The Offshore Decommissioning Conference 2018, run jointly by Decom North Sea and Oil & Gas UK, took place from 26 – 28 November at the Fairmont Hotel, St Andrews. Around 450 delegates gathered at the conference focused on the current challenges around shutting down oil and gas infrastructure together with exhibitions and keynote speeches by industry experts, and where the 2018 Decommissioning Insight Report was launched.
The report provides insight into the decommissioning market for the next ten years and provides context for operators in scheduling, forecasting and planning, and widens the scope for supply chain expertise and deployment of services.
In this blog we provide an overview of the key themes discussed in the report. Regular readers of the Claxton blog will recall Head of Brand & Marketing, Andy Norman’s piece: The Future of the UKCS Offshore Decommissioning Industry: 2017 Predictions, and we follow on to ascertain how the predictions have materialised from two years ago.
SETTING THE SCENE
Notably, since the 2017 report, rapid improvements in productivity and efficiency have been achieved – forecast decommissioning costs per well have fallen by an average of 26% and decommissioning spend in 2017 came in approximately 30% lower than anticipated at £1.15bn.
The industry will spend some £15bn (UKCS), and globally $80bn over the next decade, instilling the realisation that decommissioning companies in the UK will be well placed to gain a share of this market. With over a decade of experience gleaned through North Sea knowledge the UK’s decommissioning supply chain has matured, gained a competitive advantage, and is well positioned to exploit the opportunity and benefits of a global market.
(Fig. 13. Source: Wood MacKenzie – Forecasting UK being the highest area for global decommissioning expenditure)
FORECAST EXPENDITURE OVERVIEW
The cumulative forecast for the next ten years on UKCS is £15.3bn (a reduced figure on recent years). Regulators and the Oil and Gas Authority (OGA) strives to reduce decommissioning expenditure by 35% by 2035, supporting the policy of Maximising Economic Recovery (MER).
DECOMMISSIONING IN CONTEXT
Decommissioning activities must also be examined in context with the recent performance of the wider oil and gas industry:
• Wider efficiencies are slowing the pace of decommissioning
• Improved preparation and planning are also factors
• Decommissioning remains a small part of overall expenditure
• Well decommissioning increasingly dominates drilling activity (see Figure 4)
DELIVERING EFFICIENCY IMPROVEMENTS IN WELL DECOMMISSIONING AND REMOVAL
The expectation is that costs will fall as industry experience grows particularly as well decommissioning is the largest category of expenditure. Operators are shown to be proactive in reducing costs and learning the lessons from experience, conferences/forums, and networking. The following datasets align with these notions for both Central/Northern/Shetland and Southern/Irish Sea areas:
Topsides and substructures
Forecast costs continue a downward trend, particularly substructure removal with expenditure dropping from £4,722 per tonne to £3,953. Operators look to reduce the costs by:
• Consolidating decommissioning activity as part of longer-term programme
• Allowing the market to drive the removal method
• Being flexible about when activity takes place
• Exploring the potential for cross operator campaigns
UKCS IN DETAIL
Notable stats show although 203 fields are identified to undergo decommissioning activity (214 previous year), Central North Sea share has grown to 83 fields (an increase on 77 last year). The North Sea wells expected by 2027 number 475 (compared to 452 previously forecast) which ran to 2025. Additionally, an increase in the length of pipelines is 5,724 km (over ten years) compared to 5,514 forecast in last year’s report.
In the next decade, almost 2,400 wells are expected to be decommissioned in North Sea/west of Shetland (Over 900 of which are located across Norwegian, Danish and Dutch sectors). Norway, Denmark and Netherlands are forecast to remove 347,733 tonnes of topsides and decommission 195,067 tonnes of substructure. International activity is less than levels in UKCS for the period, but still significant. With much of the activities occurring concurrently it is vital these regions work alongside each other to ensure work scopes are cost-efficient with lessons and experiences shared and learned.
Attending the conference this year was Claxton’s Matt Marcantonio, Head of Decommissioning. Matt jointly chaired event sessions talking about the challenges in the industry as well as how our expertise in well decommissioning and rigless operations is supporting future industry developments, which as a result, Oil and Gas UK have indicated they would welcome more input from both Claxton and Acteon at future events. To quote Matt:
"After many years of discussion, it really feels as if the industry is combining; networking events like the Offshore Decommissioning Conference really do provide a valuable forum for meaningful collaborative discussions, and enables us to consider strategies towards reducing the cost to meet 30% reduction targets. The panel sessions were very enjoyable and we really do appreciate the opportunity to put Claxton's perspective on thought-leading questions."
The full report is available for download from: https://oilandgasuk.co.uk/decommissioninginsight/ and makes recommended reading for any operator, analyst or student interested in the sector.
Look out for the next in our series of decommissioning blogs, and if there is a particular subject you would like us to cover, please leave your thoughts and feedback below…