Declan Curry for OffshorePost.com
What goes up, must come down. It was true when Isaac Newton was smacked on the head with an apple. It was true when “Blood, Sweat & Tears” sang it to stay chillaxed in the Summer of Love.
And it is true for the oil and gas industry today. All those magnificent platforms and installations taming the North Sea will have to be taken down and cleaned up when it is no longer economical to extract hydrocarbons from under the hostile waters.
In fact, it has been going on for years already. BP decommissioned its Amoco-operated platform in the North West Hutton field a decade ago. In the last few years, Tullow, CNR and Perenco – among others – have secured UK Government approval for their decommissioning plans.
Centrica got the green light to pull out its subsea installations. ConocoPhillips is awaiting approval for its wind-down of the Viking field. And Shell is well on the way to decommissioning its four platforms, plus their related infrastructure, in the mighty Brent field – which at peak production met the energy needs of around half of all homes in the UK.
The North Sea Won’t Just Shut
This is what will happen when producing oil and gas is no longer worth the candle. The North Sea won’t just stop. It will clean itself up, and will spend a small fortune doing so. The lobby group Oil & Gas UK estimates that around £17bn will be spent on decommissioning in the North Sea over the next ten years.
That’s the sum already budgeted to plug 1,200 wells and scrap 79 North Sea platforms – just one-in-six of all the North Sea oil installations that will be taken out of service by 2040. The industry group Decom North Sea predicts £30 billion will be spent between now and 2040.
The Mighty Brents
Shell has been planning its decommissioning of Brent for well over a decade. It estimates it will take another decade to finish the job. It’s more than just the removal and cleaning-up of the Alpha, Bravo, Charlie and Delta platforms.
There are 140 wells and 28 pipelines to deal with as well. Shell describes the work as a “complex, major engineering project”. On its website, it says its priorities are that the work has to be safe, good for the environment, good for “affected communities” and “economically responsible”.
Investment In Skills
Oh, and it has to be “technically achievable”. As Decom North Sea notes in its 2014 Review of Decommissioning Capacity, that doesn’t just mean having the right engineering skills on the platforms.
It also means having the right removal vessels to carry the topsides and the substructure.
It means having the capacity and expertise at ports, harbours and yards for recycling. Bottlenecks in the supply chain will push up the costs of decommissioning and cause delays.
Decom North Sea argues for greater collaboration between companies in the supply chain, greater investment in equipment, innovation in management and new technical solutions. I would argue that continuous – and increasing – investment is needed to develop skills in what is still a fledgling industry.
These issues are all on the agenda for Decom’s new chief executive, Roger Esson, appointed earlier this week. He – and more pertinently, the regulator – may also have to persuade oil and gas companies to better co-ordinate their decommissioning schedules.
Pipelines & Plant
Some far-flung or recently-explored fields get their oil and gas out through the pipelines installed years before for older fields. If those mature pipelines are decommissioned while the newer-fields are still in production, the new fields run the danger of becoming locked in.
ConocoPhillips’ decommissioning plans include a shut-down of the Theddlethorpe gas terminal and the Lincolnshire Offshore Gas Gathering System, one of the North Sea’s biggest gas pipelines. At least ten gasfields, including those owned or controlled by BP, Centrica, Ithaca and Perenco, use the pipeline.
If that pipeline closes, those fields would face major challenges reaching their customers; the worry is the fields would become so uneconomic, they would also have to close.
As decommissioning spreads across the North Sea – and the Oil & Gas UK research suggests that plans are accelerating – there may be a higher risk that newer fields will be locked in.
Companies which no longer need or use the infrastructure will argue it is unfair that they should bear the economic burden of maintaining it, for the benefit of other operators – though you could say they made enough profit in the earlier life of the pipeline to pay for its later-life costs.
Greater collaboration between companies, with the owners of the old infrastructure delaying decommissioning and the operators of the new fields paying more for the upkeep, may be the simplest solution.
Or the regulator may need to consider a more radical approach – a centrally-controlled, publicly-owned pipeline network, mirroring perhaps Network Rail’s replacement of the privately-owned Railtrack in Britain’s transport sector.
Many in the swashbuckling, entrepreneurial North Sea industry will recoil at the very thought. Taxpayers may be horrified at what they will see as a bail-out for rich, bloated oil giants – on top of the guarantees already provided by Decommissioning Relief Deeds.
But the risk of being locked in will surely deter investment in new fields, and the premature closure of existing fields hardly helps extract the maximum economic return from the North Sea.
Decommissioning may be a new lease of life – but it shouldn’t happen too early, or in too haphazard a manner.
A New Offshore Industry
The opportunities from decommissioning stretch beyond the geography and timeline of the UK Continental Shelf. The engineering and energy consultancy Douglas-Westwood predicts a second wind for the decommissioning industry after 2030, when Norway starts to wind down its oil fields in a big way.
Douglas-Westwood forecasts another £20 billion or so of spending on decommissioning activity in Denmark, Germany and Norway by 2040; most of it in the final ten years.
The assumption – the hope – is that after many years of doing it in the UK North Sea, British companies will have the experience, skills and capacity to be in pole position to secure some of that work.