Following the oil price crash at the end of 2014, many in the oil and gas industry were left wondering about the future of oil and gas production in the UK, and whether the Industry would last long enough to see them to the end of their careers, be that 5, 10 or 20 years.
The remaining life of the oil and gas industry has always been very difficult to predict, with numerous factors at play. While the demise of the industry has been predicted many times in the past, those predictions have failed to occur. More recently, many practioners feared the worst following the findings of the Oil and Gas UK 2016 Activity Survey, which indicated around half of all UK oil fields would be operating at a loss in 2016!
Development engineers are often asked to predict when fields might reach the end of their field-life, when decommissioning might occur, or which infrastructure has the most robust field life in order to select export routes for new fields. These are difficult questions to answer given the complexity of the field and pipeline network in the UKCS, and the limited information in the public domain on long term plans.
Infrastructure in the North Sea has developed by a “hub and spoke” system. Large main hubs centred at some of the initial giant oil and gas fields installed main trunk lines to onshore terminals; whilst fields which developed later were installed as spokes to the hub, tapping into the existing infrastructure. This provided a lower capital cost for developing each field, but it now means many fields are inextricably connected. The shutdown of one field can lead to the premature closure of many others, either for technical or cost reasons; this is when the so-called “domino effect” can begin to take hold.
Using experience and knowledge gained through working on many field developments, Lloyd’s Register development engineers have created a pipeline network modelling tool to predict pipeline “cessation of production” dates, and to allow modelling of the domino effect. Sensitivities were tested to determine what factors have the biggest potential to shorten oil and gas production in the UK and, perhaps more importantly, what factors are key to prolonging the life of the Industry.
With over seventy key pipelines and around three-hundred fields in the model, not to mention the interconnectivity with Norwegian fields, the complexity of UKCS infrastructure was no mean feat to model.
It will come as no surprise that the oil and gas price was found to have the biggest influence on the number of years of remaining production. Lloyd’s Register also found that maintaining production rates in several key pipelines was critical. Certain pipelines have minimum flow rates required to avoid operational issues.
A high number of fields will potentially be impacted when these low rates are reached, resulting in a significant loss of production at the tail end of a field’s life. Either a rationalisation of infrastructure will be required to ensure rates are kept high in a fewer number of pipelines, or new production is needed to fill up these key pipelines.
Rationalisation of infrastructure is a tricky path to travel down, with those left needing to change export routes late in field life questioning the economics of the modifications required. With ever smaller and more complex fields remaining to be developed, tying into any pipeline other than the closest is unlikely to result in an economic development.
What appears to be needed is a more joined up strategy with a controlled and planned rationalisation, alongside managed field development plans to ensure the bigger picture is optimised and maximum economic recovery is achieved.
With the Oil and Gas Authority guiding this approach, the industry requires a shift in culture and mindset. Industry professionals need to start thinking and acting differently to ensure the oil and gas industry continues to thrive for many years to come. By adopting a more collaborative approach and seeking to do what is right for the wider industry, individuals and companies across the supply chain will reap the benefits and prolong the viability of their business in the North Sea.
Christina Smitton is the development engineering team lead at energy consultancy, Lloyd’s Register. She will deliver a talk ‘Assessing ‘The Domino Effect’ through UKCS Pipeline Network Modelling’ at Subsea Expo in Aberdeen on February 2.
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