Peak P&A years away in UK; North Sea contractors smell opportunity; Early plugging judged poorly in Norway
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P&A on rise in UK – but peak years away
Expenditure on North Sea and Irish Sea decommissioning will total £16.9 billion (US$25.5 billion) in 2015-2024, but deferral of some projects means most of this spending will be made post-2020, according to Oil & Gas UK's latest Decommissioning Insight.
Activity is expected to peak in 2022, with spending of £2.2 billion.
In the previous edition of its annual Decommissioning Insight, the trade body forecast £14.6 billion in decommissioning expenditure over a 10-year timeframe. This year’s increase was primarily due to 47 new projects entering the survey timeframe – most of them in the central North Sea – and did not signal any changes to cost estimates of existing projects.
Plugging and abandonment (P&A) accounts for 46% of total forecast expenditure, with more than 1,200 wells forecast to undergo P&A in the surveyed timeframe. This figure represents close to 30% of the total number of wells that will eventually require decommissioning, the report said.
Some 79 platforms are forecast for removal over the next decade, representing about 17% of the estimated 470 installations that will be decommissioned over the next three to four decades.
North Sea contractors eye decommissioning for business
More than three-quarters of North Sea oil and gas contractors expect to be more involved in decommissioning work in the next three to five years, in a rare positive from the Aberdeen & Grampian Chamber of Commerce’s 23rd Oil and Gas Survey.
Confidence is at an all-time low among contractors, the study found, with 79% of the surveyed companies expressing less confidence in their prospects than a year ago. Some 64% of firms reduced their workforce in 2015, compared to 14% who increased numbers.
On the other hand, 28% of contractors expect their numbers of core staff to increase over the next three years on the back of decommissioning and enhanced efficiency in producing oil fields.
“Firms identified decommissioning experience as the number one skill required over the next three years, which is a bitter-sweet positive,” said Uisdean Vass, partner at law firm Bond Dickinson, which sponsored the survey.
“An increase in decommissioning activity will inevitably herald a decline in offshore exploration and production, so in a certain sense the industry will feed on the body of infrastructure which supports it.”
British consultancy debuts in decommissioning
Project services consultancy Cambla is expanding into the decommissioning sector on the back of separate deals with two major operators in the North Sea.
“Decommissioning is now high on the agenda for many companies in the energy industry and we are delighted to have established ourselves as project services experts in this sector,” said Alexander MacLeod, founder of the Aberdeen-based firm.
Cambla will deploy at both projects its Schedule Animation Tool (SAT) software, which is designed to optimize vessel deployment in order to improve accuracy and reduce costs, time and safety risks associated with the planning of subsea oil and gas operations. The company says the software is in high demand due to the challenging market conditions in the North Sea, where vessel operators are under immense pressure to identify when their fleet is not being fully utilized.
SAT provides an accurate visual representation of a vessel’s location and planned activities, and increases engagement within a project team and external stakeholders, according to Cambla. Several upgrades have been made since the February 2015 launch, including increased fleet management capabilities, an enhanced data input system, and a function to display fixed infrastructures such as platforms and floating production, storage and offloading vessels.
Early plugging seen as bad business in Norway
The Norwegian Petroleum Directorate (NPD) has expressed its opposition to the high rates of plugging of wells, saying that conducting such activities prematurely can prevent value creation.
The NPD, an administrative body that reports to the Ministry of Petroleum and Energy, wants licensees on the Norwegian Shelf to use available rig capacity to drill new wells and re-use existing ones in order to boost production.
“Multiple re-use methods are used to produce remaining resources,” it said. “It is important that the considerable investments represented by a well are utilized as long as they are profitable from a long-term perspective.”
Forty to fifty wells are scheduled to be plugged each year “over the next few years”, out of a total of about 2,200 wellbores currently in use in producing fields, according to NPD data.