Dramatic cost cutting needed before North Sea decommissioning starts
Supply chain companies in the East of England hoping to be involved in the dismantling of hundreds of platforms and plugging and abandonment of more than 400 wells must think “completely differently,” Bill Cattanach, of the new Oil & Gas Authority (OGA), told a conference in Norwich.
Without dramatically lower costs, operators would not embark on spending the estimated £50-£70 billion in the next 30 years, up to 75 per cent of which will be paid for by taxpayers, he said.
Bringing operators and supply chain together at an event for constructive dialogue to introduce new ideas and technology into the decommissioning operation to deliver transformational cost savings might be the way forward, Cattanach said.
He was speaking at the Decommissioning Special Interest Group, run by the East of England Energy Group (EEEGR) with Decom North Sea to work for cost cutting by innovation met at Norwich City Football Club.
The East of England’s case to be the centre of the decommissioning challenge – to bring an estimated annual spend of £2-£3bn every year – was strengthened by the announcement last week that Peterson has teamed up with Veolia to develop a £1m decommissioning site at Great Yarmouth for Southern North Sea decommissioning.
As investment levels in the North Sea have fallen dramatically, supply companies are looking to decommissioning to fill the gap. But it is a young and unstructured industry with little transparency, delegates heard.
Just 10 per cent of installations have been decommissioned so far, with 300 installations remaining in the UK Continental Shelf, miles of pipeline and about 5000 wells to be plugged and abandoned.
Cattanach said: “We should be able to fill the gap in the supply chain with decommissioning. We have 23 decommissioning applications in this year and in the next two to three years, about 70 odd decommissioning proposals will be carried out.”
The OGA had been tasked by the Treasury to come up with a plan to show “real savings”, he said.
“We have already brought together some of the eight operators and we know there is a portfolio of more than 500 wells to be plugged and abandoned in the North Sea.
“Now is the time to get beyond talking about where we collaborate and get together and get companies out there and bring work forward.”
Nigel Jenkins, chief executive of Decom North Sea, said direct dialogue between supply chain and operators was needed.
“Many operators appreciate they don’t have all of the answers. Answers to cost reduction lies with operator and the supply chain working together at the earliest possible point in the project programme.”
Oil and Gas UK forecast £43bn would be spent on decommissioning by 2050, he said. “But we have seen analysis from DECC that indicates this might be in the region of £40bn to £70bn.”
“The main question is: ‘Do we have a clear understanding of the work ahead of us and do we know what good looks like?” The answer is not yet.”
The Great Yarmouth decommissioning centre was “really good news and positions the region very well. We want to keep decommissioning in the region. The last thing we want is for it to go elsewhere,” he said.
Plugging and abandonment (P&A) of wells is the most expensive part of decommissioning – about 40 to 50 per cent of the costs.
Nick Ford, of well project management specialists Acona UK, told delegates that upfront planning was key in a P&A programme estimated between £900 million and £1.9 billion in the SNS over the next 10years.
Acona UK has managed to bring down the P&A cost of development wells by between 30 and 50 per cent.
“We need to start looking at value versus cost, how do we further reduce costs?
“It is about putting a programme together, developing series of wells or grouping of wells of similar types or locations.
“We would look at the well requirements and set up programmes to efficiently abandon each category of wells i.e. sub sea, development and platform wells. Due to the repeated processes and team continuity the time and cost associated with each abandonment is rediced significantly when compared to stand alone operations.”
“The skills and experience to undertake the work are here in the East of England. We have demonstrated the ability to perform the wells plugging and abandonment and understand the methodologies to do this.”
Jonathan Turner, of ABB, called for change management and a decommissioning mindset.
“We need to plan before end of production and start thinking five years before the end not after it has finished.”
Paul Yeats, of Oceaneering, outlined a case study of several operators getting together to remove six wellheads with cost savings of 30-70 per cent.
Tomas Kristofic, of GA Drilling, outlined the Plasmabit, innovative technology developed for decommissioning.