Credit: Ana Phelps

Operators can encourage suppliers to invest in new technology and scarce resources such as light well intervention vessels, by offering them a guaranteed pipeline of work, Christie said. Marathon is discussing such arrangements with key contractors, he said.

“We are interested in doing multiple wells, with multiple owners in multiple-year campaigns and we are talking to our suppliers about investment because ultimately we will be the beneficiary.”
Oil operators tend to avoid collaborating in the upstream world in order to have as much control over their schedules as possible, Christie said.

“In the capital investment world schedule is king and we compete for resources so that we can meet our desired first oil dates. With decommissioning it’s all about quality and cost but not so much about deadlines,” he said.

The advantages of sharing a decommissioning campaign include economies of scale, knowledge sharing and increases in expertise.

At present co-operation has taken place to a limited extent in the North Sea and in the Gulf of Mexico, where contractors such as Helix Well Operations have brought together operators in joint subsea P&A campaigns.

Projects located in close proximity are able to lower transport costs and benefit from teams that becoming more-practiced, Christie said.

“The day rate stays about the same, however you do save on mobilization and demobilization costs so you eliminate some days and also the increases in efficiency are quite significant over a number of wells. I would say the total cost savings might be between 30% and 40% from the start to the end of a campaign,” he said.

Professor Paul de Leeuw, the Director of the Oil and Gas Institute at Robert Gordon University, has studied the economics of decommissioning.

De Leeuw agreed that a 30% to 40% cost saving is a reasonable estimate, but said more exact estimates would require a greater level of detail on the engineering and condition of the wells.

Plugging gaps

Collaboration between operators and contractors could also ease bottlenecks in the supply chain by providing more certainty over demand, Christie of Marathon Oil said.

In the case of subsea P&A, one example is light well intervention vessels.

“It’s very difficult to criticise the supply chain [for the lack of vessels] because there's no certainty of demand, so it’s a question of when would I invest in this equipment given the uncertainty of when it's going to be employed. It’s timing and continuity of demand, and we would be very keen to offer that because ultimately we would be the beneficiaries. We are talking to our contractors now,” he said.

De Leeuw said the firms with most to gain are driving this trend.

“A few companies who are at the front end of big decommissioning programmes are doing the same, of which Marathon is one. They can see that there is a much more efficient way to do it for everyone and there is an active debate under way now,” De Leeuw said.

Matching sites

Collaboration would work best if operators agree a consistent approach and work together on similar wells with similar characteristics that are situated in close proximity, Christie said.

Contractors could then plan their work in the most efficient way, regardless of ownership.

 “It doesn’t have to be a particularly large or repeatable campaign. One way to do it is to have multiple smaller instances of collaboration because really what you have to do is you have to align not only the work scope but also the timing and geography.”

De Leeuw argued a more formal approach may be required.

 “Where informality works that is fantastic. Where it doesn’t work it might need a bit of a push because the price is so substantial,” De Leeuw said.

“I think we do need, in the nicest possible way, to get people to work together. If you think about it, there’re about 5,000 wells to be decommissioned in the North Sea and you want cost of each well to decline compared to the previous one. At present there is no overriding mechanism to drive efficiency in the industry, and government, regulation and the industry have a role to play in creating one,” he said.

If some wells required a longer decommissioning process, they would be priced separately, Christie said.

The precise charging mechanism would be a challenge and that much would depend on how much detail of the well stock was provided going into the campaign, Christie noted.

“Obviously you need some mechanism for sharing the benefits equitably. There isn't a standard form contract, but there are precedents –sharing rigs for development is quite common but I know at least one campaign that a company has proposed in the Gulf of Mexico and they’ve proposed a benefit sharing formula,” he said.

Aligning regulation
In the North Sea, regulations require operators to take on “liability in perpetuity” for the wells they abandon. Operators may interpret this differently and have different comfort levels when it comes to defining what this means for P&A.

Christie said consistency of regulation would help to prevent operators working to different standards and thereby “impairing productivity”. 

Different operators have different risk tolerances, and in the absence of agreed standards some operators could be accused of working to excessively high standards.

The North Sea regulators could provide more guidance by moving towards the system used in the Gulf of Mexico, where the US government takes over liability providing the operator has plugged the wells properly, Christie said.

“There are a number of variants. For example, the levels of liability might be stepped - for the first so much money, or the first so many years, the operator is responsible; for the second tranche maybe the industry collectively pays into a P&I [protection and indemnity] club, and at the highest level the government takes responsibility,” he said.