Skip to main content

Scale of North Sea decommissioning market revealed

Published by , Editor
Oilfield Technology,


By 2040, investment of around £30 billion is expected in the UK Continental Shelf (UKSC) on decommissioning North Sea oil and gas projects according to a new report commissioned by Decom North Sea and Scottish Enterprise.

To capitalise on this significant opportunity, the report, which was prepared in partnership with engineering, technology and design consultancy Arup, highlights a number of key areas for industry to consider.  These include talent attraction, innovation and contracting/procurement strategies.

Scottish Enterprise international sector head for oil and gas, David Rennie, said: “Decommissioning is highlighted as a key opportunity for the supply chain in Scotland’s oil & gas strategy.  With an increasing number of assets approaching end of life, we recognise we need to ensure the supply chain is prepared to meet the challenges this presents.

“This report identifies key capacity constraints and we will continue to work closely with Decom North Sea and industry to help develop capacity and raise awareness of these and other opportunities to meet our decommissioning needs.”

Decom North Sea chief executive, Nigel Jenkins added: “A principal role of Decom North Sea is to facilitate supply chain collaboration to reduce the cost of decommissioning. This report provides an invaluable insight into the potential resource constraints which will be a significant benefit to our members and stakeholders.”

The report draws upon the experience and expertise of a number of significant firms currently operating within the North Sea decommissioning market. It considers available capacity, investment lead time, investment commitment, pressures/ synergies from other industries and existing capability. The report focuses on key areas of the supply chain where there may be significant resource constraints including:

  • Rigs/rigless abandonment resources.
  • Removal vessels for topsides and substructure.
  • Ports/harbours/yards for recycling.
  • Skilled engineering and operational resources serving all aspects of the sector.

Clare Lavelle, Scottish Energy Consulting Lead at Arup commented: “The decommissioning market will require upwards of £30 billion of expenditure before 2040 in the UKCS. This offers a significant socio-economic opportunity in terms of job creation in the Scottish, UK and European supply chain, and a foundation from which North Sea based firms can export expertise to other parts of the world. To take full advantage of this opportunity, the industry must build on its existing capacity and capability to service the complex and demanding nature of decommissioning work in the North Sea.”

Key considerations from the report include:

  • Attracting skilled workers and passing on knowledge - annual average decommissioning activity is predicted to double over the next decade, indicating a need to substantially grow the workforce capability. A significant proportion of the 271 000 people directly employed within the O&G industry across the UK, Norway and Denmark are likely to have applicable or transferrable skills to support decommissioning. However, the report suggests that this market is not perceived as interesting or as financially rewarding as the Exploration & Production (E&P) market. As a result, it is likely to be vulnerable to competition from North Sea and global E&P markets. The report also highlights the importance of transferring expertise and knowledge by older workers onto new recruits.
  • Driving innovation, driving down costs and regulation - innovation can play a role in delivering decommissioning in a more cost effective manner; for example there are a significant number of wells that could be abandoned using a rigless solution if technology innovation was stimulated. However, the ‘stop/start’ nature of the industry and the lack of certainty over timing of decommissioning programmes are seen as barriers to investment. The report highlights that the nascent market is at a stage where it can incorporate lessons learnt along with developing new approaches to reduce costs.
  • Contracting and procurement strategy - the decommissioning market is inherently different to that of E&P, so procurement strategies need to become significantly distinct. Delays in E&P impact the timing of subsequent revenue flows and programme drivers, resulting in an industry that has a peaking profile. For decommissioning, programme delays defer capital expenditure and often have a reduced impact on project economics. As a result, operators are likely to have higher flexibility to manage procurement and programme decisions, and are unlikely to procure in peak periods, flattening the peaks and troughs within the decommissioning market.

The report also highlighted the need to shift procurement strategies away from focusing solely on providers with long-term experience within the industry and to include new entrants to the supply chain who can introduce innovative methods, reduce costs, and broaden the supply chain market.


Adapted from a press release by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/exploration/10102014/scale-of-north-sea-decommissioning-market-revealed/

You might also like

 
 

Embed article link: (copy the HTML code below):


 

This article has been tagged under the following:

Oil & gas news