Shell’s Steve Phimister on the great North Sea decom debate

Shell's Brent
Shell's Brent

Decommissioning will be a prominent feature at this year’s SPE Offshore Europe. Energy found out more from Steve Phimister, executive committee member of the event and vice president of Shell’s UK & Ireland upstream business unit.

As planned decommissioning activities increase, there is a growing industry debate. Shell is hosting a keynote panel session on decommissioning at SPE Offshore Europe 2017. What will the event discuss and what format will it take?

Whilst sector experience is growing as more decommissioning projects are either completed or are progressing, it will be interesting to learn from our expert panel and delegates attending the session if they believe we are thinking big enough.

According to the latest Oil & Gas UK Business Outlook report, somewhere between 30 and 40 fields may cease production during 2018 and 2019, although asset transfers have the potential to extend the life of some mature assets. There is some uncertainty around this forecast as companies adjust their position as market conditions change.

However, our experience has shown us that planning and early preparation is key for efficient delivery. Everyone wants to know how we can make the process more efficient and cost-effective and the session at SPE Offshore Europe aims to answer some of those pertinent questions.

The discussion will be built around a number of different themes important to efficient decommissioning in the UKCS, from skills, capabilities and new technologies, to societal acceptance, late life asset management and reservoir isolation. Most significantly, there is also the opportunity to learn more about Brent, and other decommissioning projects.

Fourteen fields ceased production in 2016 with at least a similar amount expected this year. What should industry focus on to drive down the costs of decommissioning?

Of course, the most important area of focus for the industry is ensuring all decommissioning activity is executed in a safe, technically feasible, environmentally sound and cost-effective manner. However, the operation that carries the most cost is conducting plug and make safe operations, so driving efficiency in this area is key. The quickest route to this is through collaboration.

For efficient plug and make safe campaigns isolating a well on a single trip is a key objective. Currently, there are a number of technologies that are being developed to achieve this goal, but nothing is available in the market yet. Other areas where I think technology would make decommissioning more efficient would be automated debris collection and post decommissioning monitoring.

Timely and robust end of field life planning is key. At Shell, we made the first breakthrough in decommissioning and removal (D&R) cost reduction by setting up a dedicated team for Gulf of Mexico, and later a global D&R Centre dedicated to D&R across Shell. At the project level we have established one team looking at all assets in the Central North Sea to take a holistic approach. These initiatives ensure lessons are quickly passed on as they are learned.

What, if any, change in mind-set is required for delivering a decommissioning project compared to normal E&P operations?

Traditional approaches to decommissioning result in traditional costs, so the challenge is to think differently if the 35% provision reduction that the OGA demands is to be met. It’s important to remember that the value drivers and risk profile is very different in this phase to the development and production stages.

Our standards and processes have evolved to deliver safe and successful development projects. They are too complex for decommissioning and intended to manage business risks that are critical in development, but not so prominent in decommissioning. Reaching first oil on time is critical. Finishing on a particular date is not so necessary when decommissioning.

We therefore cannot continue to treat decommissioning and restoration (D&R) as a reversal of the processes and practices when we drilled the wells and installed the facilities.

SPE Offshore Europe aims to encourage early, broader thinking among industry, operators and the supply chain to address these challenges together.

Last month, Shell completed the single lift removal of its 24,200-tonne Brent Delta topside which had stood in the North Sea since 1976. Preparations for a similar operation are now underway for the topside of the Brent Bravo. Are there any lessons learned from the Brent process that the industry should take note of?

We have found a collaborative approach that allows operators working with regulators to choose the best D&R options available works best. This balances technical feasibility, economics, safety, environment, and stakeholder needs. Shell has worked well with the regulators in Gulf of Mexico, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), to implement D&R plans that we based on risk assessment and science to reduce risk and recognise benefits. We believe the offshore industry will benefit from continued dialogue and ultimately, in developing a risk-based assessment approach to D&R.

According to Oil & Gas UK’s most recent decommissioning report, annual expenditure is expected to reach around £2billion on the UKCS in 2017 making up around 12 per cent of total expenditure. How do you expect the investment to develop over the coming years and what are the most significant opportunities for the supply chain?

It is important that the supply chain is ready for D&R. This means there should be transparency about the volume and phasing of the work so that project scopes can be ‘bundled’ and contractor coalitions formed to bid for the work. We think this will create win-win situations for both contractors and operators.

As well as building capability, there may be an opportunity for commercial innovations. As one might expect with thousands of structures removed, the US Gulf of Mexico has developed an active market for D&R services. We are looking at how we should allow greater and earlier involvement of the contractor in D&R planning and execution, reducing the involvement of our own teams.

This requires trust in contractor decisions and clarity on a balanced allocation of risks.For more than five years, Shell and some of our industry peers have benefited from a unique ‘shared vessel’ model approach for contracting a mobile offshore drilling unit (MODU) specifically designed for well intervention work at great water depths. This approach allows us to have a scope-specific contracting, which means we are avoiding premium costs for contracting a full-fledged rig. Furthermore, the vessel owner receives the benefit of multiple parties contracting the MODU, which reduces overall downtime.

A new event feature for 2017 is the Decommissioning Zone. What do you hope SPE Offshore Europe 2017 and the addition of the new Decommissioning Zone will achieve?

This is a great addition to SPE Offshore Europe and firmly puts decommissioning on the map. It is encouraging to see companies are already sharing lessons, working closely with the regulator and stakeholders to maximise wider understanding of the issues and the challenges faced in end of field life management.
The keynote panel session will give delegates the opportunity to learn more about completed projects. Most importantly, it will be a thought-provoking platform to showcase new, innovative technologies and a meeting place for industry leaders, government and suppliers to develop and cultivate new and existing relationships.