The North Sea’s decommissioning phase has been a long-time coming, with production cessation dates perennially set back, and ultimate costs always based on estimates.

Now, however, activity has started in earnest and the real costs are showing a worrying upward trend.

Up until recently, the estimated decommissioning cost for assets in place in the UK North Sea has been about £35-40 billion (US$54-61 billion). Oil & Gas UK’s 2015 Activity Survey increased the estimate to £41-46 billion ($63-70 billion). But attendees at the SPE’s European Well Abandonment Seminar in Aberdeen this past April were told that, based on real costs, the figures are closer to £40-70 billion ($61-107 billion).

The new estimate is based on work by the UK’s Department of Energy and Climate Change (DECC) and Genesis, an engineering consultancy subsidiary of Technip. The work looked at the cost over time of decommissioning in the North Sea, with the aim of understanding cost trends to enable operators and DECC to determine where costs could be reduced and efficiencies could be made. The scope covered wells, tonnage, and unit costs.

Audrey Banner, head of offshore decommissioning at DECC, says while “high-level” costs have already been forecast, those forecasts have been based on nominal costs. Now that decommissioning activity is underway, and real costs are available, it has been found that costs are higher than expected. The reasons she says, could be inaccurate cost estimates, lack of scope definition (including not knowing what is in wells) and inadequate planning.

According to Oil & Gas UK figures, average cost-increase estimates are going up by about 14% per year. But the study, which took a detailed look at four actual projects, found that costs overruns had been over about 60% of the estimated decommissioning costs. As a result, the study found costs could be around £40-70 billion, or £58 billion ($88.8 billion) based on a mean estimate.

Plugging and abandonment is one of the highest cost areas – comprising about 60% of the total decommissioning cost, followed by topsides at 9.8%, then subsea structures at 6.2%. Based on real data, platform wells range from £2-8 million ($3-12 million) per well and average £3.8 million (45.6 million) per well. Subsea wells have been as high as £13 million ($19.9 million), with the low at £4 million ($6.13 million) and the average £6.8 million ($10.42 million).

Facilities removal costs have been £2200/tonne ($3371/tonne) for topsides and £4100/tonne ($6282/tonne) for subsea infrastructure.

“The largest cost sensitivity is around plugging and abandonment,” Banner says, where a change in scope can increase costs, due to rig rates and vessel service rates. “They [costs] could drop 30% or go up 20% depending on rates. Rigless abandonment could increase or decrease costs by about 50%.”

Using single lift vessels to remove topsides, such as Allseas’ Pioneering Spirit (formerly Pieter Schelte), could reduce costs by 30% or increase them by 20% depending on vessel and people costs. Changes to derogation rules could also impact costs, if the derogation rule was increased to facilities weighing more than 5000-tonne, instead of 10,000-tonne, for example.

The industry is, however, only just really starting its decommissioning curve in earnest. Delaying of decommissioning dates has been seen to hinder supply chain and skills and experience development, which would help reduce costs.

However, that should change in coming years. From 2014-2023, the industry will undergo a big increase in activity, Banner explains. “£58 billion is not a fait accompli,” she says. “There is work we can do to get the costs down.”

Banner suggests operators focus on their plans and commitments and share such information with the supply chain. Operators should also look at capability and career paths, reduce staff “churn” in decommissioning teams, create a small team that moves around projects, and have fit-for-purpose standards on wells and share information with peers.

The supply chain, on the other hand, needs to ramp up capability, she says, with fit-for-purpose technology and equipment. i.e. rigless plugging and abandonment capabilities and diverless subsea operations. The regulator also has a role to play, by offering clarity and guidance on decommissioning requirements, she says.

“[The] entry of specialist decommissioning players should be considered to late-life manage and lead in to decommissioning,” Banner says.


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