Economic analysis of disposal of drill cuttings from offshore oilrigs contaminated with oil-based mud (OBM)
Summary and conclusions
This report is a cost-benefit analysis of various methods of treatment and disposal of oil-contaminated drill cuttings from off shore oil operations in the North Sea. The cuttings contain oil and heavy metals.
In Denmark approx. 5-8000 tonnes of oil-contaminated cuttings have to be treated and disposed of every year.
Three alternative methods for treatment and disposal of the cuttings have been examined:
 | Alternative 1: Transfer to shore for recycling and landfilling |
| Alternative 2: Re-Injection at the oilfield |
| Alternative 3: Re-Injection at another oilfield |
Alternative 1. The cuttings are shipped to shore and then transferred by truck to an enterprise on the island Fyn for further treatment. The oil is recovered and most of the remaining waste is landfilled, while the rest is treated at Kommune Kemi. The recycled oil can be used as drilling oil for drilling operations.
Alternative 2. The cuttings are slurrified and re-injected under the seabed on location, i.e. at the relevant oilfield.
Alternative 3. The cuttings are transferred to another oilfield for re-injection under the seabed. This method could be relevant because there should be an annulus available to inject the cuttings into, and this should fulfil certain geological requirements.
The analysis shows the economic consequences for each of the affected parties. The two most affected parties are the oil companies and the recycling firm. The costs for the oil companies are DKK 1930, 930 and 1446 per tonne for alternatives 1 to 3 respectively, cf. table 1. The recycling company has a net revenue of DKK 602 pr. tonne in alternative 1.
Ship to shore (alternative 1) will cost the oil companies another DKK 5-8 million per year compared to re-injection at the well.
The welfare-economic analysis shows the impact on society as a whole. The welfare-economic costs include the monetary value of the environmental effects. However, it has only been possible to value the emissions to the air from the energy consumption, i.e. emissions of CO2, SO2, NOx, HC, CO and PM10 from transport (by ship and by truck) and from the re-injection process and the process at the recycling firm. The important environmental consequences for the sea from the oil content and the heavy metals content are not included in the figures, but are only measured in tonnes. This is due to the lack of prices available for these environmental impacts.
With these points in mind the welfare-economic costs for the three alternatives are DKK 1666, 1170 and 1793 per tonne respectively, cf. table 2. Re-injection at the well is the cheapest method, followed by the ship-to-shore method, while the most expensive method is re-injection at another oilfield. The long-term risks connected with the storage of oil and heavy metals under the seabed should be borne in mind. Furthermore, the fact that re-injection is an irreversible decision should be considered as it is not possible to retrieve the waste once it has been injected.
Society will have additional costs of approx. DKK 3-4 million per year for shipping to shore instead of re-injection at the well. However, the potential environmental risk for the sea is avoided.
Some sensitivity analyses have been made where central parameters have been changed in order to investigate the impact on the results. The following parameters have been changed: interest rate (social time preference rate), sales price of recycled oil, price of environmental effects, and the transport on land (no transport on land at all and transport by train instead of by truck). The sensitivity analyses show that the ranking of the three alternatives seems quite stable and not very sensitive to change. The most realistic variation in the costs is only +/- DKK 100 per tonne.