Oil & Gas Decommissioning Could Be A Massive Business Opportunity

Decommissioning of oil and gas platforms in the UK North Sea is a “massive opportunity” for the UK supply chain to keep developing skills and experience to win lucrative contracts overseas, the UK’s oil and gas regulator says.

As oil and gas fields in mature basins such as the North Sea approach the end of their production life, heavy-lift contractors, ports, and the numerous services firms in the supply chain have the opportunity to show world-leading expertise and meet part of the international demand for decommissioning services.

Demand for such services is expected to rise not only in the North Sea but also offshore Southeast Asia, Australia, and South America. Australia aims to develop a roadmap to build an Australian decommissioning industry, while companies in Brazil are teaming up with local ports to support the decommissioning of platforms.

UK Decommissioning Sector A “Massive Opportunity”

The UK’s offshore oil and gas industry spent £1.6 billion on decommissioning last year, which was its highest annual total spend to date, the North Sea Transition Authority (NSTA) said in its latest Decommissioning Cost and Performance Report in August.

The report found that the industry spent a total of around £8 billion from between 2017 and 2022.

The cost estimate for decommissioning of remaining oil and gas infrastructure on the UK Continental Shelf is £40 billion.

In November 2022, the NSTA and industry agreed a target of cutting the estimate to £33.3 billion by the end of 2028 in an effort to maintain focus on cost-efficient project execution. The target is based on NSTA decommissioning benchmarking and actual cost savings secured by the sector’s top quartile performers in recent years.

There is significant opportunity ahead for the sector, with £21 billion of spending on decommissioning expected for the next decade alone.

The UK sector has developed a track record of high-standard decommissioning services and activities, keeping costs competitive and making the industry a world leader in decommissioning, the regulator noted.

UK suppliers are in line to secure around 70 percent of the work associated with UK North Sea decommissioning projects listed in Supply Chain Action Plans (SCAPs) lodged with the NSTA in 2022. This, according to NSTA, is a clear indication of the sector living up to its North Sea Transition Deal pledge to ensure at least half of spending on decommissioning projects goes to the UK supply chain.

While costs have come down in recent years, the coming decade will be crucial to the UK industry delivering a marked and sustainable improvement in cost efficiency as half of remaining expenditure on UK Continental Shelf (UKCS) decommissioning is expected to be committed in this period.

“This represents a huge, immediate opportunity for the UK to further develop its capabilities and reinforce its status as the global centre of decommissioning excellence,” NSTA said in the report.

“Building the capacity and capability of the UK’s supply chain will not only deliver UK decommissioning but will position the industry to win lucrative contracts for decommissioning work overseas. Its experience and expertise could also be transferred to other energy sectors which will require decommissioning services, such as offshore wind.”

Operators and suppliers need closer collaboration, with clear decommissioning schedules and plans, to provide a balanced view ofperformance and drive improvements over the next decade, according to the regulator.

“The North Sea decommissioning sector is highly active and productive, and the industry is ideally placed to realise the massive £21 billion opportunity which will come its way over the next 10 years,” said Pauline Innes, NSTA Director of Supply Chain and Decommissioning.

“However, operators must redouble their commitment to collaborate with the supply chain and plan even more effectively if they are to overcome challenging market conditions and remain competitive on cost,” Innes added.

Bob Fennell, DaRT co-chair and North Sea executive vice president at Harbour Energy, said, commenting on the NSTA report:

“Collaborating and sharing data is an important first step to providing the supply chain with the visibility and confidence they require to meet UK demand for such works in a timely and cost-competitive way.”

Sam Long, Decom Mission Chief Executive, said:

“Decommissioning is but one of many market opportunities that members face, with the continuing advancement of the energy transition and the international need for decommissioning services.”

“Transparency of coming works and interaction between the owner/operator community and the supply chain is key to ensuring that the services, preferably offered from within the UK, exist to meet this current and future demand,” Long added.

Decommissioning Survey

During SPE Offshore Europe in September, Decom Mission launched a survey of the global decommissioning supply network – which will be the first to provide primary insight into its current capability and capacity, as well as providing a snapshot of sentiment across the sector.

Decom Mission plans to publish a report on the survey in May 2024, which is expected to reflect the current state of the decommissioning supply network across the oil and gas, nuclear energy, and renewable sectors.

To carry out the survey and draft the report, Decom Mission has partnered with data science experts – and Decom Mission member – Empirisys, to develop and deliver the survey, following the impact made by the latter’s recent work in delivering the largest survey of its kind for Step Change in Safety.

“Currently, there is constant emphasis on future opportunities within the energy industry; Decom Mission is adamant that those of the present should not be forgotten about,” Decom Mission’s CEO Long commented.

“Decommissioning plays a crucial role in the energy transition and this survey focuses on the opportunities of today and tomorrow – that’s vital to the survival of this industry.”

Decommissioning Deals

At the end of September, Offshore Energies UK announced its shortlist for the Decommissioning Conference awards in November.

The Excellence in Decommissioning Awards recognise companies that have performed to an exceptional level within the offshore decommissioning industry. The award criteria can cover any aspect including project execution, design, innovation, HSE, cost performance, and contribution to the energy transition.

Repsol Sinopec Resources UK Ltd, Spirit Energy, and TAQA UK were shortlisted as the Operator Category Finalists, while DOF, Stork, and
Utility ROV Services Limited were picked as Supply Chain Category Finalists.

“Decommissioning is an integral part of the lifespan of any offshore project and the awards are a great opportunity to celebrate the key role our companies and their people are playing in this innovative space,” OEUK’s HSE and Operations Director Mark Wilson, said, commenting on the shortlists.  

Meanwhile, ocean services provider DeepOceansaid in early October it had successfully completed a significant decommissioning project on Fairfield Energy’s Dunlin Alpha platform on the UKCS. As part of its scope, subsea specialist DeepOcean removed 6 subsea conductors and 4 vertical supports at varying water depths and removed the upper conductor guideframes with an estimated weight of 400 tonnes, together with the design and installation of bespoke clamps. Key subcontractors who assisted in delivering the scope of work include Claxton, Machtech, and Global Energy Group.

The Dunlin Alpha installation, located approximately 137 km northeast of Shetland in a water depth of 151 m, produced its first oil in 1978. Fairfield Energy acquired the assets in 2008 and took over full operatorship in 2014, maximizing production during its late-life stage and then progressing its subsequent decommissioning programs.

Port of Blyth welcomed in August their largest oil and gas decommissioning project to date into their Battleship Wharf terminal, the home of the Port’s unique decommissioning facility, operated in partnership with Thompsons of Prudhoe.  

Ideally located midway between Aberdeen and Great Yarmouth, Port of Blyth is a leading UK offshore energy support base and is well-placed to support major decommissioning projects in the North Sea and beyond, the port says.

Another port, Porto do Açu in Brazil, signed an agreement with Brazilian state energy giant Petrobras to provide support to the decommissioning of oil and gas platforms. The agreement makes docks available for platforms undergoing decommissioning to be temporarily docked at until the final destination of the unit has been decided, in accordance with best international practice on green recycling and sustainability (ASG), Petrobras said in September.

The agreement is part of Petrobras’s plan to decommission a total of 26 platforms by 2030.

In Australia, the government is looking to establish an Australian decommissioning industry for offshore oil and gas. The Australian Department of Industry, Science and Resources invited in September stakeholders to submit views and feedback on how Australia can establish an industry to decommission offshore oil and gas infrastructure.

About US$38 billion (AUS$60 billion) worth of offshore decommissioning activity is expected to occur in Australia over the next 30 to 50 years, the government says.

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