Monday, 12 December 2016

A John Lawrie guide to decommissioning - by Ray Grant, Environmental Director

Decommissioning of oil and gas assets is now one of the most significant, and challenging projects for the North Sea oil and gas industry.  Activities and expenditure are expected to ramp up over the coming decade, so it is vital that the supply chain fully understands the critical factors that need to be considered.

Last month’s Offshore Decommissioning Conference provided the backdrop for the launch of a new study -  Decommissioning Insight 2016 - published by Oil and Gas UK, which revealed that more than £17bn will be spent on decommissioning North Sea platforms over the next decade.

The study also highlighted around 1800 oil wells which are due to be plugged over the next ten years. Between the UK and Norwegian continental shelves more than 100 platforms will be completely or partially removed, with 7500km of pipeline forecast to be decommissioned.

Decommissioning programmes are complex and vary from region to region, so in this article, we at the John Lawrie Group have explored the critical questions to consider in order to keep projects on course and mitigate delivery risks.

Q: What is decommissioning and why is it needed?

I’ll answer the latter part of the question first. Under OSPAR (Oslo & Paris Convention set up in 1998 to protect and restore marine ecosystems and the natural environment) and various other European and UKCS legislation and regulations, oil & gas operators are largely prohibited from leaving offshore installations, such as topsides and jackets and associated subsea pipelines and wellheads etc. in place at the end of their working lives. Consequently, they must remove them to enable other users of the seas (e.g. fishermen) to work in a safe and clean environment, otherwise known as decommissioning.

Decommissioning generally involves the dismantling and breaking up of the various items to maximise their recovery in both environmental and monetary terms. This means they have to be decommissioned and made safe prior to removal to onshore facilities for disposal, preferably by environmentally sustainable means such as reuse and recycling.

Q: What types of facilities are decommissioned?

A whole range of facilities are currently in the process of being, or are planned to be, decommissioned over the next 30 - 40 years, from subsea clearances involving thousands of kilometres of pipelines, umbilicals, wellheads, protection structures and concrete mattresses etc. to large platform topsides and jackets. For example, Shell’s iconic Brent field with its Delta platform is currently being made ready for single lift and removal to shore in 2017. A relatively small number of piece small items and subsea materials have already been removed over the last few years but many more are planned to be removed in the near future. Also, hundreds of smaller platforms typically weighing between 2,000 tonnes to 5,000 tonnes are to be decommissioned, these being mainly located in the southern North Sea, with some currently being planned for removal in the next 2-3 years. A total of c620,000 tonnes of material is expected to come onshore for either reuse, recycling or disposal over the next decade in the UK Continental Shelf alone.

Centrica Rose Decom Leith June 2015

Q: What is meant by the term ‘piece small?’  

Piece small is effectively taking an offshore installation apart in relatively small pieces which can be shipped to shore utilising standard supply vessels or DSV’s which are relatively easy, and cheaper, to hire compared with specialist heavy lift vessels. This method, also known as ‘skip and ship’ obviously requires more time spent offshore compared with a single lift operation, but reduces the risks from potential offshore issues, such as the availability of heavy lift vessels, bad weather, and the inherent safety risks.

Q: What are the challenges associated with the decommissioning process?

Decommissioning involves a number of challenges and processes, most of them undertaken offshore such as plug and abandonment of the wells (which accounts for nearly 50% of the costs), subsea removal of pipelines and wellheads etc. and heavy lifting and transportation of the recovered topsides and jackets to shore for recycling and disposal.

Operators are challenged in deciding which type of decommissioning strategy to adopt, either single heavy lift, modular sections which are removed in more manageable sizes, or piece small. All options present different challenges and, therefore, each option requires to be appraised on its specific merits. Clearly, large single lifts carried out offshore will require less manpower in a hostile offshore environment compared with taking smaller pieces onshore for decommissioning in a relatively safer environment. However, lifting a topside and jacket in a single lift will, particularly in the northern North Sea where the platforms and jackets tend to be much larger (>10,000 tonnes for jackets and similar for topsides), offers limited choice due to the lack of suitable UK onshore facilities located at quaysides.

Q: How is the decommissioning market expected to grow?

This is extremely difficult to predict as operators, quite rightly, want to delay decommissioning for as long as possible to make sure every last barrel of oil (or gas equivalent) is extracted from the field reservoir. Consequently, 17 projects were postponed during 2016 alone as operators extended field life. The Oil & Gas UK Insight report, which was published at the Decom Conference in November, states that 94% of projects are in the early planning stage with actual decommissioning expected around 2024/25. However, given the slippage we’ve witnessed to date, some of these could well be delayed beyond 2025. This uncertainty, coupled with a volatile oil price, makes it very difficult to plan when to invest in the necessary onshore infrastructure to meet demand. Nevertheless, Oil & Gas UK in their report anticipate £17.6 billion will be spent on decommissioning between now and 2025, which is a pretty significant opportunity by anyone’s standards!  

Q: How much of the market does Scotland currently attract?

Currently, there are no onshore facilities in Scotland large enough to receive large super-heavy single lift structures, such as Shell’s Brent platforms which can weigh in the region of 25,000 tonnes each, the first of which are going to the only UK yard large enough to receive them at Hartlepool in England. Also, countries like Norway for example are much further ahead than the UK in decommissioning and have made substantial investment in large quayside facilities with deep water berths capable of receiving large topsides and jackets for breaking. Generally speaking, this means that only the relatively smaller subsea and piece small items are being received for processing and recycling through Scottish ports.

Given the large number of ports and quayside facilities, Scotland has the potential capability and capacity to receive more of the larger piece decommissioning market in the future to capture the installations located in the northern and central North Sea areas. However, significant investment will be needed to develop strategically located onshore facilities with deep water berthing in order to attract large scale decommissioning to Scotland. Clearly, this would need to be balanced between the scale of the investment against the certainty, or more likely uncertainty, of demand.

However, bearing in mind that the onshore processing element is only estimated at 1% of total decommissioning spend, there are significantly bigger opportunities for companies further up the supply chain, such as in Well plugging and abandonment, and offshore infrastructure removal costs.

Q: What do Scottish companies need to do in order not to miss out on a burgeoning North Sea decommissioning market?

Like any new development or business opportunity, companies need to understand the marketplace they are looking to move into. Decom North Sea, a membership organisation with over 400 members including operators, major contractors, service specialists and technology developers, and which John Lawrie is a member of, is an excellent forum for keeping up to date with decommissioning developments and networking, and I would strongly recommend it to anyone who has set their sights on entering the decom marketplace..

Q: What could decommissioning cost, and how much will taxpayers need to fund?

According to Oil & Gas UK, overall decommissioning costs for the North Sea are estimated somewhere around £45bn between 2015 and 2040. However, this figure is increasing annually and, depending on which report you read, anything up to £100bn has been suggested. Probably unknown to a large number of people is the fact that around 50% of these costs will be met by the UK tax payer in the form of tax rebates to oil and gas operators. This makes it all the more important to keep decommissioning costs as low as possible.  

John Lawrie Decom is ideally placed to offer decommissioning services to the oil and gas sector. Over the past twenty years, we have built an established track record and have successfully carried out a number of projects involving the processing of piece small items and the dismantling of medium sized oilfield and industrial structures.

John Lawrie Decom offers decommissioning facilities at a number of ports throughout the UK to suit specific client requirements. With sustainability in mind, we have progressively developed our expertise in the deconstruction, processing, recycling and disposal of a range of redundant subsea materials, including flexible risers and flowlines. umbilicals, manifolds, trees, mid water buoys, mooring systems, concrete mattresses and various associated items.

For more information, please visit our website: http://johnlawrie.com/decommissioning-services

 

Ray Grant profile picture

 

Ray Grant has more than 35 years' experience in the waste management industry. He is also a director of John Lawrie’s Norm decontamination joint venture company in Aberdeen, NORM Solutions Ltd, which has been operational since 2012. He was a North Region board member of the Scottish Environment Protection Agency (SEPA) from 1996 to 2000, has been a member of the Chartered Institution of Wastes Management since 2002 and is a Chartered Environmentalist. Ray has also been a member of the British Metals Recycling Association’s (BMRA) Legislative Policy Group since 2007 and has recently been appointed Chair of the BMRA’s Scottish Policy Group.

 

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