Making money in the decommissioning sector may be a longer game than many operators would like, but are there opportunities there for those willing to take them?
Boston Consulting Group’s (BCG) principal consultant in London, Martha Vasquez, said decommissioning is a US$500Bn market globally with hotspots due to emerge in southeast Asia, Latin America and West Africa – the question is: when?
“The truth is, decommissioning today is a really uncertain market,” Ms Vasquez said, “and I bet there are a wide range of beliefs in the room about what opportunities decommissioning creates for us.”
“I don’t know what will be the change that will transform this industry. We believe the opportunity lies in shaping decommissioning to your advantage,” she said.
In reality, the UK remains the largest single market for decommissioning in the world.
In a market projected to be worth US$100Bn through 2030, the annual expected market valuation for 2019 is US$3Bn, and the UK makes up half of that total.
In the short term, the overall market valuation is expected to double ‘for the foreseeable future’, Ms Vasquez said, with the North Sea remaining the largest market as wells and other offshore infrastructure in hot spot regions become the majority share of uneconomical projects, globally.
Taken together, the structures and wells in these regions represent approximately 50% of those expected to become uneconomical in the next 20 years, according to BCG.
“Globally, over 5,000 structures are expected to become uneconomical in the next 10 years,” said Ms Vasquez. “90% of those are rather small, under 2,000 tonnes, and these are only the topsides, so the jacket of the substructure you can expect is going to be in the same weight range, making them candidates for a single lift removal with a small vessel.”
The market clearly represents a huge opportunity said Ms Vasquez but the familiar market 'catch' remains.
“Unfortunately, what will become uneconomical is very different from what will be decommissioned,” she said. “The biggest uncertainty today is timing. Operators have no pressure to decommission today.”
In most countries, decommissioning is not bound to any prescriptive deadlines. Of the 20 global hotspots BCG have isolated, only eight countries prescribe specific timings for decommissioning.
The opportunities, then, lie in the countries with decommissioning deadlines, it would appear.
For instance, for OSVs in UK, decom could represent between 5-10% of an engaged vessel operator’s revenue according to BCG’s calculations.