By Magdalena A K Muir, Advisory Board Member, Climate and Global Change
The oil price collapse has been bad news for nearly every company involved in the offshore hydrocarbon industry, but one group that could actually benefit from it are specialist decommissioning companies. For these companies there is an opportunity to be part of removing the huge tonnage of hydrocarbon infrastructure that exists in the North Sea. With oil prices forecast to remain low, life extension work that has kept many North Sea platforms producing long past their design life no longer makes commercial sense. As decommissioning occurs, the costs, innovation, suitable approaches and environmental implications also need to be considered.
The offshore decommissioning process within the area around the UK, better known as the United Kingdom Continental Shelf (UKCS), and the other parts of the North Sea that belong to Norway, Ireland, The Netherlands, Belgium, Germany, Denmark and Sweden are governed by the Oslo Paris Convention, also called “OSPAR”. Each of these countries has its own internal legislation regarding the decommissioning process and the taxation applied to it.
The picture below from the Decom website shows the different decommissioning options currently used to decommission an offshore platform. With regards to the North Sea sector, according the current OSPAR 98/3 regulation the only possible option regarding the substructure is the total removal.
Per the Decom, the rig to reef program is considered to be more economic and environmental friendly. Under this approach, the structure is not removed entirely from the sea, with four main techniques:
a)Leaving the structure in situ
b)Sinking the structure
c)Cutting the upper part of the structure at 85 feet below the sea level and placing the remaining part on the sea bed
d)Towing the entire structure to another site and sinking it
Per Scottish Enterprise’s Decommissioning in the North Sea: Review of Decommissioning Capacity report, projected North Sea decommissioning activity estimates vary, with the most conservative estimates predicting the market will require over £30bn of expenditure before 2040 in the UK Continental Shelf alone. As ageing assets reach the end of their economically useful life it is expected that the next 5 to 10 years will see a significant increase in activity, increasing up to an estimated annual spend in excess of £2.5bn per annum.
Unlike the other countries in the report, the UK will see reasonably high levels of activity throughout the forecast period. Costs could exceed $50 billion (bn) using current removal methods, or $43bn if alternative approaches are utilised. This $7bn saving is due to the number of extra-large platforms that will require removal, which would lead to high costs using current techniques. The most common decommissioning method is reverse installation and while this is well established and safe, it is time consuming, resulting in high costs. Lifts could be much quicker, lowering offshore costs substantially. 146 platforms could be removed from the UK during 2019-2026 – 51% of all UK platform removals over the forecast. This is due to the high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields. However, many of the largest platforms will remain in place until the 2030s, mainly due to tiebacks that have increased production life.
An practical example of the scope and nature of these offshore activities is the BP Decommissioning Programme, which has been approved by the UK government in 2013. The Miller field ceased production in 2007 and BP has already completed the first phase of decommissioning, involving well abandonment and topsides clean up. The pipelines which were used to export oil and gas from the Miller installation have been flushed clear of hydrocarbons and are being left in place for potential future use. The detailed decommissioning programme contains proposals for dealing with the topsides, jacket, and drill cuttings pile. he UK Government approved the decommissioning programme in December 2013.The Miller field is situated 270km NE of Aberdeen, in Blocks 16/7b and 16/8b, in the Central North Sea. BP is the field operator and partners are ConocoPhillips and Shell.
Decommissioning in the North Sea : Review of Decommissioning Capacity (Scottish Heritage, October 2014)
Decom North Sea webpages http://decomnorthsea.com/ and http://decomnorthsea.com/decom-explained/market-reports
BP Miller Decommissioning Programme, http://www.bp.com/content/dam/bp-country/en_gb/uk/documents/Miller_Decomm_Programme.pdf
Offshore decommissioning ‘a new beginning for North Sea industry’
Douglas-Westwood’s new North Sea Decommissioning Market Forecast 2016-2040
Decom Offshore 2016 Conference, May 25, 2016