These targets are part of the ‘Statoil Technical Efficiency Program’ (STEP), which was launched last year to improve cost and resource efficiency. The ultimate target of the program is to increase pre-tax cash flow by $5 billion.

Halving costs

Steinar Strøm, Statoil’s leading adviser on plugging and abandonment, said he believed the goals, which have been set “right from the top” of the company, were realistic and that 25% of the cost would be cut in 2015, with a further 25% being cut in 2016.

At present Statoil operates two rigs in the North Sea and this year the company is planning to perform 15 P&A operations and 70 slot recoveries. Over the next 20 years, however, it has about 1,260 wells to decommission.

A recent study by Schlumberger estimated that the average cost of P&A for a North Sea well was $2 million from a fixed platform and $10 million from a floating platform. Based on this, the potential savings that can be made on the retirement of all of Statoil’s assets begins at about $1.2 billion.

R&D collaboration

Collaboration is key if the industry wants to reduce its costs and this collaboration is even more important when it comes to the research and development of new technologies.

“We have an R&D department in Statoil that is focusing a lot on P&A technology but none of it will really be ready in the short term. We have a few technologies for piloting this year but the game-changers will be a few years down the line,” said Strøm.

“We are looking, as a number of other companies are as well, at plasma milling to create an area to install a plug and we’re working on a thermite project with a Norwegian company. We are also working a lot with BP and ConocoPhillips. The service companies haven’t really got going yet, so it’s creative companies that are coming up with the new technology,” Strøm added.

Attitude adjustment

Strøm said the fundamental aim of the STEP program was “to change the mindset” of Statoil’s staff. Although he did not expect cost cutting to be driven by dramatic improvements in down-hole technology in the near future, he said Statoil was looking to use the equipment presently available in a more creative way.

“What we are doing now on our fixed platforms is to lift the tubing and use it as a kind of work point to place the cement, so we don’t have to pull out all of the tubing, we just lift it to establish an area for a barrier,” Strøm explained.

Regulations and techniques

Robert Byrd, the Vice President of Consulting at TSB Offshore, said the way decommissioning was carried out in the North Sea was “horrifically expensive” owing to a combination of regulations and the current methods that are used.

“Well you have to understand where Statoil’s coming from with the 50% cut, because the Norwegian approach to well decommissioning has been very, very draconian. The Norsok regulations require rock-to-rock barriers, and the way that has that has been practiced in recent years has been horrifically expensive,” Byrd said.

“Shell has been using those regulations to plug their wells on the Brent platforms and the cost is just horrific. What Shell has been doing, and I assume what Statoil and others have been doing, is to use a full-blown drill rig in order to plug the well, but the technology is coming into place that alleviates the need for a drill rig,” Byrd added.

According to Byrd, this combination of factors made the cost of decommissioning in the North Sea much higher than the Gulf of Mexico.

“Our costs are generally about two-thirds of the North Sea. Some people say it’s about half but I don’t think it’s that much. The main factors are regulatory uncertainty, and our labour costs and service costs are generally lower,” Byrd said.

A change of platforms

One way that Statoil is hoping to cut its costs is by moving towards rigless P&A systems. At present light well-intervention vessels cannot be used to carry out all the decommissioning work for most wells because they are unable to remove the tubing and the control lines. Instead they are used to prepare the wells by killing them and inserting a deep plug before the rig is brought in to do the heavy work. Nevertheless, Strøm said Statoil was looking for ways to develop rigless technologies.

Byrd argues that “the Statoil and the Shell’s of this world think the technology is not there because they want belt and suspenders on everything that they do”.

He said: “A lot of people would say that it is there and some of the emerging technologies are pretty good and very safe. I would point you to the down-hole riserless systems that are being put forward by Wild Well Control, Helix, and Weatherford. They’ve developed tools that will accomplish many of the things that have previously been accomplished with drill rigs.”