Being long in the tooth and possessing a healthy scepticism born out of decades of experience I look upon the proposition that Scotland can develop a major decommissioning sector with wry amusement.
We know the amount of decommissioning work across the UKCS is going to be huge. UK Oil and Gas suggest that it already accounts for 2% or so of expenditure rising to over 10% over the next ten or so years. This – they calculated last year – would amount to an expenditure on the UKCS alone between 2016 and 2025 of £17.6 billion which is nearly £1 billion higher compared with 2015 forecast.
But we’ve known about this for a long time. Indeed we’ve actually known about it since the seventies when the first fields started going in. Everyone must have realised then that at some point all this hardware was going to have to be taken back out and all those wells would need capping. Didn’t they?
However, the big question is how much of that work can we reasonably assume will come to Scotland.
Of course the big problem is that as usual we didn’t decide to do much about this until relatively recently. I can remember having discussions with operators about this whole topic fifteen or twenty years ago. So if it was in at least some people’s minds then why weren’t we considering what it would take to snaffle a large chunk of this work.
Where for example was the plan to build a UK owned heavy lift vessel capable of removing the likes of the Brent topsides and most jackets. We didn’t bother building such a vessel during the construction period so the chances of building one for decommissioning work were of course always slim.
Having that capability though was surely key to building a decommissioning industry because it seems to me that to a large extent whichever company gets that tier one lifting job also dictates where whatever they’ve lifted actually gets “scrapped”.
For me the day that it was announced that Allseas intended building the Pioneering Spirit (formerly Pieter Schelte) heavy lift vessel the game was really over for any UK pretence that it wanted to become a major player in the decommissioning business.
No UK company would have been prepared to make that sort of investment and I actually wonder if any UK company could have realistically made that level of investment anyway. After all, the build cost was reputed to be nearly £2.5 billion!
When Shell awarded the Brent topsides removal contract to Allseas with their nice new heavy lift vessel the site selected for where it was to be scrapped was the huge Able demolition yard on Teesside. It was an entirely logical decision. There was nowhere else – particularly in Scotland – capable of doing the job.
Again, although we had plenty of time to do it we didn’t make any real attempt to create such a facility. There was a lot of talk about a number of options including Peterhead, Dundee, the Shetlands and others but unlike Norway no realistic investment was ever going to be made to enable Scotland to even come close to competing with the Able yard. That said, some effort is being made to provide some facilities in Dundee and they’ve formed a joint venture with AF Offshore which is part of AF Gruppen which coincidentally runs the Vats base in Norway.
Norway has not only created the Vats base in Western Norway but also has the Lutelandet Offshore facility in South West Norway.
Vats has already been used for work on the Frigg field decommissioning programme and – significantly for Scottish aspirations – the decommissioning of the UK sector Murchison platform working with Heerema who also have a heavy lift capability.
Lutelandet works with the decommissioning division of the French company Veolia Environment S.A. and they have jointly already undertaken a number of decommissioning and recycling projects.
Veolia also operate the Shetland decommissioning site and has recently taken on the decommissioning of the 12,000 tonne Buchan Alpha semi-submersible moored floating production vessel.
The Shetland site whilst smaller than its Teesside and Norwegian counterparts has already undertaken a number of fair sized decommissioning projects including parts of the Frigg topsides structure and various subsea systems. It therefore certainly can compete on some but certainly not all projects.
Well abandonment is of course the other important aspect of the decommissioning process. Successful “plug and abandonment” is what really defines whether a decommissioned field is going to be both safe and environmentally secure.
Self-evidently this is also a very big business. Current estimates suggest some 1,470 wells will need dealing with in the UK sector alone between 2016 and 2024. Of these 1,180 wells are platform-based with the rest being subsea well.
Plug & abandonment activity is expect to result in an average annual spend of just over £820 million over the next ten years but it’s important to know that some suggest this figure could increase again later.
In reality and reading across a number of forecasts there remains a lot of uncertainty of the numbers of wells that will need plugging and abandoning although it’s fair to say that regardless of that this is a growing and ultimately huge market not just in the UK but globally.
Proof of that is that this market is attracting new players with relatively deep pockets. Note for example the recent establishment of Well-Safe Solutions by a collection of “well kent” and experienced faces here in the NE of Scotland.
They’re in the process of raising £200m in investment and are intent on employing around 400 people. I believe them and I also believe this is going to be the sector in which Scotland can genuinely carve itself a profitable niche.
Also worth mentioning of course are the specialist companies that have been developing technologies such as cutting systems. They have an important role to play.
Time will tell as to whether we develop a reasonably scaled decommissioning sector in Scotland in those areas where we can compete sensibly. Without a heavy lift capability I’m not overly optimistic but let’s concentrate on those things we can do including well abandonment and plugging and see how it goes.
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