In choice between decom and business as usual, some are taking middle ground
Stuck between two extremes of extending or ending offshore production in response to persistently low oil prices and reduced capital funds, a few outliers have been found opting for a middle ground of partial decommissioning.
Partial decommissioning typically includes removal of excess infrastructure or temporary abandonment of a well; in both cases, the operator retains the option of restarting production at a later date.
This middle path has been described to DecomWorld as a “growing conversation” by Will Rowley, Group Analyst at Acteon, a specialist in subsea services. According to Rowley, it buys operators time when deciding the future of their asset portfolio, allowing them to wait for the market to recover before being forced into a permanent decision.
Alan Stokes, Global Decommissioning Manager at WorleyParsons, has extensive experience of partial decommissioning, most recently in collaboration with a multinational operator off the coast of Malaysia. The environmental consultancy performed a total shut-in of the operator’s asset, leaving it ready to be restarted again in the future. The decision to temporarily abandon the reservoir, without any physical dismantling, was motivated by market pressures and by the lack of barrels being produced in late life, he told DecomWorld.
Finding middle ground
Those who have opted for partial over complete decommissioning are largely motivated by reducing short-term operating costs, maintenance costs, and the final decommissioning sum.
Process simplification, mothballing of assets, or placing of assets into lighthouse mode (which involves ongoing care and maintenance but no removal activity) are commonly used to reduce operating costs, Craig Shanaghey, Director of Operations for Late Life and Decommissioning at Amec Foster Wheeler, told DecomWorld. He said all three of these strategies fall under the umbrella of partial decommissioning.
“It’s neither practical to take everything away or leave it all in place. The industry must establish an optimal balance,” Shanaghey said. Effective late-life management and complete decommissioning are not mutually exclusive, he said, noting that operators must achieve a balance between the two in order to simultaneously maximize economic recovery and reduce liabilities.
Despite the apparent benefits of partial decommissioning, few operators are going so far as to shut-in production or temporarily abandon wells. As of February 2016, only about 100,000 barrels per day had been shut-in due to the low oil price, representing about 0.1% of global production, according to a Wood Mackenzie report. In the UK North Sea, six fields ceased production of a combined 13,000 bbl/d in 2015. In the US, the report said wide-scale abandonment of wells requires capital commitment and for that reason shut-ins will be short-lived.
Shanaghey has supported a number of temporary abandonments in the southern North Sea. He warned that partial decommissioning can be counter-productive if not thoroughly planned or designed to fit in with the rest of the decommissioning strategy.
“If you end up abandoning half the platform but you have a single-lift strategy in place, then you may have to spend a lot of money strengthening the platform before you lift it,” he said.
Similarly, Stokes said his concern with partial decommissioning was that recommissioning the platform and drilling equipment could cost much more than anticipated. These costs intensify when equipment has not been properly maintained, requires recertification or has been degraded by corrosion, he explained.
Stokes identified three ways to tackle these concerns about partial decommissioning: managers must learn to manage the expectations of their labor force, be mindful about system interactions and to think long-term.
On the first point, he explained that once capacity has been streamlined and wells temporarily shut-in, there will be a temporary reduction in the head count. These employees will be needed back on deck when the well is unplugged, and so management must give staff advance notice of their plans.
In terms of system interactions, partial shutdown of one system is likely to be linked to others; connectivity must be thought out in order to have greater control over operations and avoid any costly surprises. WorleyParsons has developed templates on dealing with system interconnectivity issues, which it will make available to the industry in the near future.
Thinking long term would avoid what Stokes described as “the embarrassing position of shutting down a system, utility or electrical power generation and distribution, and then realizing, ‘Oh my God, we needed that!’”
Because many of the North Sea platforms are interconnected by pipelines, microwave communication or cables, Stokes said regulatory bodies may have to intervene to protect “the national interest”. Shanaghey and Stokes both noted that UK regulators have a role to play in facilitating the exploration of different techniques that will maximize late-life production, create learning opportunities on minimizing costs, and ultimately ease the industry into the decommissioning phase.
By Sayo Rotimi