North Sea oilfields offer new prospects:
For three decades the UK, Norway and Netherlands have feasted on the large volumes of oil and gas discovered in the North Sea.
But as production in the prolific basin declines, a multibillion dollar clean-up operation is required to return an area of sea pockmarked with ageing platforms, wells and networks of pipes back, as far as possible, to the way it was found.
The scale of the task facing oil and gas operators in the UK sector alone was set out recently in a paper issued by Oil & Gas UK, an industry body. It calculates that £10.4bn will be spent to take the growing number of redundant oil and gas installations out of service between 2013 and 2022. Eventually, it expects the cost of decommissioning all of the UK’s assets in the North Sea to exceed £31.5bn.
A strict legal framework of national, regional and international regulations governs how disused offshore facilities are decommissioned. These are designed to prevent ecological damage as well as protect the lives of those involved in the dangerous work of installing, maintaining, and eventually disassembling hazardous structures at sea.
But while the challenge of decommissioning of platforms, wells and pipelines presents a heavy financial burden to the sector, it also offers a lucrative business opportunity for those companies involved in the task.
According to Oonagh Werngren, operations director at Oil & Gas UK, the survey into the scheduling of decommissioning work “highlights the growth of the industry in coming years and offers the opportunity for both operators and contractors to collaborate to maximise efficiency and reduce cost”.
Getting things wrong during exploration can result in disaster. The 2010 Deepwater Horizon oil spill in the Gulf of Mexico was caused by the planned temporary abandonment of an exploration well and prompted a spasm of safety reviews by operators and regulators around the world.
But permanent shutdown of oil and gas facilities also presents another layer of physical, environmental and reputational risks.
In 1995, Royal Dutch Shell provoked widespread outrage with plans – then approved by the British government – to abandon the floating oil storage facility Brent Spar in deep Atlantic water. Controversy over the scheme was to lead to 15 European countries adhering to the Ospar convention agreeing that all future disposals of oil facilities be handled on shore.
Shell now faces the task of how best to decommission a range of platforms and subsea structures on the Brent field as plans for full abandonment loom.
Two platforms are expected to cease production next year with another shutting the following year. Complex plans for the abandonment and disposal of equipment expected to take several years are now being agreed with the UK’s Department of Energy and Climate Change.
This summer, Shell contracted the Pieter Schelte, an oil platform installation and decommissioning vessel capable of lifting units in their entirety for disassembly on shore. The vessel, under construction in Korea, will be one of the world’s biggest and is expected to be in service by the end of 2014.
For Pieter Schelte’s owners, Swiss-based Allseas , the investment in its construction is a bet on strong demand for oil platform installation and safe removal in the North Sea and beyond for decades to come.
But vessels such the Pieter Schelte are just one element in the complex task of lifting, removal, cleansing and recycling of materials and equipment previously used to bring oil and gas ashore.
One of the main business areas for Amec, the oil services company, is to help maintain and extend the operational lives of fields for operators. But the issue of how best to plan for abandonment is coming to the fore.
Alan Johnstone, managing director of Amec’s brownfield business, says: “The regulations [on decommissioning] are very strict – and operators have to work to them as do the supply chain.
“But the supply chain in the UK is developing technology that will provide more effective ways to move pieces of infrastructure in more economic ways.”
Trevor Garlick, head of BP’s North Sea operations, agrees a massive commercial opportunity exists for UK companies but warns of bottlenecks and complacency by those seeking the work.
“There’s an opportunity for us [the UK industry],” Mr Garlick told a panel discussing business innovation in the UK recently. “Billions of pounds of work is coming towards us in the North Sea in money.
“At the moment there is not a technical capacity or supply chain to meet it. We need to meet it, or the Norwegians or Spanish or others will.”
According to Liane Smith, managing director at Wood Group Intetech, another oil services company, oil and gas operators are faced with an increasingly tricky task. They must ensure the integrity of subsea wells and other equipment, often operating beyond the intended operational life in corrosive waters, as they seek to safely eke out the output from fields as they head for eventual abandonment.
Tough and clear regulations often make it easier for operators and their service companies to agree on how best to protect the integrity and plan for the eventual disposal of their installations, she says.
Examples of poor practice do exist, as witnessed by the blight of abandoned rigs in fields on the Caspian Sea, concedes Ms Smith. But the experience in the Gulf of Mexico, where field decommissioning has become commonplace, has set the scene for further development of expertise in the harsher waters of the North Sea, she suggests.
And these skills could prove to be highly marketable in other oil and gas basins where local operators and regulators are increasingly keen to emulate toughened western standards. “I think North Sea procedures are respected – UK and Norwegian standards get quoted around the world, she says.
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