SPE International: London Section 30 th September 2014, London. - - PowerPoint PPT Presentation

Decom North Sea SPE International: London Section

30th September 2014, London.

Nigel Jenkins Chief Executive Decom North Sea

• State of play; a brief update
• Challenges & opportunities
• The Wood Review
• Decom North Sea Leadership
• Conclusions

courtesy Peterson SBS / Veolia

Today’s discussion

since 2010 - the industry forum for decommissioning

• not-for-profit organisation, privately

funded

• c230 member companies from

Denmark, Germany, Norway, The Netherlands, the UK and USA

• membership across the whole sector:-
• perators (large & small), contractors,

marine, subsea, onshore disposal, wells P&A, legal, environmental, specialist services, consultants etc

Caithness & Dounreay Inverness & Invergord

• n

Tyneside & Teesside SNS / Gt Yarmout h Londo n Norway Denmar k Belgiu m The Netherlan ds Franc e

Decom North Sea strategic and regional partnerships stimulating collaboration in decommissioning

Decom North Sea’s role in the industry

• stimulating a vibrant, efficient and cost

effective industry

• promoting stakeholder collaboration,

innovation and the sharing of knowledge and learning

• developing models, templates and guidelines

for the decommissioning sector

• responding to economic and technical

challenges facing the sector

• researching other sectors for synergies and

experience (GoM, nuclear, salvage)

State of Play: General situation in UK Continental Shelf

• £14.4 billion CAPEX in 2013 with forecast of £13 billion in 2014
• £39 billion of capital investment approved and under development

however:-

• production in UKCS has fallen for 11 straight years (38% over the past 3 years)
• concerns over unplanned shutdowns, reliability of equipment etc.
• perating costs rising – produced water, energy consumption, asset integrity, etc.
• production efficiency falling
• Some operating assets are more than 30 years old

resulting in several assets nearing CoP and 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.

State of Play: Regulations for offshore decommissioning

1000 2000 3000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042

£m (Real 2011) Potential Decommissioning Expenditure $70/bbl and 40p/therm Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 Cns Irish Sea MF NNS SNS WoS

Sate of Play: What has been decommissioned so far?

• 3 installations with large concrete substructures
• 1 with large steel jacket (> 10,000 tonnes)
• 15 other steel jackets
• 7 floating production systems
• 2 subsea production systems
• 10 other facilities (loading buoys, flares etc)
• 16 pipeline programmes

10% of installations decommissioned to date

1000 2000 3000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042

£m (Real 2011) Potential Decommissioning Expenditure $70/bbl and 40p/therm Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 Cns Irish Sea MF NNS SNS WoS

State of Play: Infrastructure still in place

• 8 installations with large concrete

substructures

• 32 with large steel jackets (> 10,000

tonnes)

• 244 other steel jackets
• 311 subsea production systems
• 30 floating production systems
• 3,300 pipelines – around 25,000 kms
• <5,000 wells
• <200 cuttings piles

Total expenditure until 2040 – c£40.6 billion

subsea infrastructure

• wells P&A
• manifolds
• flowlines
• umbilicals
• mid height arches
• protection covers
• mooring systems

Summary of Forecast Activity

Operators current expectations are being outlined, however scopes are sometimes not firm and still subject to change/approval.

Brian Nixon, Chief Executive

• 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

Steel Piled Jacket (SPJ) structures CNR International – Murchison Platform

5000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042

£m (Real 2011) Potential Decommissioning Expenditure $70/bbl and 40p/therm Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 Cns Irish Sea MF NNS SNS WoS

Schiehallion/Loyal

• regulatory approval obtained in June 2013
• offshore removal & onshore disposal is underway of subsea

pipelines and production flowlines etc. Don

• expected start date of 2015/16 – subsea flowlines, injection

equipment, control umbilicals and manifolds etc. Miller

• removal of ~28,000 tonnes topsides scheduled for 2016
• removal of ~18,000 tonnes six leg jacket scheduled for 2017
• overall completion by end 2018

DECC Bar Chart in Here

• Three fixed steel jacket platforms (Brae Alpha, Brae Bravo & East Brae)
• 85 platform drilled wells to P&A
• 87kT topsides to remove
• 33kT sub-structures to remove
• Three subsea tiebacks (Central Brae, West Brae & Braemar)
• 19 subsea drilled wells to P&A
• 1000 T manifolds, templates and structures to remove
• 75 km flowlines, 38 km umbilicals
• 195 km of pipelines, 57 km submarine cables
• Decommissioning Activities
• Project team established
• Compliance activities on-going
• Studies in support of Decommissioning Programme
• Drill cuttings piles survey and sampling
• Brae Alpha drilling rig reactivated – completion Q1 2014
• Pilot well plug and abandonment to commence (3 – 4 wells) –

completion Q1 2015

• Brae Bravo / East Brae rig recertification study to commence Q1 2015

Activity in Central & Northern North Sea Brae Field Decommissioning Programme

• BRENT Field:
• 4 Platforms (Alpha, Bravo, Charlie, Delta), 3GBS, 1 Steel

Jacket.

• PreDecom Programme Study being finalised, robust

stakeholder engagement ongoing.

• Finalising DECC Submission.
• P&A complete on Delta, ongoing on Bravo, 57 of 142

complete.

• Engineering Down Delta prior to single lift
• Onshore working closely with Able, Quay Upgrading ongoing
• Contracts with:
• Allseas (lift), Able (onshore disposal),
• WGPSN (decom services), Baker Hughes (Conductor

Cutting/Removal, Archer (drilling services).

Activity in Central & Northern North Sea

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

Activity in Southern North Sea

• Planning for decommissioning projects:
• Stamford (6 wells 1,250Te topsides /

1,000Te jacket)

• Markham ST-1 (Single Tree)
• Rose
• Audrey 7X
• Bains
• Forecast timetable: 2014-2017
• Potential for A-field:
• Ensign
• 4-legged Steel jacket NUI4 wells slots,

2 production wells 1 SS tie-back

• Alison, Ann, Annabel
• 5 production wells
• Export to TGT via LOGGS & WD
• Audrey A (WD)
• Steel Jacket NUI
• 8 Production wells

• Exploration & appraisal

+$

Years

• $

development abandonment production

• perations

Challenges & Opportunities Typical oil & gas life cycle

exploration & appraisal regular industry perception of life cycle decommissioning often overlooked

• 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

some market observations

1000 2000 3000

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042

£m (Real 2011) Potential Decommissioning Expenditure $70/bbl and 40p/therm Hurdle : Real NPV @ 10% / Devex @ 10% > 0.3 Cns Irish Sea MF NNS SNS WoS

decommissioning expenditure - UKCS

11% 43% 13% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Total Expenditure For Each Work Breakdown Structure Component

Monitoring Topsides and Substructure Recycling Site Remediation Subsea Infrastructure Topsides Removal Substructure Removal Topsides Preparation Facility/Pipeline Making Safe Wells Facility Running/Owners' Costs Operator Project Management

Source: Oil & Gas UK

Overheads:19% Wells: 43% Removal: 21*%

*This relates to expenditure clearly identified as removal

• State of play; a brief update
• Challenges & opportunities
• The Wood Review
• Decom North Sea Leadership
• Conclusions

courtesy Peterson SBS / Veolia

Today’s discussion

The Wood Review:

A new shared strategy for “maximising economic recovery (of oil and gas) for the UK”, with commitment from the government (HM Treasury and a new Regulator) and the oil and gas industry. Creation of a new arm’s length regulatory body to oversee and develop this programme of change and growth. Greater collaboration and commitments by industry in areas such as development of regional hubs, sharing of infrastructure and reducing the complexity and delays in current legal and commercial processes

The Wood Review:

4.6 Decommissioning Strategy Objectives:

– “Maximum economic extension of field life to ensure key assets are not decommissioned to the detriment of production hubs and infrastructure” – Manage the often conflicting interrelationship between:

• extending economic production,
• asset integrity,
• retaining facilities to optimise decommissioning &
• Preserving assets for future use

Key Comments:

– Focus on cost reduction in well P&A and offshore lifting – Lack of focus on macro cost reduction and innovation – No strategic decommissioning plan – Greater collaboration between suppliers

The Wood Review:

New Regulator Action A25:

– A new single decommissioning forum responsible for delivering significant decommissioning cost reduction, promoting innovation & great cooperation, jointly led by the new regulator and industry – Be more ambitious in what it seeks to achieve – Set a radical target to reduce cost – Work with the supply chain A26, Technology A27, No premature decom A28, Late Life Business Models A29, Game changing decommissioning concepts

• Streamlined template for decom

programme DECC approval

• Risk & compensation models for different

phases and types of decommissioning

• Created Southern North Sea special

interest group with EEEGR

• Working with operators on Earlier selection

and engagement of contractors to stimulate innovation and alignment

• Reuse Project team to deliver

methodology and guidance

Decom North Sea Leadership

• Meaningful Market Data from Operators
• Streamlined template for EIAs
• Collaborative multi-party approach to

wells P&A (Accenture)

• Decommissioning Training Courses
• Lessons Learnt
• Supply chain mapping and capability

assessment.

• Regular conferences, consultation

events, learning journeys etc.

N J Jenkins CEO DNS

Foundations for the future

On which to build opportunities:

Reduce the cost of decommissioning Maximise economic recovery Create a strategic plan for the future Make the UK a centre of excellence for decommissioning

A strong platform:

240 members Engaged, knowledgeable & passionate Growing UK wide profile Making a difference Dedicated Board and team

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Preparation for CoP Suspension Live Well Abandonment Cleaning & Decommissioning Disconnection Suspension Cold Removal Disposal Continuing Liability

Average Capability by Supply Chain Phase

Average Capability

Capability Levels Definition

1 Very limited 2 Limited/Not Proven/Under Development 3 Established 4 Proven Track Record / Innovative – “Where we want to be” 5 Best in Class/Industry Benchmark

capability levels not uniform across the lifecycle

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% % Capability and Experience

% of Suppliers with Capability vs % of Suppliers with Experience per Phase

% Suppliers with Stated Decommissioning Capability % Suppliers with Stated Decommissioning Experience

capability doesn’t always mean experience

The Role of Decom North Sea: Lessons Learned & Knowledge Exchange

the concept :- many operators and contactors are preparing for their first decommissioning programme, and expressing a willingness to work together :-

• pportunities to learn from previous projects and share experience
• adopt models, templates and guidelines already proven
• develop a system for knowledge capture and transfer
• promote awareness and use of knowledge transfer possibilities
• Increase opportunities for collaboration

N J Jenkins CEO DNS

Why collaborate?

Significant advantages Improves decision quality Provides ongoing assurance Supports our goals Creative thinking Provides different perspectives Diverse opinions find diverse solutions Provides encouragement to improve Commercial advantage Economies of scale Shareholder value

• State of play; a brief update
• Challenges & opportunities
• The Wood Review
• Decom North Sea Leadership
• Conclusions

courtesy Peterson SBS / Veolia

Today’s discussion

Conclusions

potential benefits :-

Decom North Sea is playing a vital role in the decommissioning of Oil & Gas Assets. We facilitate, coordinate, promote and drive collaboration, removing barriers and encouraging the most efficient end of asset life solution development and delivery. We nurture the skills that are the lifeblood of innovation At our core is a drive to safely reduce decommissioning costs and reduce the liability for the UK Tax Payer.

N J Jenkins CEO DNS

From “talking and sharing” to meaningful impact.