Decommissioning projects abound in the Gulf of Mexico, but those in very deep water will stretch even the most accomplished offshore vessels, writes Selwyn Parker
In stark contrast to the upsurge in activity in Mexican waters, the oil and gas industry is steadily winding down in the US Gulf, as mature fields in this vast sea are progressively decommissioned.
Long one of the most important petroleum production areas in the world, in part because many of the fields lie in shallow continental-shelf waters, exploration will progressively give way to ‘decom’, requiring a different kind of expertise on the part of the offshore support industry. That is especially true of platforms located in deep water, most of which were established after the easier fields nearer the shore were exhausted.
The decommissioning industry in US waters already has a lot of experience however. Although it is the big discoveries that make the headlines rather than routine activities, dismantling of redundant infrastructure has been accelerating since the late 1980s, overseen by the powerful US Bureau of Safety and Environmental Enforcement (BSEE). As Boston Consulting Group points out in an April 2018 study entitled Preparing for the next wave of offshore decommissioning: “No area in the world has more experience with decommissioning than the Gulf of Mexico. Since the late 1980s operators have removed structures at a rate of 150 to 250 a year.”
Although the rate of decommissioning slowed during the downturn in oil prices, as many companies ran into financial difficulties and could not afford to undertake non-productive projects, there can be little doubt it is now picking up again. And not before time. More than 2,000 structures must be removed in the next few years on top, sometimes literally, of the more than 9,000 wells that must be plugged and abandoned, according to estimates by two authorities, the BSEE and the US Government Accountability Office.
That adds up to a lot of contracts for the offshore support industry – but henceforth such projects will become more demanding. “Shallow water decommissioning has been relatively routine, with topsides and jackets being removed and brought to shore for scrapping and re-purposing,” explained the Houston-based operations director of London Offshore Consultants, Alan Clifton, in a briefing in September.
A veteran of decommissioning projects, both on and offshore, in the challenging environment of the North Sea and elsewhere, Mr Clifton explained: “Some jackets [in the Gulf of Mexico] were deliberately sunk to form artificial reefs, providing sanctuary for marine life and flora and fauna in the area. But this is starting to change because a number of platforms in deeper waters are reaching the end of their lives and decommissioning will soon become necessary.”
Deep-water dismantling, like all work far offshore, is a complex operation. But it has become more complicated, more onerous and more heavily regulated since the Deepwater Horizon disaster that involved BP and several other operators, in recriminations and litigation that remains ongoing. The aftermath of the explosion and consequent oil spill in the Macondo Prospect that occurred on April 10, 2010, continues to haunt – and influence – the entire offshore support industry.
It was the largest spill in the history of marine drilling operations; oil poured over the Gulf for 87 days before the rogue well was finally capped and 11 workers died.
As the official report into the disaster, entitled Deep Water: The Gulf oil disaster and the future of offshore drilling, highlighted, the spill “began a human, economic and environmental disaster”. The report concluded that the explosion, deaths and spill were preventable and warned that the oil and exploration industry must immediately tighten up its act in environmental as well as safety issues, or face serious consequences.
“The industry’s focus has shifted significantly since the Deepwater Horizon disaster,” explained Mr Clifton. “Nowadays, companies looking to decommission a structure want to be seen as a responsible and good business. Oil companies’ reputation is now uppermost…companies are approaching [decommissioning] very differently.”
As the deep-water platforms come down, the offshore support industry will be called on to handle larger-scale equipment than it has dealt with in the Gulf so far. This will include vessels such as the Pioneering Spirit, the world’s largest offshore construction (and deconstruction) vessel, that is designed specifically to hoist giant platforms straight off the seabed. The Pioneering Spirit has been at work in the North Sea during 2018, but may in future be required in the Gulf of Mexico as the decommissioning phase gathers pace.
“No area in the world has more experience with decommissioning than the Gulf of Mexico. Since the late 1980s operators have removed structures at a rate of 150 to 250 a year”
While more platforms are being dismantled than erected in the US-part of the Gulf, they are also getting bigger. As Boston Consulting Group explained: “The challenges in the Gulf are intensifying. While earlier decommissioning waves included 600-tonne structures in water depths of up to 100 m, the upcoming portfolio includes 11,000-tonne structures in depths exceeding 100 m.”
The same concerns apply to wells. About a quarter of the 2,000 wells waiting to be plugged and abandoned lie at these depths. Boston Consulting Group noted: “The complexity of such projects means that costs will also be higher. Operators and contractors will need more advanced technologies and capabilities.”
Further complicating things for dismantling specialists is the fact that more and more offshore structures have gone long past their use-by date. They have been left idle in wind, rain and storms for years, resulting in the deterioration of basic operational infrastructure. Dismantling crews from offshore vessels may find walkways and handrails are no longer safe. Lifting equipment may be rusted. Pipelines may have moved on the seabed. Essential data may be many years old, out of date or even unavailable.
As the decommissioning industry prepares itself for the bigger infrastructure, there is still a lot of exploration and production going on. With 74 rigs currently active in the Gulf of Mexico, including jack-ups, semi-submersibles and drillships, the oil and gas is still being brought up. Offshore oil production from the Gulf accounts for 17% of total American crude, keeping the local refinery industry in business. More than 45% of US petroleum refining capacity is located along the Gulf coast, along with more than half of total natural gas processing.
Despite its difficulties following Deepwater Horizon, BP remains one of the biggest operators in the Gulf. In mid-October the oil and gas major started up its deep-water Thunder Horse Expansion project, four months ahead of schedule and 15% under budget. The London-based group, which operates four large production platforms – Thunder Horse, Atlantis, Mad Dog and Na Kika – in the Gulf, expects to pump energy out of the seabed for years to come.
“Over the past five years we’ve driven up production through safe and reliable operations [while] bringing on new deep water projects in a more efficient and standardised way,” explained the regional president of BP’s Gulf of Mexico and Canada business, Starlee Sykes, who started her career as a sub-sea operations engineer. “We are focused on being a safe business that has learned from its past. There is a really long future ahead of us here.”
BP also expects to find more hydrocarbons in the Gulf, using the seismic imaging fleet. It has just designed and built a new ultra-low frequency seismic technology under the name of Wolfspar that, BP expects, will make it easier to find oil. “We are excited about how that is going to improve our ability to see through heavy salt formations in the Gulf and in reservoirs around the world,” said Ms Sykes. “The biggest game-changer in the Gulf of Mexico, given the complexity of the resource base, is seismic imaging.”
And a new kind of offshore support technology may be emerging: sea-going drones and robots used for offshore inspections. BP and ExxonMobil, its partner in Thunder Horse, expects them to do jobs normally conducted by people – but better. “If we can inspect our facilities more efficiently, we can use those assets for a longer period of time,” added Ms Sykes.
And seismic prospecting continues unabated. In late 2018, Houston-based Seabed Geosolutions deployed the Hugin Explorer seismic vessel for an unnamed major company in the Gulf, where it will monitor a number of fields for hydrocarbons. Collected directly off the seabed, the data brought up by the Hugin Explorer helps identify reserves of oil and gas, along with potential geo-hazards. Simultaneously, another seismic services group, SeaBird Exploration, reports that its 81-m long Osprey Explorer is also conducting a seabed survey for another unidentified company in the hope of discovering new fields.
Eventually though, say experts, the decommissioning arm of the industry will have more work than the exploration side, as the Gulf finally yields up its last accessible hydrocarbon resources.
The big spill
Deepwater Horizon precipitated a long-running bout of legal actions against BP and other defendants that cost the London-based company US$14.3Bn in fines, settlements and penalties with just one of the many plaintiffs, the US Environmental Protection Agency. Of this sum, a record US$5.5Bn was paid out under the Clean Water Act and up to US$8.8Bn to compensate for damage to natural resources. This came on top of many other claims, some still running, over medical issues and economic damage among other litigation. According to BP’s latest report on Deepwater Horizon, in January 2018, the company is still paying out. It expects to foot a bill of around US$3Bn in 2018, US$1Bn higher than its earlier estimates.
Aside from the financial penalties, there has been a groundswell of resentment and distrust against the broader oil and gas industry, reflected in much tougher regulation of its activities throughout the Gulf, especially regarding environmental issues. One of the new supervisory bodies is the Gulf Coast Ecosystem Restoration Council, essentially an environmental organisation established in mid-2012 that embraces a swathe of federal agencies dedicated to the prevention of, not just another Deepwater Horizon, but any kind of damage in these waters. The council is running a project known as Restore the Gulf that is involved in everything from improving water quality to oyster restoration. Its mandate covers a huge coastline, encompassing the Gulf Coast states of Alabama, Florida, Louisiana, Mississippi and Texas.
All operators in the Gulf now have to engage with the council as well as all the other regulators, some of which were also on the receiving end of heavy criticism in the wake of Deepwater Horizon.