Over the next decade £15.2Bn (US$19.8Bn) is projected to be spent on decommissioning platforms and wells in the UK continental shelf, making it a growing source of business for all manner of offshore support vessels
The UK continental shelf (UKCS) is the largest of the £67Bn (US$85Bn) global decommissioning market, according to an industry association analysis.
In its Decommissioning Insight 2019 report, the UK Oil and Gas Industry Association (OGUK) reports decommissioning expenditures will average £1.5Bn (US$2Bn) annually over the next decade.
Of course, applying a dollar amount to the decommissioning market can be misleading in terms of activity. While the oil industry’s expenditure will remain steady, overall activity will increase, reflective of efficiency gains made by the UK decommissioning industry.
“Year-on-year, the industry is delivering a steady improvement in cost performance, as demonstrated in June when the Oil and Gas Authority (OGA) published its latest Decommissioning Cost Estimation report,” says OGUK upstream policy director Michael Tholen.
Mr Tholen says the report showed a 17% reduction in the overall cost of decommissioning over the last two years, which he deems “persuasive evidence of the close collaboration between industry and government to deliver the overall 35% cost reduction target.” The cost reduction is with the baseline year of 2016, when the UK Oil and Gas Authority projected overall costs at £59.7Bn (US$77.7Bn). As of 2018, the estimated cost had dropped to £49Bn (US$63.8). The goal is to reach £39Bn by 2022.
Mr Tholen says the significant cost reductions are “a result of operators working closely with their supply chain, openly and constructively challenging each step in the process and learning from the best and sharing with others.” He says the OGA has also assisted by sharing performance benchmarks to help set new norms and it is industry’s intention to continue to build on this approach in years to come.
When analysing the market in terms of the number of wells and topsides and the amount of pipeline it is apparent that industry is faced with a herculean task in the coming decade. OGUK estimates 1,630 wells and 6,234 km of pipelines are expected to be decommissioned in the UKCS. Some 12 topsides per year will be decommissioned up to 2025. When including the Norwegian and Danish offshore sectors, the number of wells grows to 2,624 in the North Sea basin over the next 10 years.
Looking even further out, the UK Oil & Gas Authority estimates over the next 20 years that average annual expenditures will range from £1.5Bn (US$2Bn) to over £2.5Bn (US$3.3Bn). During the period, over 4,000 wells will be decommissioned, 320 platforms reused or removed and 2M tonnes of topsides, 1M tonnes of substructures (legs and jackets), 75,000 tonnes of subsea structures and 20,000 km pipelines will be recycled or decommissioned.
“The skills this industry has acquired to meet the decommissioning challenge at home positions it well to tackle the emerging global market opportunities,” says Mr Tholen.
“It is also exciting to see new companies are emerging specialising in decommissioning, either offering full-scope solutions or more specialised activities, such as offshore decommissioning of wells and removal of structures or onshore dismantling and disposal,” he says.
Specialist decommissioning company Maersk Decom, formed as a 50-50 joint venture between Maersk Drilling and Maersk Supply Service, has been analysing ways to reduce well plug and abandonment costs.
At the Offshore Decommissioning Conference in November, Maersk Decom contracts and partnerships manager Ole Udsen gave a presentation as part of the well decommissioning session, showcasing performance improvement initiatives, technologies, and contracting models which are reducing the well decommissioning cost base.
Mr Udsen pointed out that well plug and abandonment makes up the largest portion of the overall cost of decommissioning programmes, estimated at more than 50%. He also noted that first-mover disadvantages must be eliminated.
“In a regular campaign, the first wells or structures decommissioned do not benefit from savings that are derived from lessons learned down the road,” said Mr Udsen. “One way to overcome this is to distribute risk and lessons learned across all wells or structures in the campaign to levelise the cost across operators. The model can also be modified to distribute according to the categories of well complexity.”
He also says the approach to plug and abandonment must be reconsidered from an operational perspective.
“In general, we need to find ways to employ more cost-effective assets,” said Mr Udsen. “We call our approach to this The Optimisation Continuum. The basic idea is shifting scopes from heavy assets to less expensive and more flexible ones. For example, converting temporarily abandoned wells to permanently abandoned wells using a support vessel instead of a jack-up rig. Another option is distributing plug and abandonment scopes for challenging subsea wells between a drilling rig and support vessel,” he said.
Decommissioning offers new beginning
While the number of wells decommissioned surpassed the number of wells drilled in the UKCS in 2017, Mr Tholen noted: “Decommissioning is not the end of our industry; it offers a new beginning.”
He continued: “Four years ago, industry stepped up to the challenge to cut decommissioning costs by 35% and we are well on the way to achieving that. We must apply the same collective determination and pioneering capabilities to deliver the net zero carbon challenge. Re-use of old facilities for carbon capture and storage presents new opportunities, not just to create new value from old assets but also to help deliver that net zero future that we as an industry have committed to deliver as part of Roadmap 2035. Decommissioning with the net zero agenda at the forefront of our minds will be the next big step; where we lead, others will follow.”
A raft of new generation heavy-lift crane and installation vessels have proved pivotal in lowering costs and improving decommissioning efficiencies. One of the largest is the dual-fuel, semi-submersible Sleipnir. Joining HMC’s fleet in 2019, the dynamic positioning (DP) class 3-capable Sleipnir is equipped with two cranes, each capable of lifting 10,000 tonnes, or 20,000 tonnes in tandem, allowing for the removal of jackets and topsides during decommissioning projects.
After being delivered to Belgian marine engineering and vessel owner DEME Group in August 2018, the self-propelled DP2 class jack-up vessel Apollo was deployed in December by Everseas to carry out a platform decommissioning project in the Dutch sector of the North Sea in 2018.
Equipped with a crane with an 800-tonne capacity and a spacious 2,000-m2 deck, Apollo can operate in 65 m of water using its 106.8-m long lattice legs in jack-up mode.
DEME Group’s Apollo performed the decommissioning of the Q1 Halfweg unmanned gas platform on behalf of Petrogas E&P Netherlands BV. The scope included the engineering, preparations, removal and disposal of the 500-tonne topside, as well as the four foundation legs.
The Q1 Halfweg platform was a three-well, unmanned gas production facility which was installed in 1995. It was designed for ‘self-installation’ and consists of a concrete, gravity-based foundation which supports a process deck by means of four tubular steel legs of 60 tonnes each in a water depth of 24 m.
DEME’s Apollo handled both the topside and four large piles in one transfer. Apollo offloaded the unit ashore at the disposal yard in Vlissingen for recycling.
DEME also secured another major frame contract from AF Offshore Decom for the decommissioning of four satellite platforms located in the UK sector of the southern North Sea. With the 2018 agreement, DEME is now responsible for the marine engineering and the removal and transportation of 11 platforms in the North Sea. Offshore works are expected to start in 2020.
With its single-lift technology, Allseas Group’s 382-m twin-hull Pioneering Spirit will be deployed for a unique removal project in the Norwegian continental shelf. Repsol Norge AS has awarded Switzerland-based Allseas an EPRD contract for the removal, transfer, load-in to shore and disposal of its Gyda platform in the southern sector of the Norwegian North Sea. The contract covers both the 18,000-tonne topsides and 11,200-tonne jacket, and an option for reinstallation on another field, which would be an ‘unprecedented step’ for a fixed installation off Norway, says Allseas. A contract option would cover the removal, transfer, load-in and disposal of the jacket’s 32 conductors, weighing a total 3,100 tonnes.
Removal is planned for between late 2020 and 2023. Allseas has selected Kvaerner AS to dismantle and recycle the platform at its Stord disposal facility on the west coast of Norway.
Decommissioning Dunlin Alpha platform
Retiring these aging concrete and steel structures is a complex job, posing logistical, environmental, engineering and regulatory challenges. When all is said and done, for example, the decommissioning process for the Dunlin Alpha platform will have taken 10 years.
With Shell as its operator, Dunlin Alpha platform began producing oil from the Dunlin field in the North Sea 195 km northeast of Lerwick, Scotland in 1978. Comprising a concrete gravity base structure (CGBS) supporting a steel topside deck and production facilities, Dunlin Alpha platform yielded about 522M barrels of oil during its 37 years of operation.
Fairfield Energy became the platform’s duty holder in April 2014, announcing plans to decommission the platform in May 2015 and shutting production in June 2015.
In December 2019, Rever Offshore announced the completion of the subsea infrastructure decommissioning project for the Greater Dunlin Area. Commenced in January 2018s completed by the subsea contractor in a two-year campaign utilising nearly 300 vessel days, underpinned by in-house engineering.
To support the project, Rever Offshore utilised saturation diver support vessels Rever Sapphire and Rever Polaris, along with the heavy construction support vessel Normand Clipper. The work scope involved multiple campaigns comprising of preparation, removal of subsea infrastructure and final surveys, along with the management of all recovered waste for processing and safe disposal.
Rever Offshore chief executive Barry Macleod, says the project was significant for Rever Offshore: “[It was] one of the largest scale decommissioning projects undertaken by the company and the first completion of a full Engineering, Preparation, Removal and Disposal (EPRD) contract.”
In January 2019, Fairfield Energy contracted the partnership of the Netherlands’ Heerema Marine Contractors(HMC) and AF Gruppen for the EPRD of the 20,000 tonne Dunlin Alpha topsides. The platform is scheduled to be removed and dismantled between 2021 and 2024.
In May 2019, HMC partnered with Decom Energy and AF Offshore Decom to form Fairfield Decom. The project targets a new business model designed to reduce complexity and the number of contractual arrangements and deliver operational efficiency, cost-effectiveness and predictability. The project will contribute to the 35% cost reduction targets set by the UK Oil and Gas Authority.