California is the next decommissioning growth market, expert says

With a finite number of platforms in the Gulf of Mexico (GoM), companies should look to California as the next promising US offshore decommissioning market, an expert has said.

While GoM decommissioning activity should stay at a fairly high level for the next decade – with 200-plus platforms coming out each year, if historical figures are any indication – after that it’s hard to predict, says Professor Eric Smith, associate director of Tulane University Energy Institute.

“You’re dealing off a finite base,” he said. “As long as you’re not installing new platforms and you’re taking out two hundred-plus platforms a year, and we’re dealing with a universe... of three thousand platforms in shallower water, you have trouble predicting past a decade or so that those kind of levels can be maintained.”

“There are two or three things that look promising to me in the domestic market and one of those is California,” Prof Smith told a conference during DecomWorld’s Gulf of Mexico Decommissioning & Abandonment Summit in Houston in March.

There are currently 23 large drilling and production platforms off California, producing 22 million barrels of oil and 21 billion cubic feet of gas per year, according to the Bureau of Ocean Energy Management (BOEM).

Many of them are over 30 years old, and the equipment and skills needed to decommission them are not currently available, Prof Smith said.

“I was part of an MMS study 10 years ago that said you’d better start planning on billions and billions of dollars because there are no derrick barges, there’s precious little in the way of diving capability, no onshore fab yards and sites where you can take things apart, and these things were put in between the late seventies and early eighties,” Prof Smith said.

“So at some point somebody’s going to make a lot of money figuring out how to take these things apart.”