Oil and gas supply chain leaders need to drive “transformational change” to bring down costs before the multi-billion North Sea decommissioning program will start, a leading industry figure said.
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 and Gas Authority (OGA), told a conference in Norwich.
Without dramatically lower costs, operators would not embark on spending the estimated US$78-109 billion (£50-£70 billion) in the next 30 years, up to 75% 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, said Cattanach.
Cattanach 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 center of the decommissioning challenge – to bring an estimated annual spend of $3.1-4.7billion (£2-£3 billion) every year - was strengthened by the announcement last week that Peterson has teamed up with Veolia to develop a $1.5 million (£1 million) 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% 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.
“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,” said Cattanach.
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.
Nigel Jenkins, chief executive of Decom North Sea, said direct dialogue between supply chain and operators was needed.
Oil and Gas UK forecast $67 billion (£43billion) 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 £40 billion ($62.7 billion to £70 billion ($109 billion).”
“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.”
Plugging and abandonment of wells is the most expensive part of decommissioning - about 40-50% of the costs.
Nick Ford, of well project management specialists Acona UK, told delegates that upfront planning was key in a plugging and abandonment program estimated between $1.4 million (£900 million) and $2.9 billion (£1.9 billion) in the SNS over the next 10 years.
Acona UK has managed to bring down the plugging and abandonment cost of development wells by between 30-50%.
“It is about putting a program together, developing series of wells or grouping of wells of similar types or locations.
“We would look at the well requirements and set up programs 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 reduced significantly when compared to stand alone operations.”
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.”
Image: Bill Cattanach/East of England Energy Group
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