oil & gas decommissioning agenda market challenges - PDF document

6/19/2014 NDA Scottish SME Steering Team Dounreay, Thursday 13 February 2014 Brian Nixon, Chief Executive oil & gas decommissioning ‐ agenda  market  challenges  opportunities  the role for Decom North Sea courtesy Peterson SBS / Veolia 1

6/19/2014 general situation in UK Continental Shelf  £11.4 billion CAPEX in 2012 with forecast of £13.5 billion in 2013  £44 billion of capital investment approved and under development  45 new projects approved in 2011 & 2012 however: ‐  production in UKCS has fallen for 11 straight years (10.7% in 2012 alone)  concerns over unplanned shutdowns, reliability of equipment etc.  operating costs rising – produced water, energy consumption, asset integrity, etc.  production efficiency falling  only 13 new exploration wells started in 2013 resulting in several assets nearing CoP and decommissioning regulations for offshore decommissioning The Convention for the Protection of the marine Environment of the north east Atlantic ‐ ‘OSPAR Convention‘. Signed and ratified by all Contracting Parties to the original Oslo or Paris Conventions (Belgium, Denmark, the European Union, France, Germany, Iceland, Ireland, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom and Northern Ireland) and by Luxembourg and Switzerland. 2

6/19/2014 some market observations  little thought of decommissioning at design and build stage, or through life of asset  most operators preparing for first project  forecast costs rising  multiple drivers to defer  limited experience – operators or contractors  decommissioning projects unique and stand alone forecast decommissioning expenditure £m (Real Potential Decommissioning Expenditure 1,600 2011) £10.4 billion in the UKCS $70/bbl and 40p/therm Increased Uncertainty Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 in Forecasts 3000 1,400 (~£20 billion across the North Sea) 2000 Forecast Expenditure (£ Million) 1,200 1000 1,000 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 800 Cns Irish Sea MF NNS SNS WoS 600 400 200 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Year Source: Oil & Gas UK Northern North Sea Central North Sea Southern North Sea Irish Sea 3

6/19/2014 decommissioning expenditure ‐ UKCS 100% £m (Real Potential Decommissioning Expenditure Monitoring 2011) $70/bbl and 40p/therm Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 3000 1% of > £30 billion 90% Topsides and Substructure = £300 million 2000 Recycling Proportion of Total Expenditure For Each Work Removal: 13% 80% Site Remediation 21*% 1000 Breakdown Structure Component Subsea Infrastructure 0 70% 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 Cns Irish Sea MF NNS SNS WoS Topsides Removal 60% Substructure Removal 50% Topsides Preparation 43% Wells: 43% 40% Facility/Pipeline Making Safe 30% Wells 20% Facility Running/Owners' Costs 11% 10% Overheads:19% Operator Project Management 0% Source: Oil & Gas UK *This relates to expenditure clearly identified as removal oil & gas decommissioning ‐ agenda  market  challenges  opportunities  the role for Decom North Sea courtesy Peterson SBS / Veolia 4

6/19/2014 challenge - the oil & gas life cycle +$ regular industry perception of life cycle exploration production & appraisal Years operations •Exploration & appraisal abandonment development -$ decommissioning often overlooked Steel Piled Jacket (SPJ) structures CNR International – Murchison Platform  programme to DECC June 2013 – CoP in 2014  topsides ‐ 24,548 tonnes – 26 modules  steel jacket ‐ 24,640 tonnes (excl piles)  water depth 156m – 150 km NE of Shetland  33 platform & subsea wells  drill cuttings pile – degrade naturally in time  export pipeline – remedial rock placement  infield pipelines & branches ‐ removed 5

6/19/2014 Gravity Base Structures (GBS) Shell Brent Field  production ceased December 2011  contracts for topsides removal, transportation and onshore disposal recently awarded (removal 2015)  GBS ~ 400,000 tonnes likely to remain in place  P&A of wells underway – many years of work  topsides preparation underway – years of work  >300 studies ‐ programme not yet submitted  first project for Pieter Schelte SNS steel piled jackets / platforms ‐ ~400 installations  typically less than 1,500 tonnes jacket weight  up to ~ 1,400 tonnes topsides weight  many unmanned (i.e. no accommodation)  mainly gas producers  total removal expected courtesy Veolia / Petersen SBS – Shell Inde 6

6/19/2014 subsea infrastructure  wells P&A  manifolds  flowlines  umbilicals  mid height arches  protection covers  mooring systems some removal options 7

6/19/2014 oil & gas decommissioning ‐ agenda  market  challenges  opportunities  the role for Decom North Sea courtesy Peterson SBS / Veolia decommissioning typical phases in work breakdown decommissioning programmes structure preparation well continuing disconnection removal for CoP abandonment liability onshore suspension cleaning & suspension cold disposal live decommissioning (NUI/MMI) Reservoir Concepts Monitoring P&A of wells Disconnection Hook down Impact s programme : ‐ Rig upgrades Split modules Module separation Risks remaining Waste and scale Remove small & Padeye refurbishment Inventory structures treatment loose items Sea bed clean ‐ up Surveys or subsea Post production Prepare for NUI/MMI Removal : ‐ Inspections ops. support Post production Single lift Re ‐ use Rig ‐ less options ops. support Reverse engineering Technical Piece small Offloading Isolation/Purging Societal Maintenance Cleaning & treating Environment Cleaning & handling Tier 1 contractors Structural integrity Waste disposal hazardous materials Monitoring Care and maintenance Waste accounting Deconstruction Inspection Waiting for removal Post production Recycle and disposal Integrity ops. support Possible re ‐ use 8

6/19/2014 oil & gas decommissioning ‐ agenda  market  challenges  opportunities  the role for Decom North Sea courtesy Peterson SBS / Veolia since 2010 ‐ the industry forum for decommissioning  not ‐ for ‐ profit organisation, privately funded  230 member companies from Denmark, Germany, Norway, The Netherlands, the UK and USA  membership across the whole sector: ‐ operators (large & small), contractors, marine, subsea, onshore disposal, wells P&A, legal, environmental, specialist services, consultants etc 9

6/19/2014 Decom North Sea’s role in the industry  stimulating a vibrant, efficient and cost  stimulating a vibrant, efficient and cost effective industry effective industry  promoting collaboration and the sharing of  promoting collaboration and the sharing of knowledge and learning knowledge and learning  developing models, templates and guidelines  developing models, templates and guidelines for the decommissioning sector for the decommissioning sector  responding to economic and technical  responding to economic and technical challenges facing the sector challenges facing the sector  researching other sectors for synergies and  researching other sectors for synergies and experience (GoM, nuclear, salvage) experience (GoM, nuclear, salvage) joint industry initiatives standard template for standard template for compensation models in different compensation models in different decommissioning programmes decommissioning programmes phases and types of decommissioning phases and types of decommissioning research greater re ‐ use of plant research greater re ‐ use of plant North Sea map of onshore disposal North Sea map of onshore disposal and equipment and equipment facilities facilities model template for EIAs model template for EIAs more reliable activity forecasts to more reliable activity forecasts to support industry investment support industry investment Southern North Sea Southern North Sea special interest group special interest group work together earlier & better work together earlier & better multi ‐ party approach multi ‐ party approach ‐ start with wells P&A ‐ start with wells P&A raise awareness & profile of raise awareness & profile of decommissioning decommissioning 10

6/19/2014 benefits of membership   operator programme update events operator programme update events   training courses training courses   industry lunch ‘n learns industry lunch ‘n learns   learning journeys around the North Sea learning journeys around the North Sea   2 annual conferences (one with Oil & Gas UK) 2 annual conferences (one with Oil & Gas UK)   work groups and steering groups on JIPs work groups and steering groups on JIPs   website with industry capability matrix website with industry capability matrix   regular newsletters regular newsletters   market intelligence reports market intelligence reports   business advice business advice bnixon@decomnorthsea.com shillyear@decomnorthsea.com jmann@decomnorthsea.com 11