Thought Leadership

Offshore decommissioning: the elephant in the room

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For the last decade, the oil and gas industry have been wrestling with the subject of offshore decommissioning. Key questions surrounding this hot topic continue to be asked including who is ultimately responsible? Who is liable? To what extent should decommissioning take place? and what is the most cost-effective way to decommission?

One of the biggest challenges facing the industry is the lack of clarity regarding the total cost. Due to the bespoke nature of every oil and gas operation, analysts either publish conflicting cost predictions or offer huge ranges thus making it difficult for the industry to fully understand the extent of the liability. A recent article forecasted a Worldwide decommissioning cost over the next decade to be in the region of US$100bn, whilst a similar industry publication identified a decommissioning plan for the South East Asia region alone over the next decade to be in the region of US$100bn.

In the UK, where offshore projects decommissioning cost estimates have ranged from £30bn to £80bn over the next 30 years, there are growing concerns that some independent oil and gas businesses have decommissioning costs exceeding their market capitalization value, if these businesses were to fail then the likelihood of that liability resting with the previous asset owners or even the UK Government are highly likely. In a bid to support the industry, the UK Government has pledged to reduce decommissioning costs by some 30%, this could be met through several initiatives including policy changes, the implementation of new technology as well as financial support and incentives.

From a technology and engineering perspective we have seen in recent months the deployment of Allsea’s Pioneering Spirit in removing the 17,000 tonne Brent Bravo topside to Middlesbrough, this behemoth, although effective, represents a significant cost to any oil and gas operator with charter rates exceeding a million euros a day. On the other hand, we have the seen the issues facing the industry when things go wrong, in the case of Repsol’s Buchan Alpha where an ill thought out decommissioning plan resulted in a significant amount of the structure beached in a local Loch for several months after it broke its moorings.

The result is that very few oil and gas companies have defined the offshore decommissioning operating model that they want to follow and as such they are still to identify the skills they want to retain internally, the operations they will outsource, and the network of contractual relationships they will use to mitigate their decommissioning obligations. What is clear though is that of the 60,000 wells in production today, the industry and international community need to come together to adopt a pragmatic approach to enable decommissioning to take place efficiently, cost effectively, safely and without harm to the environment.

At Proudfoot we understand the complexity of large-scale offshore decommissioning projects with multiple stakeholders working to tight budgets and short time schedules in highly regulated environments. In response to the UK Government’s objective to reduce offshore decommissioning costs by 30% we are applying our ‘Results Hub’, methodology to the decommissioning of major oil and gas installations.

We deploy our experienced oil and gas team in an ASSESS phase, working alongside clients teams to conduct a full appraisal of the asset to be removed, review the decommissioning plans, identify the skills and experience required in the project management team, understand national and local decommissioning regulations, audit the project management operating system and meet with key stakeholders.

The culmination of this ASSESS phase is a presentation to the client highlighting the likely cost and schedule outcome based on their existing plans. In addition, we would present areas for improvement if Proudfoot were to be engaged in the next phase and the likely savings in both cost and schedule that would be realized through the implementation of Proudfoot’s improvements.

If engaged in the next stage, ADDRESS, Proudfoot is committed to deliver the improved schedule and cost savings identified in the ASSESS phase. We deploy experienced teams in a series of sprints, usually no longer than 6 to 8 weeks long, in the various disciplines requiring improvements, this could be project management team structure, stakeholder alignment, upgrading the offshore decommissioning operations plan etc. The culmination of these sprints is a robust decommissioning plan and fully aligned team that are ‘fit for purpose’.

In the concluding phase ACHIEVE, we ensure the clients staff adhere to the plan and deliver the project to the schedule and budget identified. Our ‘Results Hub’, methodology and support creates operational, cultural, and behavioral change, at all levels of the decommissioning project which is sustainable for the future and allows our clients offshore decommissioning teams to become world class organizations.

What if you could “Deliver a cost effective decommissioning project to budget and schedule whilst adhering to local and international rules and regulations” With Proudfoot you can.

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Posted on October 12, 2020

By David Warren

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