Oil & Gas UK’s latest Decommissioning Insight Report identifies key areas where cost reductions could be made through new technologies
Painting a comprehensive picture of the decommissioning market is tricky. Certainly, there has been no explosion of activity in recent years, especially in light of low oil prices. But while some operators have opted for life extension programmes or indefinitely delayed decisions, the sector is growing year on year, suggesting the topic is no longer a case of “kicking the can down the road.”
In its Decommissioning Insight 2016 report, Oil & Gas UK (OGUK) points out that GBP1.1 billion (US$1.4 billion) was spent on decommissioning in the UK and GBP1 billion (US$1.25 billion) in Norway – up from the GBP800 million (US$1 billion) and GBP770 million (US$960 million) respectively in 2014.
Nevertheless, the size and scope of the issue is growing too. Over 100 platforms require complete or partial removal and 1,800 wells are in line to be plugged and abandoned (P&A), as well as 7,500 km of pipeline in UK and Norwegian waters. That is a sizable opportunity for technology firms.
Plugging the gap
As is perhaps well recognised, P&A is the area where cheaper or more efficient methods could have the greatest impact. Between the UK and Norway, P&A accounts for somewhere between 47-56% of the total expenditure. Average costs per well have been estimated at GBP2-GBP4 million (US$2.5-5 million), depending on the location and well design.
According to OGUK, the exploration and appraisal well P&A unit costs over the next ten years are forecast to fall by 35% in the southern North Sea and Irish Sea to GBP5.6 million (US$7 million) per well. In the central North Sea, Northern North Sea and West of Shetland these costs are forecast to be around 20% cheaper at GBP6.2 million (US$ 7.7million) compared with forecasts made last year. The type of rig needed to perform these operations will vary on well type and water depth, but rigless P&A, as InnovOil has reported on previously, could reduce costs dramatically. The authors note: “Platform wells are typically plugged and abandoned in phases. The first phase can be rig-less and uses lower cost methods such as wireline, coil tubing or a hydraulic workover unit. This is followed by the second and third phases that are more likely to require a rig.”
Indeed, they specifically call attention to Interwell’s thermite P&A technique (see page 22) which could reduce costs by up to half. Other solutions, useful in this first phase in particular in avoiding the requirement for section milling and case pulling – such as using hot plasma to melt through concrete, casing and tubing – have also been trialled, although so far industry uptake has been slower than might be preferred. OGUK and its sibling organisations will be supporting development of some of the most promising technologies. OGUK communications adviser Lucy Gordon told InnovOil: “Well P&A is one of the key areas that will be focused on by the new Oil and Gas Technology Centre (OGTC) when it establishes a centre of excellence. The work will be aimed at more core research and development, with research, test facilities, simulation, big data and automation at its heart.”
Cut-up method Besides wells themselves, topside and substructures must also be moved. Large structures require large heavy-lift vessels – the demand for which is likely to increase in the next decade. If costs can be controlled, new and innovative single-lift vessels may be preferable, lifting the entire topside to shore in one piece rather than cutting structures into pieces and requiring multiple trips via barge, also known as “reverse installation”. That is likely to require a larger or more adaptable fleet of vessels, and therein lies the opportunity for vessel contractors, shipyards and designers. Moreover, because North Sea and Norwegian structures tend to be larger and heavier, suitable vessels could be replicated or adapted for use on smaller Gulf of Mexico platforms too. Indeed, new vessels such as the Pioneering Spirit – capable of lifting 25,000 tonnes – are now setting the bar for single-lift topside removal. The Spirit is chartered for work on Royal Dutch Shell’s Brent field this year, and may begin to move the Delta 24,000-tonne Delta platform as soon as May. But more such vessels will be required if this method is to prove effective.
New cutting technologies will also be needed, if topsides and substructures are to be broken up effectively – especially when work may take place over several deployments, and months apart. Indeed, according to OGUK, 23 platforms are scheduled to be removed before 2025 but do not yet have contracts. Provided their decommissioning goes ahead, a flurry of activity may well pick up in the next few years. As OGUK’s upstream policy director Mike Tholen remarked in a statement accompanying the report: “The UK’s supply chain will need to focus on developing a high-quality, cost-efficient and competitive decommissioning capacity to make the most of the opportunity and provide a range of goods and services that can not only be deployed in the UK but also exported overseas.”
For more information, you can download the Oil & Gas UK Decommissioning Insight Report here