Market Insight: gearing up for North Sea oil & gas decommission

With an estimated seventeen billion pounds to be spent over the next decade on cleaning up and removing ageing oil & gas infrastructure, the North Sea decom market is set to take off in a big way, offering a significant opportunity to those in the supply chain.

In the early 1970s the discovery of oil below the UK continental shelf (UKCS) prompted an explosion of activity in the North Sea that saw hundreds of offshore facilities undergo construction. This fueled a golden age of prosperity for the UK as it became a net exporter of oil.

Forty-odd years on, a combination of rising operational costs and a slump in the crude oil price to US$33 a barrel – brought about by the shale revolution in the US and lower than expected demand from China – has dramatically changed the market dynamics for oil and gas firms (Environment Analyst 11-Dec-15). Although North Sea output increased for the first time in 15 years last year, the current pressures on the sector are making the case for facility closure more relevant.

While licensing, permitting and the construction of new facilities continues on a much smaller scale – with Taqa’s 10,000 barrel-a-day Cladhan field off the Shetland Isles being the most recent at the end of last year – the industry now faces the much larger challenge of cleaning up a 45-year legacy of rigs, pipelines and steel jackets located miles offshore in one of the world’s most difficult working environments. The era of offshore decommissioning is well and truly upon us.

Key facts and figures

According to a report from Oil & Gas UK, Decommissioning Insight 2015, nearly £800 million was spent decommissioning 19 assets on the UKCS in 2014, up 70% on the £470 million spent in 2013. But in the words of Arup’s marine environment leader Zoe Crutchfield, “this is only the beginning,” with over 470 registered installations decommissioning will begin to “ramp up significantly from 2020 onwards”.

In the next decade to 2024, around 80 platforms will have been removed at a cost of £16.9 billion according to the study. And by 2050, total spend on decommissioning will be at £58.2 billion – which is equivalent to over half of the amount needed to clean up all of the Nuclear Decommissioning Authority’s legacy of nuclear energy sites in the UK to give it some context. This will encompass the clean up of no less than 5,000 wells, 10,000 kilometres of pipelines, 500 platforms, eight “large” concrete structures, 31 large steel jackets and 220 smaller steel jackets. Make no mistake the scale of the task ahead is enormous.

Shell’s Brent Field, north east of the Shetland Isles, provides a case in point. The site contains four topsides with a combined weight of 100,000 tonnes, three concrete base structures weighing 900,000 tonnes, 17,000 tonnes of steel jackets, 103 kilometres of pipelines, 140 wells and 64 oil storage tanks each taller than Nelson’s Column and with a capacity of four Olympic-sized swimming pools. This field is one of 40 similar decommissioning project programmes submitted so far to the Department of Energy and Climate Change (DECC).

Environmental expertise

As with any large infrastructure development, the vast majority of decommissioning project costs will go to engineers and contractors – the firms that undertake the physical work – in particular for the plugging and abandonment of wells, which is likely to account for half of expenditure. But there will still be a substantial slice of the pie for specialists providing marine environmental consulting, surveying and waste management services.

As soon as the Energy Bill is approved in the House of Commons, expected sometime this year, the newly established Oil and Gas Authority – as an executive agency of DECC – will assume responsibility for regulating the licensing of oil and gas exploration, extraction, taxation and decommissioning. But environmental report approval responsibilities will remain with the secretary of state for energy. DECC’s role in this is bound by the UK’s membership of the OSPAR Commission that sees its 15 governments of the western coasts and catchments of Europe working together to protect the environment of the North-East Atlantic and its resources.

“There are significant opportunities for consultancies to get involved in this industry,” says technical director at SLR Consulting, Duncan Thomas. “Every decommissioning programme needs to be preceded by an environmental impact assessment (EIA) and comparative assessment, forming a crucial part in the decision-making process for how best to approach removal. This will require input from a range of marine specialist disciplines.”

Speaking at the 2015 Offshore Decommissioning Conference in St Andrews, Amec Foster Wheeler’s strategic business development director, Bob Churchill, claimed his firm is “uniquely placed” to lead North Sea decommissioning work. With fifteen years of experience working for the UK nuclear decommissioning industry, Churchill is confident the lessons learned here can be applied North Sea oil and gas to deliver cost savings, and in particular the use of ‘lifetime plans’.

In considering the decommissioning of offshore facilities, operators on the UKCS are obligated to produce a programme of work complete with an EIA. Core elements of the EIA include impacts on the benthic environments, fish, birds and marine mammals from decommissioning activities such as the use of cutting tools or explosives, the removal of topsides and foundations, and the accidental release of pollutants.

But there are also some very unique environmental challenges to consider such as the hazards associated with reaching the foundations of facilities in order to detach them for removal as Arup’s Zoe Crutchfield outlines: “At the base of many platforms is a drill cutting pile which, depending on the age of the structure, may contain drill cuttings and oil-based or synthetic-based muds, a fluid to lubricate the drilling of wells. During decommissioning activities to reach foundations which require cutting, it is often necessary to disturb the drill cuttings pile which has the potential to release contaminants into the marine environment, an area that needs environmental assessment.

“Previous studies have considered management options for drill cuttings piles including complete removal, however, the volume of cuttings and water depths make this a technical challenge and to date, during decommissioning, drill cuttings pile have been left in situ.”

In some cases, the EIA may consider the impact of leaving parts of the facility in place, particularly where they involve concrete and steel jackets weighing more than 10,000 tonnes.

Drivers

The early platforms built in the 70s and 80s were built at a time of few marine environmental safeguard and and small thought was given to their eventual decommissioning. And in 1999 – four years after Shell met intense criticism for its proposal to dump the Brent Spar platform in the Atlantic Ocean – the OSPAR Commission decision ‘98/3’ mandated the reuse, recycling or final disposal on land prohibiting the leaving of wholly or partly disused offshore platforms unless there are significant reasons for not doing so.

Duncan Thomas of SLR says: “Implementing the requirements of OSPAR 98/3 is a significant driver for the industry and there is already an interesting debate into how to enact it for some of the older assets in the North Sea. Some of these installations were not designed to be removed and as such the removal process itself has the potential to impose environmental impacts that must be considered.”

In 2013, Oil & Gas UK set up  a joint industry project called INSITE (Influence of Structures in the Ecosystem) with eight energy companies to better understand the effects of manmade structures on North Sea ecosystems. Using money from industry funders such as Shell, BP and Exxonmobil the INSITE has supported a number of specific marine environmental research projects – some of which have added credibility to the idea of leaving certain structures in situ.

One way in which an operator can assess the marine habitat that has developed on installations is with a marine growth assessment (MGA). Depending on the depth, water temperature and salinity a subsea structure can become home to seaweeds, anemones, mussels, corals and tube worms, to name just a few. And it is not just the disruption of this habitat at stake but the transport of potentially-invasive species to near-shore habitats which is of concern.

In a paper written to encourage the undertaking of MGAs as a matter of course, BMT Cordah director Joe Ferris says: “An important environmental issue is the occurrence and spread of marine species outside their naturally occurring range with the risk of introducing an invasive species. Species including the Ross worm and Lophelia coral are listed under the Convention on International Trade in Endangered Species of Wild Flora and Fauna (CITES) meaning a certificate is required to transport them between states.”

Arup’s Crutchfield also sees the in situ versus removal debate as being critical for the sector in the years to come: “Historically organisations such as Greenpeace have piled on the pressure for complete removal as have commercial fisheries representatives; however, whether complete removal of all infrastructure is the best overall option is a difficult issue which will be debated and challenged more in the coming years.

Issues such as the environmental impacts and health and safety implications of removal, in perpetuity liability for structures left in situ and the costs of decommissioning, as well as how removal of the network of facilities will itself impact upon marine ecosystems, all require consideration.”

Decommissioning and the circular economy

Although marine environmental consultancy has not been one of SLR’s traditional focus areas, the consultancy is now looking to bring its expertise in land-based waste and resource management and apply it to the offshore decommissioning arena, which arguably looks to offer more in the way of growth opportunities. The firm has already identified the potential to integrate the waste hierarchy into the onshore decommissioning of assets.

“By 2023 an estimated 500,000 tonnes of [offshore decommissioning] material will have landed on UK shores presenting a significant challenge to the waste industry. We are recommending operators maintain an accurate inventory of assets during later-life management and start working now to develop the market for re-use,” says Thomas.

A recent report authored by Thomas and published by SLR, The management of decommissioned material in a circular economy, identified a multitude of possibilities for the assets, including onshore applications for recovered pipelines, refurbishment of accommodation blocks for onshore use and the redeployment of concrete ‘mattresses’ used for ballast offshore into agricultural applications. Whilst there are obvious environmental benefits from re-use, another plus point is this approach also also adds to the corporate social responsibility credentials of the operating firms.

With expenditure in this sector forecast to grow substantially over the coming years, the opportunity for marine environmental specialists and waste management experts alike is clearly there. But with decommissioning at least partly funded by the taxpayer, there is also a huge pressure to remove these structures with the lowest environmental impact and at the least cost – so consultants will need to bring both cost-efficient and innovative solutions to the table.

Source: environment analyst

Comments

comments

Leave a Reply

Your email address will not be published. Required fields are marked *