Intelligence brief: Execs want UK government involved in decom; Another contractor buys into North Sea
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Senior execs want UK government to be active on decom
Decommissioning is one of three key areas in which oil-industry executives are keen for the UK government and regulator to take a more active role, PwC has found.
PwC interviewed 30 senior executives in the UK, the Netherlands and Norway for its “A Sea Change” report on the future of UK oil and gas. It found executives wanted the government to become an equity player in decommissioning and to show willingness to take on risk and cost for decommissioning.
The other two areas in which executives want more government involvement are: midstream/infrastructure and exploration.
Summarizing the executives’ comments on decommissioning, the report said the government should consider setting up a decommissioning fund or a guarantee scheme which helps smaller companies cover their letter-of-credit requirements for decommissioning.
An alternative option would be to establish a “Decom plc” – a government-owned vehicle which acquires late-life assets at zero cost and manages the decommissioning, paid for by the operators, it said.
The government’s long-term focus should be on the need to develop a transferable, exportable and scalable skillset around decommissioning which can secure the future of the UK services industry, the report said.
PwC also noted that executives recognized a need to ensure the North Sea basin has a clear roadmap that will help take the UK from a hydrocarbon world into a low-carbon future, although it did not elaborate further on this point.
In contrast to the British executives, Dutch executives expressed a feeling that the industry was moving more quickly toward decommissioning over the next five to 15 years, the report noted. The focus in the Netherlands is more on maximizing revenues from hydrocarbons to fund renewable energy projects in the basin, such as wind farms and tidal initiatives.
Another contractor buys into North Sea decommissioning
Costain Upstream has announced it is strengthening its decommissioning capability in response to the low oil price, which it said has encouraged operators to retire aging facilities.
The subsidiary of leading engineering-solutions provider Costain Group has appointed Eamonn McGennis as decommissioning lead. McGennis’ 35 years of experience includes a five-year stint as UK general manager of field decommissioning with Talos Energy. He will head a team of personnel drawn from across the Costain Group, with the intention of drawing on their experience in areas such as nuclear and civil engineering.
“In civils and utilities, margins are incredibly tight. We’ll be bringing this discipline to the upstream sector. We’ll be using lessons learned in sectors like highways authorities and Network Rail. Those organizations have had to embrace collaboration because of increasingly tight financial constraints,” McGennis said.
Until now, McGennis noted, the industry focus has been on new developments, brownfield modifications and platform work – all because it has aspired to increase and enhance existing production.
Decommissioning came almost as a side-product of other jobs, he said, but demand for decommissioning-specific services is changing all that.
He identified the need to conduct decommissioning projects under tightly fixed budgets as a major challenge. “This places a premium on getting the plan right from the start, as changes and modifications do not add value in the same way usually seen in development work. With this mindset, decommissioning requires a more collaborative effort where all participants must deliver on safety, the environment and costs.”
At least two other ventures have been formed in recent weeks to work in North Sea plugging and abandonment, as DecomWorld has reported: Well Decom, led by three industry veterans, and Ardyne, backed by Lime Rock Partners.