North Sea rig shortage a ‘big challenge’ to industry’s decom plans, says Spirit boss

Industry’s plans for shutting down scores of obsolete wells in the North Sea could be scuppered by a lack of free rigs, a senior figure has warned.

Head of decommissioning and projects at Spirit Energy, Donald Martin says competition for vessels is “going to be big challenges” for the sector moving forward.

According to statistics released by trade body Offshore Energies UK (OEUK) in November, over 2,000 unused wells will be plugged and abandoned (P&A) over the next decade.

The successful completion of the work hinges on operators ability to secure vessels to shut down wells and  remove structures  – and they’re in a hot competition.

Oil and gas producing countries across the glove are trying to boost their supplies, putting pressure on an already diminished rig market.

As a result day rates for leasing vessels have risen to historic highs, and recent reports suggest that new builds will be few and far between.

Mr Martin said: “Speaking from Spirit’s perspective, we do see pressure on marine spreads, be it rigs, dive support vessels, construction support vessels and heavy lift vessels.

© Supplied by Allseas

“In terms of the overall picture, we probably see more pressure from the marine construction market – a massive proportion of their utilisation has been taken up by wind. There has been a real upswing there, in terms of rates and reduced availability.

“From a well P&A perspective we have seen some good competitive rates still out there, but it is clear that the pool of rigs is consolidating – a number of units have left the North Sea. It is definitely going to be one of the big challenges moving forward, in terms of cost effective well P&A in the next five to 10 years.”

Centrica-owned Spirit recently toasted its “busiest year-to-date” in decommissioning, with campaigns across the Central and Southern North Seas, as well as the East Irish Sea.

Competition for resources from adjacent sectors is one of the rationales given for the rise in the North Sea’s total decommissioning bill.

© Supplied by Spirit Energy

As it stands the total cost for shutting down the North Sea is in the region of £40 billion, according to estimates from the North Sea Transition Authority.

That figure has swelled in recent months, with the regulator pointing to heightened demand for equipment, vessels and services from other regions and sectors, like offshore wind.

Decommissioning manager at the NSTA Alasdair Thomas said: “Global competition for rigs has definitely increased, and we are seeing rigs transiting out with the European sector. Rig rates, like in all other parts of the sector, are definitely increasing.

“The market overall is readjusting to take account of energy security, global demand for decommissioning, and uptick in offshore renewables.”

He added: “I would add though that are definitely pockets where early contracting, good planning, readiness when it comes to decommissioning, early engagement with supply chain, has led very cost effective forecasts for well P&A, even in the market that we exist in.”