Figure 1-1. The classifications of substrata type used in the current analysis are the same as those used in the previous liability studies and are described in Table 1-1.

Shoreline Classification Description

Exposed rocky headlands and wave-cut platforms Shear cliffs with unconsolidated sediment (Cliff)

Man-made solid structures Sea walls, breakwaters, slipways, harbours, caissons locks (Man/Boulders)

Sandy beaches Sand (Sand)

Coarse-grained sand beaches Spits and bars (Coarse)

Pebble/gravel/cobble beaches Shingle beach (Single)

Tidal mud flats Mud (Mud)

Vegetated tidal flats Intertidal marshes, swamp (Marsh)

Table 1-1: Shoreline classification used in beaching analysis

_______________________________________________________________________________________________________


Source: Ordnance Survey (2008) Figure 1-1: Shoreline assessment and potential booming locations for Papa Stour, Shetland Islands

_______________________________________________________________________________________________________


12.2 Cost assessment

12.2.1 Command Centre Cost Breakdown

Table 2-1 shows the breakdown of command centre costs.

Each command centre has a 40-person day shift and a 10-person night shift. Allowances have been made for services, facility hire and staff rotations on a two week shift basis.

Variable per day costs / per command centre £ / day Number required

Total cost per day (£)

Command centre staff ( 2 shifts, 40 day 10 night)

475 50 23,750

Command centre hire inc. services 1000 1 1,000

IT / communications maintenance 1000 1 1,000

Meals 25 50 1,250

Accommodation 100 50 5,000

Total per command centre / day 32,000

Fixed costs / per command centre

£ Number required

Total (£)

IT / communications set up 10000 1 10,000

Toilets / logistics etc 5000 1 5,000

Travel to and from command centre for staff / 2 week rotations (assume 4 rotations)

4000 50 200,000

Total fixed costs / command centre 215,000

Table 2-1 Command centre costs

12.2.2 Offshore dispersant spraying costs

Offshore dispersant spraying has been costed on the basis of use of two aircraft (Oil Spill Response Limited’s Hercules and MCA’s Electra) delivering 3 runs each per day. In addition, it has been assumed that three offshore vessels will be applied (e.g. supply or field support vessels) delivering up to 50m

3 per day each. The

cost breakdown for offshore dispersant spraying is given in Table 2-2.

Dispersant costs are based on the product Dasic Slickgone EW, which is costed at £2350 per m

3 (2010

manufacturer’s price). Allowances have also been made for spotter aircraft and fluorometry to test for spraying efficiency.

_______________________________________________________________________________________________________


Variable per day costs £ / day Number required

Total variable costs (£)

Spray aircraft and equipment

OSR Hercules (£ 3000/hr in use) 15000 1 15,000

MCA Electra 40000 1 40,000

ADDS Pack 1850 1 1,850

Spotter aircraft

OSR ( £ 500/ hr) 2000 1 2,000

MCA 2000 1 2,000

-

Specialist operators of spray equipment

In aircraft 375 4 1,500

At airport 375 6 2,250

On vessels (3) 375 6 2,250

-

Dispersant stock

Oil dispersant stock ADDS ( 3 runs / day )

119850 1 119,850

Oil dispersant stock Electra (3 runs/ day)

35250 1 35,250

Airfield charges 1000 1 1,000

Dispersant supply logistics 5000 2 10,000

-

-

Marine dispersant spraying

Spray boat hire FSV/PSV 25000 3 75,000

Port costs 250 3 750

Dispersant stock (50m3) 58750 3 176,250

Spray system hire 70 3 210

Dispersant supply logistics 5000 3 15,000

Fluorometry

Fluorometry equipment 140 2 280

Specialists 475 2 950

Vessel 7500 2 15,000

Analysis 500 2 1,000

TOTAL 517,390

Variable costs / person /day £ / day No. people Total per day (£)

Meals 25 18 450


General PPE 40 18 720

Rotation transport costs of persons

100 18 1,800

Total costs per day 4,770

Table 2-2 Dispersant spraying costs.

12.2.3 Offshore mechanical recovery

Table 2.3 shows the cost breakdown for offshore mechanical recovery.

Offshore booming and recovery has been costed on the basis of 4 offshore (boom and skimmer) systems. This has been chosen as a realistic number that can be gainfully and logistically employed close to the source to

_______________________________________________________________________________________________________


enable maximum recovery efficiency and reduce spreading. Once oil has spread, collection efficiency is dramatically reduced. Large specialist vessels and storage tankers have also been costed. The range of the costs were considerable and dependent upon market conditions. During an oil spill requiring many vessels, it is considered that the costs would be at the upper end of recent historical day rates because of demand. International vessels, e.g. from NOFO or EMSA, could be deployed and make up some or all of these systems. Costs for specialist advisors to advise vessel captains have been included.

Allowances have been made for vessel mobilization, demobilization, port costs and cleaning. No additional costs for vessel standby charges whilst awaiting cleaning have been applied as these were included in the general standby costs. It was estimated that each system would collect 500m

3 per day giving an overall recovered volume of

45,000m3. This level of operational activity led to approximately 10% of the oil released being effectively

recovered and removed from the mass balance. This is a typical figure of success for offshore containment and recovery.

_______________________________________________________________________________________________________

February 2012 Appendix 2 – Page 61

Variable per day costs / offshore system £ / day Number required

Total (£)

Vessels

FSV 45000 1 45,000

Tow vessel 10000 1 10,000

Storage barge 5000 1 5,000

Equipment

Offshore boom 1000 1 1,000

Offshore skimmer 500 1 500

Transfer pump 180 1 180

Other

-

Port costs 2000 1 2,000

-

Persons Specialist offshore advisor FSV 475 3 1,425

-

Total variable costs / day / offshore system 65,105

Variable costs /day / offshore region £ / day Number required

Total (£)

Vessels Offshore tanker inc mob / demob / clean

20000 1 20,000

Total variable costs/ day/ region 20,000

Fixed costs / system £ Number Required

Total (£)

Mobilisation and Rehabilitation

Vessel prep costs 10000 1 10,000

Ship system to port 5000 1 5,000

Return system from port 5000 1 5,000

Recover / clean repair boom 5000 1 5,000

Recover clean repair skimmer 5000 1 5,000

Decontaminate FSV 10000 1 10,000

Decontaminate Tow vessel 10000 1 10,000

Decontaminate Barge 10000 1 10,000

Total fixed costs / system 60,000

Table 2-3 Offshore mechanical recovery costs.

_______________________________________________________________________________________________________


12.2.4 Nearshore mechanical recovery

Nearshore mechanical recovery systems will be deployed by smaller vessels than those used in offshore response. It is estimated that they would be operational for approximately 45% of the time (this is not based on metocean analysis but is only an estimate). When not in use they have been costed at 50% for standby rate. Nearshore mechanical recovery methods have been applied to 40 days of recovery, with multiple nearshore systems spread across a number of regions, dependent on the spill extents indicated by the modelling. They include standby and mobilisation costs for equipment. Estimated operational time has been assumed to remain the same across all scenarios, however, for the Northern North Sea and Central North sea scenarios, where beaching occurred only in Norway, uplift has been included. As in the offshore booming, costs for mobilization, demobilization, port costs, cleaning and specialist advisors have been considered (Table 2-4).

Variable per day costs / nearshore system £ / day Number required

Total

Vessels

Tow vessel 10000 1 10,000

Tow vessel 10000 1 10,000

Storage barge 2000 1 2,000

Equipment

Nearshore boom 500 1 500

Nearshore skimmer 500 1 500

Transfer pump 180 1 180

Other

-

Port costs 2000 1 2,000

-

Persons Specialist advisor 475 2 950

-

Total variable costs / day / offshore system 26,130

Variable costs /day / nearshore region £ / day Number required

Total

Vessels Storage barge, mob, demob, clean 15000 1 15,000

Total variable costs/ day/ region 15,000

Fixed costs / system £ Number required

Total

Mobilisation and Rehabilitation

Vessel prep costs 10000 1 10,000

Ship system to port 5000 1 5,000

Return system from port 5000 1 5,000

Recover / clean repair boom 5000 1 5,000

Recover clean repair skimmer 5000 1 5,000

Decontaminate tow boat 10000 1 10,000

Decontaminate Tow boat 10000 1 10,000

Total fixed costs / system 50,000

Table 2-4 Nearshore mechanical recovery costs.

_______________________________________________________________________________________________________


12.2.5 Protective near shore booming

Thirty sites were identified in the UK in the West of Shetland scenario, and 72 sites in the Moray Firth scenario. 72 sites were also applied in the subsequent northern North Sea and central North Sea scenarios, and uplift included on the basis that all beaching occurred along the Norwegian coast. The costs involved in protective booming include equipment rental, deployment of the booms by a trained workforce, the logistics of transport, marine activity and construction plant (e.g. crane) operations (Table 2-5). The costing takes account of the time and manpower to maintain the booming systems and to subsequently remove them. On average, each site has been assumed to require 50 days of maintenance, which reflects the period of time the resource under protection would remain at risk. Staff rotational costs and local accommodation has been taken into account.

_______________________________________________________________________________________________________


Costs to protect or demob NB 3 days to protect a site

£ / site / day

£/site ( 3 days per

site)

Number required per site. Site = 500 metres of protective booming Total (£)

Workforce

Install Demob

Controller 475 1500 1 1 3,000

Supervisors 475 1500 1 1 3,000

Drivers 200 600 1 1 1,200

Plant Operators 200 600 1 1 1,200

First Aid Person 200 600 1 1 1,200

Logistics Personnel 300 900 2 2 3,600

Booming specialists 375 1125 6 6 13,500

Equipment hire

Workboat 500 1500 3 3 9,000

Protection boom 20 metres

100 300 25 25 15,000

Ancillaries 10 30 25 25 1,500

Welfare Accommodation 100 300 13 13 7,800

Food 25 75 13 13 1,950

Transport Transport boom to and from site

2500 2500 1 1 5,000

Cleaning Cleaning boom costs 5000 5000 0 1 5,000

Total cost to protect and demob a site 71,950

Per site / per day costs to maintain £ / site /

day

Number required per site. Site = 500 metres of protective booming

Total (£)

Workforce

Maintain

Controller 475 1 475

Supervisors 475 1 475

Drivers 200 1 200

Logistics Personnel 300 2 600

Booming specialists 375 3 1,125

Equipment hire

Cars 50 8 400

Protection boom 20 metres

100 25 2,500

Workboat 500 1 500

Ancillaries 10 25 250

Welfare Accommodation 125 8 1,000

Food 25 8 200

Staff travel / rotation

100

8 800

Total costs per site per day to maintain 8,525

Table 2-5 Protection booming costs.

_______________________________________________________________________________________________________


12.2.6 Shoreline Clean-up

Table 2-6 details the breakdown of resources for the heavy oiling shoreline clean-up. The cost of these

resources for each substrate type, together with other breakdowns is shown in Table 2-7. Each of the 7 identified substrate types requires a different approach and different resourcing requirements in its clean-up. These have been determined for shorelines with heavy and light shoreline oiling for each type.

For the heavy oiling, 500 m

3 per 10km section has been applied. For light oiling, 25 m

3 per 10km section has

been applied. These figures are representative of typical oiling volumes for the high shoreline oiling and low shoreline oiling model results, respectively. In each case, equipment, personnel and a number of days of clean up activity have been determined for each substrate type. These have been multiplied against the total length (or, specifically, the total number of 10km sections) of each substrate type determined from the modelling and substrate assessment.

Exposed rocky

headlands and

wave-cut platforms

Man-made solid

structures and

boulder beaches

Fine to medium grained

sand beaches

Coarse-grained

sand beaches

Pebble/ gravel/ cobble

beaches

Tidal mud flats

Vegetated tidal flats

Workforce Variable per day / per 10km(500m

3)

£ / day Number required /10km coastline (500m3) oiling

General Workforce

Controller 475 1 1 1 1 1 1 1

Supervisors 450 1 1 1 1 1 1 1

Drivers 250 1 1 1 1 1 1 1

Plant Operators 250 5 5 5 5 5 1 1

First Aid Person 250 1 1 1 1 1 1 1

Logistics Personnel 250 1 1 1 1 1 1 1

Difficult Access Specialist 450 2 1 0 0 0 0 0

Caterers 150 2 3 3 3 3 1 1

Security 250 1 1 1 1 1 1 1

Clean up labour 200 10 30 40 40 40 6 6

Boat Handlers 250 2 2 1 1 1 2 2

Specialist OSR Contractor

Technical Advisors 475 1 1 1 1 1 1 1

Beach Master 375 1 1 2 2 2 1 1

Specialist Equipment Operators 375 1 1 1 1 1 1 1

Environmental advisors

Effects of the clean up strategy on marine life 450 1 1 1 1 1 1 1

Total numbers of personnel 31 51 60 60 60 20 20

Variable costs /person /day £ / day Number required /10km coastline (500m3) oiling

Meal and Clothing per

day per person

Meals 25 1 1 1 1 1 1 1

Accommodation 100 1 1 1 1 1 1 1

PPE (all ) 75 2 2 2 2 2 2 2

Number of days required to clean up a Unit 10 35 33 33 33 9 12

_______________________________________________________________________________________________________


When considering the difference between light and heavy oiling, the number of days required for the clean-up has been altered, rather than any alterations to the amount of equipment or personnel. This is because it would take the same amount of people and logistics to set up a shoreline cleaning operation regardless of the level of oiling but the time required to perform the clean-up would be reduced for a smaller volume. For the light oiling case, the same resources were applied but for a lower number of days. The approach taken to calculate shoreline clean-up costs – that of determining equipment for a 10km section and multiplying this across the full section of affected shoreline – has resulted in high, possibly unrealistic, quantities for certain items of plant, such as cranes. The figures have been adjusted to allow for this by capping this equipment at a reasonable quantity for supply in this region. This reduces the overall figure by £4 million for the high shoreline oiling case only. In the low shoreline oiling case, the required equipment fell below the capping level.

Table 2-6 Shoreline Clean-up Resources and Units Costs for Different Shoreline Substrates in the Heavy Oiling Case.

Exposed rocky

headlands and

wave-cut platforms

Man-made solid

structures and

boulder beaches

Fine to medium grained

sand beaches

Coarse-grained

sand beaches

Pebble/ gravel/ cobble

beaches

Tidal mud flats

Vegetated tidal flats

Workforce Variable per day / per 10km(500m

3)

£ / day Number required /10km coastline (500m3) oiling

General Workforce

Controller 475 1 1 1 1 1 1 1

Supervisors 450 1 1 1 1 1 1 1

Drivers 250 1 1 1 1 1 1 1

Plant Operators 250 5 5 5 5 5 1 1

First Aid Person 250 1 1 1 1 1 1 1

Logistics Personnel 250 1 1 1 1 1 1 1

Difficult Access Specialist 450 2 1 0 0 0 0 0

Caterers 150 2 3 3 3 3 1 1

Security 250 1 1 1 1 1 1 1

Clean up labour 200 10 30 40 40 40 6 6

Boat Handlers 250 2 2 1 1 1 2 2

Specialist OSR Contractor

Technical Advisors 475 1 1 1 1 1 1 1

Beach Master 375 1 1 2 2 2 1 1

Specialist Equipment Operators 375 1 1 1 1 1 1 1

Environmental advisors

Effects of the clean up strategy on marine life 450 1 1 1 1 1 1 1

Total numbers of personnel 31 51 60 60 60 20 20

Variable costs /person /day £ / day Number required /10km coastline (500m3) oiling

Meal and Clothing per

day per person

Meals 25 1 1 1 1 1 1 1

Accommodation 100 1 1 1 1 1 1 1

PPE (all ) 75 2 2 2 2 2 2 2

Number of days required to clean up a Unit 10 35 33 33 33 9 12

_______________________________________________________________________________________________________


Fixed costs /day £ /day Number required /10km coastline /500m3 oiling

General equipment and plant

JCB 300 0 5 5 5 5 0 0

Hymac 240 0 5 5 5 5 0 0

Bulldozer 300 0 5 5 5 5 0 0

Cranes 400 10 10 2 2 2 0 0

Tipper Trucks 400 0 0 10 10 10 0 0

Cement Mixer 50 0 0 0 0 20 0 0

Off Road Vehicles 100 10 10 10 10 10 10 10

8x8 150 1 1 3 3 3 0 0

Quad Bikes 100 0 10 10 10 10 0 0

Farm Tractors 200 3 10 10 10 10 0 0

Tank Trailers 24 3 10 10 10 10 0 0

Boats 600 2 10 10 10 10 10 10

Vacuum Trucks 450 0 10 10 10 10 5 5

Specialised Oil Spill

Equipment

Spades, Shovels, Rakes 5 100 200 200 200 200 100 100

Plastic Bags HD 1 1000 1000 1000 1000 1000 1000 1000

Container Booms (200m) 535 0 10 10 10 10 0 0

Skimmers (3) 300 0 10 10 10 10 0 0

Heavy Duty Pumps (3) 150 0 10 10 10 10 0 0

Sorbents 200 10 10 10 10 10 10 10

Temporary Storage 70 0 20 20 20 20 0 0

Hot Water Washers 60 0 5 1 1 1 0 0

Water Pumps 50 2 5 10 10 10 0 0

Detergent Spray Equipment 30 2 2 0 0 0 0 0

Gas Monitoring Equipment 60 1 1 1 1 1 1 1

Washing and cleaning

PPE / people Washing 25 10 30 40 40 40 6 6

Cleaning system for plant, decontamination unit with water processing etc 100 5 10 10 10 10 5 5

Site control

Ropes 5 10 10 10 10 10 10 10

Signs, Fencing, Barriers 50 10 10 10 10 10 10 10

First Aid Equipment 5 10 10 10 10 10 10 10

Sanitation (Portaloo) 75 10 10 10 10 10 10 10

Shelter 500 10 10 10 10 10 10 10

Tanks and tents 60 10 10 10 10 10 10 10

Table 2-7 Shoreline Clean-up Resources and Unit Costs for Different Shoreline Substrates in the Heavy Oiling Case.

_______________________________________________________________________________________________________


12.2.7 Wildlife clean-up costs

. The average cost per animal has been checked against costs from literature (Jessup and Mazet, 1999; Massey et al, 2005) and compares reasonably well. As a benchmark figure, wildlife costs have been reported as being between 1 and 2% of total clean-up costs, and the figures presented in this study agree with this (for high shoreline oiling cases). In the Northern North Sea and Central North Sea scenarios, wildlife costs have been uplifted to allow for oiling only on the Norwegian coastline (Table 2-8).

Costs per day costs / per Wildlife Centre £ / day Number required

£

Vets 750 3 2,250

Support staff 350 10 3,500

Staff accommodation 100 13 1,300

Staff welfare 25 13 325

Volunteer training 1 -

Rental and services 2000 1 2,000

Total per Wildlife Centre /day 9,375

Costs / day / centre to rescue recover animal releases to/from Rehab centre

£ / day

Number required

£

Manpower (5 teams of 2) 375 10 3,750

Transport , (car per team) 100 5 500

Air survey 2hrs flying / day 1000 1 1,000

Boat survey (5 team's) 1000 5 5,000

Manpower accommodation 100 10 1,000

Manpower food 25 10 250

Total per command centre / day 11,500

Treatment costs / animal £

Number treated

£

Oiled Seal 100 100 10,000

Oiled seabird 50 2000 100,000

Oiled otter 100 25 2,500

Total cost of all animals 112,500 Table 2-8 Breakdown of wildlife treatment costs.

_______________________________________________________________________________________________________


12.2.8 SCAT team, media liaison and surveillance

A shoreline clean-up assessment team of 18 persons have been costed in total, representing an appropriate level of resources for the spills considered. 20 persons have been included in order to cover media response and community liaison. Two general use aircraft have been included for the provision of daily surveillance flights to give real time information on the spill location and to assist in shoreline categorization duties. Personnel have been assumed to be on site for up to 50 to 60 days. It is assumed that all media and SCAT is to be initiated and conducted predominantly from the UK, therefore no uplift has been included.

Misc costs / per day £ / day Number required

Total

Liaison officers 400 10 4,000

Media responders 400 10 4,000

SCAT Team 500 18 9,000

Cars 50 38 1,900

General spotter and surveillance aircraft 4000 2 8,000

Total misc costs / day 26,900

Variable costs / person /day £ / day

Food 25 38 950


Total costs per day 4,750

Fixed costs

£

Travel to and from work location assuming 2 week rotation

3000 38 114,000

Total fixed costs 114,000

Table 2-9 SCAT and media liaison costs.

12.2.9 Disposal costs

The amount of additional material removed during shoreline clean-up varies according to type and ranges from zero for rocky shorelines to 10 times the original oil volume for sandy beaches. This additional volume is important when considering disposal costs. The total volume of oil as well as residual recovered material (PPE, substrate, seaweed etc.) was used for costing purposes. A summary of recovery success rates together with the expected percentage of residual material is shown in Table 2-10. This has been taken from the earlier studies and based on inputs from specialist oil spill response contractors (BMT ARGOSS, 2002 and BMT ARGOSS, 2006). The density of the Schiehallion oil used for the waste volume is 902 kg/m

3. In reality,

weathering of the oil will increase this density, perhaps by 5-10% in this case. Given other uncertainties in the figures, particularly regarding the cost per tonne of disposal, as well as the large volumes of additional waste material, this hasn’t been taken into account. The formulae used to derive the disposal costs are shown below:

_______________________________________________________________________________________________________


CT = (Toil + Tres)Dtotal

Toil= Voil × ρoil × Roil

Tres= Vres× Twaste

CT = total cost (£) Toil = tonnage of beached oil Voil = volume of oil (m3) Tres = tonnage of residual shoreline material collected during clean up ρoil = density of oil (kg/m3) Dtotal = total disposal rate (£ per tonne) Roil = the proportion of oil recovered for each shoreline type (Table 31) Tres = tonnage of residual shoreline material Vres = volume of residual shoreline material (m3) per 50 m3 of shoreline Twaste = tonnes of waste produced by clean-up of each shoreline type (Table 31)

Shoreline Classification Clean up capacity of 50m

3 (crude)

from 1km of shoreline

Exposed rocky headlands and wave-cut platforms

No oil recovery and minimal waste produced (less than 1 tonne, mainly sorbents)

Man-made solid structures and boulder beaches

55% recovery and approx 30 tonnes of waste produced

Fine to medium grained sand beaches 90% recovery and approx 500 tonnes of waste produced

Coarse-grained sand beaches 90% recovery and approx 500 tonnes of waste produced

Pebble/gravel/cobble beaches 78% recovery and 450 tonnes of waste produced

Tidal mud flats No oil recovery and minimal waste produced (less than 1 tonne, mainly sorbents)

Vegetated tidal flats No oil recovery and minimal waste produced (less than 1 tonne, mainly sorbents

Table 2-10: Summary of clean up capacity for each shoreline type (Figures relate to the results of mounting a full clean up operation and are not time-specific. Percentages represent the final recovery rates). Based on inputs from specialist spill contractors in previous study (BMT ARGOSS, 2006).

The volume of oily material and remote location of some of the shorelines will necessitate storage in temporary storage facilities before waste it can be transported to a site where it can be processed. Following the Braer incident, excavated lined pits were dug in Shetland and these have been included in the basic costing for this study. The number of pits needed was estimated to be 5 (two sites each on Orkney and Shetland and one site in North Scotland) because of the transportation logistics. Weathered oil reaching Norway is predicted to be scattered over a wide area and no temporary storage pits have been considered here. It should be noted that there is significant uncertainty in the costs for oily waste disposal, as disposal will present a logistical challenge. Estimation of disposal costs followed discussions with a large waste disposal company (personal communication, 2010). From these discussions, it was clear that disposal would be considered on a case-by-case basis but an average disposal cost of £500 per tonne was estimated and has been used in this study. The figure has been uplifted by 50% for waste disposal in Norway. This figure considers the variations in contaminated material type, the different disposal methods (e.g. direct disposal, incineration or stabilisation), transportation and any gate charges. Disposal costs also consider the success rate of recovery and the ability to separate beached oil from the underlying substrate.

_______________________________________________________________________________________________________


The types of wastes generated by oil spill clean-up operations at sea and on shore are detailed in Figure 3-1. In situ burning has not been considered in this study. The other activities leading to oily waste are offshore skimming and shoreline clean-up. Waste from dispersant operations has been assumed to be minimal in comparison and not included in the calculations.

Figure 3-1 Oil spill response strategies and their effect on waste generation (IPIECA/Energy Institute/Cedre, 2004).

12.2.10 Economic Impact

The most widely available economic data regarding businesses in these sectors is industry revenue, which is generally available through industry or government statistics, and this is the data used in this report. The matters affecting compensation are summarised as: Shellfish farms

The average revenue for one year of operations has been applied

Data has been taken from three years of results (Marine Scotland) to give high, medium and

low results

The medium revenue is £70,400 per farm and this is the figure used for the calculations in

sections 7 and 9.

Only UK farms have been included. Norwegian farms were determined to suffer no impact

10% of revenue has been included for cleaning of equipment

_______________________________________________________________________________________________________


Salmon farms

The annual tonnage of salmon produced by affected farms was estimated

Typically, two year’s salmon stock would be affected (one year maturing, one year ready for

sale)

A market price per tonne of £1200 for large salmon and £690 for medium salmon was

determined and used to provide upper and lower figures for revenue loss

Fisheries

The extents of fisheries ground closures over a 3-month period has been determined.

The value of UK catches within these regions over this period has been determined as the

compensation value

The lower figures are based on closure of the same areas over three months but outside of

the pelagic fishing season (i.e. no pelagic costs). The higher figures consider a closure of the

fishing grounds for a whole year.

Tourism

Statistics on tourist expenditure has been applied for the region.

As an estimate of the net impact throughout the duration of the spill and for the year

following, one month’s loss of this revenue has been applied. During the incident, it is

expected that revenue may be maintained to an extent through expenditure by clean-up

staff.

12.2.10.1 Claims from impact on aquaculture

In 2002 and 2006, the oil spill liability studies conducted for OPOL used a fixed compensation figure of £600,000 per fish farm or aquaculture site, based on analysis of claims reported to the International Oil Pollution Compensation (IOPC) fund. Additional research was conducted as part of this report to identify and distinguish typical annual incomes for fish farms and shellfish aquaculture sites in this region. The sources for figures applied have been obtained from reports issued by Marine Scotland Science (2010a and b) and SAC (2010).

12.2.10.2 Fish Farms

To arrive at a value for active salmon farms the annual production figures (Marine Scotland Science, 2010a) in the impacted regions were multiplied by a market price per tonne of salmon produced in the UK. The market value was taken from the Scottish Agriculture College’s (SAC) estimated price for large and medium salmon (SAC, 2010), which are typical sizes sold from these farms. The total income for the geographic region was then divided by the number of active sites in the region (Pers. Comm. with Marine Scotland, 2010) to give an average income per salmon farm. Ten percent of the annual value per active salmon farm was added for clean-up of the equipment and cages (this figure is an estimate as no actual data could be found or supplied by those in the industry). In this study, two years loss of salmon has been assumed. It was not possible to determine the proportions of medium and large salmon sold from affected fish farms. Therefore, a low value was estimated by using the total value of losing two years of medium sized stock (£650 per tonne). A middle value was estimated using 1 year of large sized salmon’s value (£1200 per tonne) and 1 year of medium (£650 per tonne) salmon. The maximum value was calculated from the loss of two years of large salmon stock.

12.2.10.3 Shellfish

_______________________________________________________________________________________________________


The financial impact of the oil spill scenario on shellfish farms was calculated based on the average amount of product sold to the table (for consumption) in the area from 2007 to 2009, multiplied by the average price paid for the product (Table 2-11) (Marine Scotland, 2010b; Marine Scotland, 2009; Fisheries Research Services, 2008). Costs regarding equipment clean-up and replacement were discussed with the Scottish Environmental Protection Agency and Scottish Sea Farms but a value could not be determined. An estimate of 5% of the total value has been applied. The lower cost of clean-up estimated for these businesses, compared with the fish farms, reflects the smaller amount of equipment employed.

Shellfish Type Value

Mussels £950 / tonne

Pacific Oyster £0.36p / shell

Native Oyster £0.34p / shell

Queen Scallop £0.08p / shell

Scallop £0.70p / shell

Source: Marine Scotland 2010, 2009 and Fisheries Research Services 2008. Table 2-11 Average Value of Shellfish Production in Affected Areas (2007-2009)

The range of compensation values (best case and “worst-case”) including clean-up and replacement costs were based on the highest and lowest production values from the last three years. The figures were applied to all shellfish farms for one year, although it is be uncertain for how long shellfish farms would be affected.

12.2.10.4 Claims from impacts on Fishing

The cost of the impact on fishing was calculated primarily on the basis of the value of the fishing ground likely to be affected together with the type of catch. The previous financial liability studies have assessed the major fishing ports affected together with the type of catch (BMT Cordah, 2002 & 2006). This method was not followed in this study as it was felt that the ports directly affected by the spill would not necessarily correlate to the value of the fish landed from the impacted region. Instead, closure of fishing areas has been considered and the loss of revenue from these areas calculated using data from Marine Scotland. Due to the transient nature of the fishing industry and the ability to move away from an area it is unlikely that fishing equipment and vessels will be directly in contact with the oil and therefore no compensation for clean-up costs have been included. Although the oil spill could affect spawning and nursery areas and in turn have a detrimental effect on future catch size the potential financial impact has not been included in this assessment. This is because the actual affect the spill could have on future stocks is too uncertain. The approach taken has considered a situation where fishing grounds are shut for three months from the point of the oil reaching an area. This is based on the situation seen in the same region following the Braer oil spill in 1993. In this case, the sea fisheries were opened in April after being shut in January (Perry, 1993). Discussions with fisheries scientists at Marine Scotland were undertaken concerning whether the assumption of a three month closure was reasonable and the potential effects of the oil discharged and spreading subsurface. Whilst the oil spill may have little effect on sea fish in the deep waters, fishing grounds will generally be closed as a precautionary measure and to help maintain public confidence in the quality of fish being marketed. Therefore a closure of three months was considered reasonable. The predicted extents of the modelled oil slick were laid over the fisheries value maps for demersal, pelagic, Nephrops and shrimp, and other shellfish. These maps, available from Marine Scotland (Marine Scotland,

_______________________________________________________________________________________________________


2010c), show the range of value (based on UK landings and landings by UK vessels overseas) for different areas in the region, and for the different fish types. The extent and affected grid cells were determined at 30 day intervals for the five months following the spill. An example of an overlay for the West of Scotland scenario of the fishing grounds impacted between days 30 to 60 of the spill scenario is shown in Figure 2-1. The value of landings for each species in each month has been calculated by adding the mean (annual) values in the affected cells for each month and dividing these by twelve. A different approach was used for pelagic species. In this case, the season typically lasts only two months in this region and therefore, the annual value in the cells predicted to be affected has been included on the assumption that the slick is present during these months. In addition to the medium value case above, upper and lower values have also been calculated. The lower figure is based on closure of the same areas over 3 months but outside of the pelagic fishing season (i.e. no pelagic costs). The higher figure considers a closure of the largest extents of the fishing grounds for a whole year. The value for the area affected was calculated from the mean value for the grid cells affected. There are limitations in the extent of the maps and they also exclude fisheries in other nations (primarily Norway in this instance). However, the maps cover most of the affected area and, in particular, cover the most heavily affected parts and the most valuable fishing grounds. They include areas adjacent to Norway but only show the value to UK fisheries of these areas.

_______________________________________________________________________________________________________


Figure 2-1: The spatial extent of the impacted fishing grounds from day 30 to day 60 for the West of Shetland scenario.

_______________________________________________________________________________________________________


12.2.10.5 Claims from impacts to tourism

Considerations of costs due to impact on tourism are largely defined by ‘loss of amenity’. The loss of amenity is transmitted to a loss of visitors to hotels, other accommodations and attractions in seaside locations. None of the tourism claims made following the Braer oil spill were compensated, apart from those relating to property damage (IOPC, 2010). However, in other oil spill events claimants have been compensated if they could prove that they have incurred a loss due to the spill (IOPC, 2004). The total annual expenditure by tourists has been used to estimate the possible economic impact resulting from for the loss of tourism due to the oil spill. The total expenditure by tourists in Orkney and Shetland in 2009 was published in the visitor survey reports for Orkney and Shetland (AB Associates, 2006 & 2010, Section 4.2.6). The total annual expenditure by tourists in North Scotland in 2009 was published in Northern Scotland Tourism Report (Visit Scotland, 2009a, Section 4.2.6). The total annual expenditure in the Highlands was estimated as £436m. However, utilizing this method would be an over estimate of the loss of tourism income generated in North Scotland as a very small area of the region would be affected by the oil spill. In order to establish the tourism spend in Caithness (North Scotland) the average expenditure per trip was multiplied by the number of beds in Caithness to estimate the tourism loss in the region (GTS, 2010). The total loss to these areas could be offset by revenue from oil spill response personnel who would be staying in the region during the oil spill clean-up. Therefore, the total compensation for tourism has been limited to one month’s compensation. It is also noted that no tourism loss was compensated during the Braer.

_______________________________________________________________________________________________________


12.3 References

AB Associates (2006). Shetland visitor survey 2005/ 2006. Shetland Enterprise. AB Associates (2010). Orkney visitor survey 2008/ 2009. HIE, Orkney Islands Council AB Associates Ltd & Visit Orkney. BMT (2002). OPOL Oil Spill Liability Study, Report No. 17500/01DEFRA (2005). BMT Marine Information Systems (now BMT ARGOSS), First Floor, 3700 Parkway, The Solent Centre, Solent Business Park, Fareham, Hampshire, PO15 7AL. BMT (2006). OPOL Oil Spill Liability Study. BMT Cordah Ltd/S.OPO.001/2006, BMT Cordah (now BMT ARGOSS), First Floor, 3700 Parkway, The Solent Centre, Solent Business Park, Fareham, Hampshire, PO15 7AL. BMT (2007). RP 549: Development of a Protocol for the Treatment and Disposal of Oily Waste in the UK. Task 4: Designing infrastructure for the handling of large quantities of oily waste. A guidance document for the UK. BMT Cordah

Ltd.http://webarchive.nationalarchives.gov.uk/20100927152143/http://www.mcga.gov.uk/c4mca/final_report_rp_549_march_2007_task_4-2.pdf. Accessed December 2010. BP (2010) Claims and Government Payments. Gulf of Mexico Oil Spill Public Report – 16

th December 2010.

Curtis, H., Brodie, C., Longoni, E., 2010. SEAFISH 2008 Economic Survey of the UK Fishing Fleet. DBI Alisa (2010). Oil spill waste minimisation and management plan. Shetland., DBI Ailsa and BP Sullom Voe

terminal. http://www.shetland.gov.uk/ports/contingencyplans/documents/ OilSpillWasteMinimisationandManagementPlan.pdf. Accessed December 2010.

Eurostat website (2010) http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ (Viewed

December 2010). Fisheries Research Services (2008). Scottish shellfish farm production survey. 2007 Report. The Scottish Government. Food Standards Agency (2000) “Ban lifted on mussels and lobsters in Braer Shetland exclusion zone”. Press

release 16th May 2000, available at http://www.food.gov.uk/news/ pressreleases/2000/may/banlifted Grey, C. (1999) The Cost of Oil Spills from Tankers: An Analysis of IOPC Fund Incidents. The International Oil Spill Conference 1999, 7-12 March 1999, Seattle, USA. ITOPF, London GTS (UK) Data Processing Centre; Scottish Tourism Economic Activity Monitor (STEAM). IOPC (2000) Incidents Involving The 1971 Fund – Braer. IOPC Executive Committee, 63

rd Session. International

Oil Pollution Compensation Funds, London, UK. Available online at http://www.iopcfund-docs.org/ds/pdf/71exc63-3_e.pdf (Accessed December 2010) IOPC (2003). The lOPC Funds’ 25 years of compensating victims of oil pollution incidents. The international oil

pollution compensation funds. http://en.iopcfund.org/npdf/jub_en.pdf. Accessed December 2010. IOPC (2004). International oil pollution compensation funds annual report 2004. Report on the activities of the

international oil pollution compensation funds in 2004. http://www.iopcfund.org/npdf/AR09_E.pdf. Accessed December 2010. IOPC (2009a) Annual Report 2008. International Oil Pollution Compensation Funds, London, UK

_______________________________________________________________________________________________________


IOPC (2009b) Incidents Involving the IOPC Funds October 2009. International Oil Pollution Compensation Funds, London, UK. IPIECA/Energy Institute/Cedre (2004) International Petroleum Industry Environmental Conservation Association 5th Floor, 209–215 Blackfriars Road, London, SE1 8NL, United Kingdom.

www.ipieca.org/system/files/publications/Vol12_WasteManagement.pdf. Accessed December 2010. ITOPF (2010) Cost of Spills. The International Tanker Owners Pollution Federation Limited. http://www.itopf.com/spill-compensation/cost-of-spills/ Jacobsson, M.,(1993). The Braer, Legal aspects of a major oil spill. International Oil Pollution Compensation Fund. London Jessup, D and Mazet, J (1999) Rehabilitation of Oiled Wildlife: Why Do It? Proceedings of the 1999 International Oil Spill Conference, Seattle, Washington. Available online at:

http://www.iosc.org/papers/01817.pdf (Viewed December 2010) Marine Management Organisation, 2009. UK sea fisheries statistics 2009. Marine Scotland Science (2009) Scottish shellfish farm production survey. 2008 Report. The Scottish Government. Marine Scotland Science (2010a) Scottish fish farm production survey. 2009 Report. The Scottish Government. Marine Scotland Science (2010b) Scottish shellfish farm production survey. 2009 Report. The Scottish Government. Marine Scotland Science (2010c) Value maps for demersal, pelagic and shellfish fisheries based on all landings into the UK and all landings abroad by UK vessels in 2009. The Scottish Government. Massey, J, Hampton, S and Ziccardi, M (2005) Cost/Benefit Analysis of Oiled Wildlife Response. Proceedings of the 2005 International Oil Spill Conference, Miami, Florida. Available online at

http://www.iosc.org/papers/IOSC%202005%20a401.pdf (Viewed December 2010) Natural Resources and the Environment (2008). Land and land use. Statistics Norway. OPOL (2010) The OPOL Agreement. Offshore Pollution Liability Association Limited, Bank Chambers, Ewell, Surry, UK. Ordnance Survey (2008). Ordnance Survey of Northern Ireland mapping. Perry, R., (1993) The Braer oil spill. Proceedings of the 1995 International Oil Spill Conference, Long Beach,

California. Available at http://www.iosc.org/papers/00193.pdf (viewed December 2010). SAC (Scottish Agricultural College) (2010) SAC's Farm Management Handbook.

http://www.sac.ac.uk/consulting/services/f-h/farmdiversification/database/ fishfarming/salmon.

Accessed December 2010. SKEMA (2011) SKEMA Consolidation Study Evaluation of methods to estimate the consequence costs of an oil spill. SEVENTH FRAMEWORK PROGRAMME SST–2007–TREN–1 SST.2007.2.2.4. Maritime and logistics co-ordination platform SKEMA Coordination Action “Sustainable Knowledge Platform for the European Maritime and Logistics Industry” Visit Scotland (2009a) Tourism in Northern Scotland 2009. Highlands & Islands, Aberdeen & Grampian, Orkney & Shetland Factsheet.

_______________________________________________________________________________________________________


Visit Scotland (2009b) Scottish accommodation and occupancy survey 2009. Final Report 27 May 2010. White, I.C. & Molloy, F. (2003) Factors that Determine the Cost of Oil Spills. International Oil Spill Conference 2003, Vancouver, Canada, 6-11 April 2003

_______________________________________________________________________________________________________


13 APPENDIX 3 – Extrapolation of cost estimates to a 90 day blowout

The UK has a capping capability that can be deployed in 30 days to arrest a blowout, for the small proportion of blowouts that are not arrested by other means within this time. Nevertheless the costs of a longer duration, 90 days, have been estimated and are summarised here. 90 days is the typical length of time taken to drill a relief well to arrest the flow from a blowout. The method used in extrapolating the fate of oil over this longer period is approximate and involves the use of three consecutive and overlapping OSIS model runs that together cover the 90 day period. The results obtained are indicative only, and considered to be conservative. In the below tables, the costs for remedial measures and economic impact have been rounded to two significant figures. The totals, however, were calculated using the unrounded costs which accounts for the difference between the totals and the costs stated for remedial measures and economic impact.

13.1 West of Shetland

Economic impact Low High

Shellfish £2.3m £4.0m

Salmon Farms £39m £68m

Fisheries £37m £196m

Tourism £2.4m £6.4m

Total £81m £270m

Low High



Table West of Shetland - Summary of costs for 90-day oil spill. Rate of £1: $1.6 has been used.






£58m £58m


£15m £15m

Command centre £14m £14m



Disposal £23m £62m

Total £180m £280m

_______________________________________________________________________________________________________


13.2 Moray Firth






£57m £57m


£36m £36m





Total £230m £330m


Shellfish £2.9m £3.4m

Salmon Farms £22m £39m


Tourism £15m £28m

Total £73m £200m

Low High



Table Moray Firth - Summary of costs for 90-day oil spill. Rate of £1: $1.6 has been used.

_______________________________________________________________________________________________________


13.3 Northern North Sea






£79m £79m


£54m £54m





Total £220m £240m


Shellfish NA NA

Salmon Farms NA NA

Fisheries £4.3m £42m

Tourism NA NA

Total £4.3m £42m

Low High



Table Northern North Sea - Summary of costs for 90-day oil spill. Rate of £1: $1.6 has been used.

_______________________________________________________________________________________________________


13.4 Central North Sea






£79m £79m


£54m £54m





Total £220m £230m


Shellfish NA NA

Salmon Farms NA NA


Tourism NA NA

Total £17m £67m

Low High



Table Central North Sea - Summary of costs for 90-day oil spill. Rate of £1: $1.6 has been used.

_______________________________________________________________________________________________________


14 APPENDIX 4 – Breakdown of costs for major European shipping incidents

Braer, Shetland UK, 05/01/1993 Costs (GBP)

Clean up 593,883

Fishery related 38,538,451

Tourism related 77,375

Farming related 3,572,392

Other damage to property 8,904,047

Other loss of income 252,790

Total 51,938,938

Source: IOPC, 2009a

Table 1-2: Breakdown of associated costs for the Braer incident

Sea Empress, Milford Haven UK, 15/02/1996 Costs (GBP)

Clean up 22,773,470

Other damage to property 443,972


Tourism related 2,389,943

Other loss of income 1,044,785

Total 36,806,484

Source: IOPC, 2009a

Table 1-3: Breakdown of associated costs for the Sea Empress incident

Erika, Brittany France, 12/12/1999 Costs (Euros)

Clean up 31,887,782


Property damage 2,556,905

Tourism 76,094,076

Other loss of income 8,387,521

Total 129,659,307

Source: IOPC, 2009a

Table 1-4: Breakdown of associated costs for the Erika incident

_______________________________________________________________________________________________________


Prestige, Spain, 13/11/2002 Costs (Euros)

Spain

Clean-up/preventive 3,011,744*

Property damage 2,066,103*

Mariculture 20,198,328*

Fishing and shellfish gathering 3,610,886*

Tourism 688,303*

Fish processors/vendors 20,830,377*

Misc 1,775,068*

Government 968,524,084*

Subtotal 1,020,704,893*

France

Clean-up/preventive 10,512,569*

Property damage 87,772*

Mariculture 2,336,501*

Shellfish gathering 116,810*

Fishing boats 1,601,717*

Tourism 25,166,131*

Fish processors/vendors 301,446*

Misc 2,029,820*

Government 67,499,154*

Subtotal 109,651,920*

Portugal

Clean-up 2,189,923

Subtotal 2,189,923

Total 1,132,546,736

Source: IOPC, 2009a *Un-settled. The IOPC 2009 Incidents Report (IOPC, 2009b) indicates that the total value of admissible claims is likely to be around €573,000,000, of which the majority are government claims relating to remedial measures and onward claims for compensation already paid by those governments. A large proportion of the remedial measures claims are considered technically unreasonable by IOPC, as is some of the compensation already paid by governments.

Table 1-5: Breakdown of costs and claims for the Prestige incident (largely unsettled)

Oil & Gas UK Aberdeen3rd FloorThe Exchange 262 Market StreetAberdeen AB11 5PJTel: +44 (0)1224 577250Fax: +44 (0)1224 577251

Oil & Gas UK London6th Floor EastPortland HouseBressenden PlaceLondon SW1E 5BHTel: +44 (0)20 7802 2400Fax: +44 (0)20 7802 2401

Email: [email protected]: www.oilandgasuk.co.uk

Copyright © The United Kingdom Offshore Oil and Gas Industry Association Limited trading asOil & Gas UK and The Offshore Pollution Liability Association Limited February 2012.

OPOLBank Chambers29 High StreetEwellSurrey KT17 1SBTel: +44 (0)20 8786 3640Fax: +44 (0)20 8786 3641

Email: [email protected]: www.opol.org.uk

oil spill cost study - opol financial limits

Documents