The North Sea is facing one of the biggest challenges in its history – the decommissioning of its inventory of oil and gas fields as the point of ‘Maximum Economic Recovery’ is reached, and production comes to an end.
Over the next 30 years, more than 475 platforms, 10,000km of pipelines and 5,000 wells are expected to be decommissioned in the North Sea alone. Production peaked around the year 1999 and although advances in technology have extended the life of some fields and have enabled new wells to be drilled, more than 200 fields are forecast to be decommissioned within the next seven years.
The need to find effective decommissioning solutions has never been more pressing, particularly considering the role of the taxpayer in its funding. This is a huge engineering challenge, but one that Scotland is uniquely positioned to meet to be at the forefront of a burgeoning new industry sector with global potential.
To date, it is primarily the major oil companies who have tackled the decommissioning of their own assets in the North Sea.
Worldwide, extensive decommissioning is being undertaken in the shallow waters of the Gulf of Mexico. The challenges experienced there differ significantly from those of the North Sea, which by contrast has deep water and harsh climatic conditions.
The industry is entering a new era and setting the standard for decommissioning. Both Scotland and the UK are poised to become the home of a flourishing new, multi-billion-dollar industrial sector, building on a heritage of engineering innovation and tapping into a resource pool of skilled and experienced oil and gas professionals. However, in order for this to become a reality it is essential that the decommissioning process is efficient and effective, the associated costs are reduced, new commercial models developed, and talent redeployed from exploration and production to gain decommissioning expertise.
Developments in technology, knowledge-sharing and the application of lessons learnt from operators decommissioning first generation platforms are already having an impact and have led to the Oil and Gas Authority (OGA), the government body responsible for decommissioning, recently reporting a seven per cent underlying cost reduction on a like-for-like basis compared to its 2017 predictions.
Decommissioning is a specialised activity requiring a specific mind-set and approach. An effective working model is for a specialist decommissioning operator to take control of a field for the last years of its life to gain a thorough knowledge of its infrastructure so that when production comes to an end, a safe, efficient and cost-effective outcome can be achieved.
This is all the more important given the burden the UK Government and the taxpayer is shouldering when it comes to decommissioning.
Through a new business model, Decom Energy is addressing a gap in the market as the first fully outsourced end-to-end, late-life and decommissioning operator in the North Sea. We are challenging the conventional thinking that the company responsible for developing and operating an asset during its productive life should also decommission it. Our subsidiary company, Fairfield Energy, is half way through the plugging and abandonment of the Greater Dunlin Area’s 45 platforms and 16 subsea wells, progressing subsea infrastructure removal activities, and preparing for the removal of the topsides. This gives us, a Scottish company, a proven track record when we discuss future opportunities with operators.
We believe that the application of this best practice negates the need for owners and operators to ascend the same costly learning curve as we become their decommissioning arm, maximising efficiencies to reduce the cost of decommissioning and enabling them to focus on the production of oil from their existing operations.
Decommissioning remains a complex business and one where there are still some hurdles to be overcome, for example in the updating of regulation to reflect current thinking and in the development of new technology and innovation to address the very unique technical challenges in the North Sea.
The emergence of specialist decommissioning operators will not only streamline the decommissioning process but will ensure the availability of decommissioning delivery capability for the benefit of the industry in the UK, with the potential to expand this expertise globally into other mature basins facing similar decommissioning challenges.
This, in turn, will reduce the cost burden and ensure that the North Sea becomes the world leader in an emerging sector that will allow operators to focus on core business. Although the North Sea is facing one of its biggest challenges, the opportunity exists for Scotland and the wider UK to create a new industry sector and establish an important centre of excellence.
Graeme Fergusson is managing director of Decom Energy Limited, parent company of Fairfield Energy Group