Oil Companies Are Decommissioning A GrowingNumber Of Offshore Rigs
The Shell Brent Delta platform is brought to Able UK shipyard in Hartlepool to be decommissioned.
PA IMAGES / ALAMY STOCK PHOTO
Offshore oil rigs are going offline. Depressed prices, rising operating costs, aging equipment and, most importantly, tapped out wells have all contributed to a perfect storm: the need to decommission offshore rigs around the world, including in the North Sea, Gulf of Mexico and Middle East.
More than 600 decommissioning projects are slated to start between 2016 and 2021, with an additional 2,000 expected between 2021 and 2040. Many are bigger than ever before—with budgets stretching well past US$1 billion. Annual spending on decommissioning projects is expected to increase from US$2.4 billion in 2015 to US$13 billion by 2040, according to research and consulting firm IHS Markit.
Execution is a bit more complicated than turning off the lights and disassembling a platform, though. Offshore decommissioning projects require collaboration across a broad array of specialists and companies—from geologists, engineers and economists to firms that control remotely operated subsea vehicles or handle hazardous waste disposal. Vastly different weather and water conditions are also a factor. And facilities’ structural designs vary depending on whether they are located in deep sea or shallow water.
“There's no single company that can handle all the aspects of a decommissioning project,” says Grigorij Serscikov, director, IHS Markit, London, England. “It's an extremely fragmented industry that can involve dozens of companies for a single project.”
“There's no single company that can handle all the aspects of a decommissioning project.”
—Grigorij Serscikov, IHS Markit, London, England
“There's a need to start planning for asset retirement many years in advance of the anticipated [decommissioning] date.”
—Nigel Lees, Wood Group, Aberdeen, Scotland
Part of the problem is that beyond the sheer size of these structures and the complex stakeholder landscape, the project realm lacks broadly understood standards and practices. “There's no single methodology used to plug a well and remove all the infrastructure and equipment,” Mr. Serscikov says. “There is no way to benchmark because there is no standardization. It's a highly unregulated and unstandardized business.”
Better processes and procedures can help in some areas, but given the rise of so many first-of-their kind projects, so will tailored solutions that fit a project's unique needs, says Nigel Lees, vice president for decommissioning at Wood Group, a multinational energy services firm, Aberdeen, Scotland. For these projects, “It might be necessary to adapt or develop a specific process.”
Take Shell's billion-U.S.-dollar program to dismantle four major rigs—the Brent Delta rig, for instance, stands nearly as tall as the Eiffel Tower—in the North Sea's Brent Field. The program was unveiled in February. Deep, treacherous waters combined with unusual concrete construction methods required the use of a specially designed ship that could lift the entire 24,000-metric-ton platform—the heaviest single marine lift in history.
And, if it's like many other decommissioning efforts, early budget estimates could easily rise, says Mr. Serscikov. “If you have a well from hell or bad weather, your costs can go up by a factor of 10 times or more. There are many areas where problems can occur.”
Despite the fact that so many decommissioning projects call for unique solutions, there are emergent risk mitigation practices. For example, in some cases, duty holder service agreements, which allow a contracting firm to assume responsibility for certain assets, can reduce complexity and liability. “Too often, companies simply split projects up into teams and there's little or no coordination,” Mr. Serscikov says.
Approximate number of oil rig decommissioning projects slated to start between 2016 and 2021
Number of additional offshore dismantling projects expected between 2021 and 2040
Annual global spending on decommissioning projects by 2040
Source: IHS Markit
Past platforms were often removed one small piece at a time, adding difficulty to Shell's Brent Field project. The project also required “extensive calculations and risk assessments to determine the safest and most efficient towage plan,” Bas van Hoorn, the project's tow master, said in a news release. The platform now resides in a former U.K. shipyard, where steel and other components will be recycled.
Taking the long view on a production facility's life cycle from the beginning can help drilling organizations avoid an unexpectedly costly decommissioning process. No facility lives forever—the reservoir will eventually deplete—so the endgame should ideally be clear from the start. “There's a need to start planning for asset retirement many years in advance of the anticipated [decommissioning] date,” Mr. Lees says. That's true for assets in early oil production stages as well as ones nearing decommissioning, he says.
For greenfield projects, a design for decommissioning approach is vital, Mr. Lees says. It's necessary to “ensure we meet the objectives of the delivered asset, but we must also address the practicalities of its removal at the end of its economic life.”
Wood Group has developed a “fit for purpose” process for decommissioning that includes a flexible project delivery framework unencumbered by the normal demands of greenfield capital initiatives. “We have to recognize that our activities are not focused on meeting a first oil date, protecting an asset's value and returning value on the investment,” Mr. Lees says. Fast execution shouldn't be seen as a primary value-driver.
“There isn't a need to rush. By adopting a more flexible approach, we can focus on discharging the liabilities of asset owners in the safest and most cost-effective manner possible.” —Samuel Greengard