Forecasts suggest that decommissioning work valued at somewhere between £15 billion and £16 billion will be performed in the UK alone over the next decade. Globally, the figure is expected to be several times higher.
We had anticipated that 2020 would be the year in which the pace of growth in the UKCS market would pick up significantly – OGUK’s Decommissioning Insight 2019 report had predicted that as many as 62 fields would host decommissioning activity this year – but the reality has been very different.
Our own market assessment at Aquaterra Energy suggests around 70% of planned work has been deferred (in part or entirely) and 10% cancelled; leaving only 20% to go ahead. The COVID-19 pandemic and the low oil price have of course been the twin reasons behind this slump; the former has posed very significant challenges to project execution, while the latter obviously changes the economic landscape against which operators make strategic decisions. Timing invariably poses a dilemma for operators when it comes to decommissioning; low oil prices incentivise the process but deliver cash flow challenges, while higher prices make ongoing production more feasible.
The good news for the service sector is that so much of the work has only been deferred, and we are seeing positive indications of a potential market pick-up. Over the last few weeks, we have seen a real uptick in requests for tenders, a sure sign the market is starting to move again.
It signals that decommissioning activities will increase notably in 2021 – especially if we can begin to put the COVID-19 difficulties behind us – and continue a strong growth trajectory through 2022-2023.
As decommissioning does move back up the agenda, it’ll also serve to underline a new mindset among operators. Over the past two or three years, integrated work packages have become more popular as an efficient and effective way to deliver on a project’s objectives. That’s the case whether it involves platform or subsea wells, topsides and jackets, or subsea infrastructure.
In the past, operators have often looked to partner with specialists in specific areas, such as well re-entry and surface riser systems, but now they’re looking for complete solutions from a single provider.
Aside from the resulting cost-efficiency gains, there’s a safety dividend for operators who can sidestep the challenge of effectively inducting multiple vendors into their safety culture and practices. And there’s an environmental benefit: a single-source solution reduces logistical requirements in areas such as transportation, therefore lowering the carbon footprint of decommissioning projects and helping operators meet their ESG commitments.
We saw an opportunity to offer this as a strategic service to the market, and as such collaborated with Oceaneering earlier this year. Driven by customers who wanted to see more all-in-one alternatives in the market, the collaboration effectively combines our engineering, project management and riser systems services with Oceaneering’s tooling, cutting and severance capabilities to create one complete end-to-end decommissioning package.
This joint offering also supports environmental gains in that multiple bases across Europe offer personnel and equipment, thereby reducing transport movements in support of North Sea projects.
From our experience, the key to success in any decommissioning programme is attention to detail and we’ve carried that principle into this collaboration. It’s customary for us to perform detailed analysis up front to ensure we supply our customers with what they need offshore – and only what they need – to help realise cost efficiencies through un-necessary contingencies.
There’s a further dimension to decommissioning that I expect will become more prevalent over the coming years – and it represents an opportunity both to move the energy transition agenda forward and to monetise offshore assets that would otherwise be discarded – carbon capture and storage (CCS).
Production wells that are a target for a plug and abandonment (P&A) campaign possess the potential to be revitalised as part of an alternative CCS solution. While this may not be an operator’s most pressing priority, early awareness of this potential may save spending money later.
Like many in the supply chain, our prime focus in the meantime is upon pursuing the growing volume of decommissioning opportunities. Our optimism for the short- and medium-term future is based on more than an anecdotal belief – there’s firm evidence in the rising number of RFIs and ITTs being issued, perhaps driven to an extent by some operators accelerating their decommissioning programmes because of the prevailing economic conditions. It’s too early to declare that the market’s fully back, but it’s certainly re-emerging after the toughest of years.
Author: Christian Berven, Aquaterra Energy
Read the article online at: https://www.oilfieldtechnology.com/special-reports/08122020/decom-where-next/