By Rikki Stancich

Oil and gas operators in the Gulf of Mexico will need to set permanent plugs in nearly 3,500 non-producing wells, and dismantle roughly 650 idle oil and gas production platforms, in order to comply with the US Department of the Interior's new rules on idle iron.
With 1200 wells and 130 structures to be removed annually on top of normal decommissioning activity, offshore service providers are positioing themselves to reap the rewards of a pending upswing in demand, valued at US$3.5bn, according to estimates by Professor Mark Kaiser, director of research and development at Louisiana State University’s Center for Energy Studies.
DecomWorld speaks to Bill Napier, president of oil and gas engineering, project management, and consulting company, Fairwinds International, to gain insight into how the Idle Iron mandate will shape the decommissioning market in the Gulf of Mexico in the short-to-medium term.

DecomWorld: How is the NTL impacting operators in the gulf of Mexico?

Bill Napier: The likes of Chevron and Apache have a lot of idle iron out there. Operators hate the decommissioning side - it is a non-profit generating exercise, so it needs to be as cost effective as possible. But the volumes are there.
The rules didn’t change things that dramatically, it is really just reemphasizing and reinforcing existing rules. The independents are getting their programmes in place as we speak to get a plan moving forward.

DecomWorld: Is it likely to force many operators to review their existing decommissioning plans, or were operators prepared for this?

Bill Napier: Yes. [Operators] are going to have to step back and review their programme to make sure they are in compliance. Operators have to meet with the Bureau of Ocean and Energy Management (formerly MMS) every year and they have to tell the BOEM their plans, and stick to them.

DecomWorld: How will the market change in coming months – is there likely to be a supply gap?

Bill Napier: What we will see is more service companies opening up to go after this business. Is there likely to be a supply crunch? Selfishly, I hope so! There is, but what I see is competition positioning themselves as decom experts. The market is opening up and it is becoming flooded with service providers.

DecomWorld: What is the current vessel situation in the GoM – will there likely be a spike in day rates as demand outstrips supply?

Bill Napier: I don’t think so. There are a lot of vessels and no-one is building new platforms. I had a meeting with a large contractor 2 weeks ago and I don’t get the sense that there is not going to be enough capacity. There will always be crunches due to weather or seasonality, but on a year round utlitisation, no, I don’t think there will be any supply crunches.

DecomWorld: How are offshore service providers positioning themselves to take advantage of the decommissioning market?

Bill Napier: Here, the consensus is that clearly it will be a growth market over the coming years for the Gulf of Mexico. No doubt about it.
All the service providers are getting on board. New construction has slowed dramatically and so service companies are forming alliances – ourselves included – in order to be in a position to offer services to the majors as a bundled package.
It may be more cost effective for operators to look for bundled packages, rather than going to say four or five independent companies for a range of different services. So the service providers are positioning themselves to deliver packages.
Operators are looking for turnkey solutions in a bundled package. They’ll be looking to go to one provider who can arrange the well P&A, decommissioning of structures, project management and permitting.

DecomWorld: Concerns have been voiced over the apparent lack of preparedness of the regulator to handle the volume of permitting. In your view, is this a valid concern?

Bill Napier: Yes, permitting will more than likely be an issue.

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