Adopting a campaign approach to well decommissioning in the UK North Sea is the way forward, according to the sector’s regulator.
Pauline Innes, head of decommissioning at the Oil and Gas Authority (OGA), believes there is a “very real opportunity” to take a strategic approach to the way wells are plugged and abandoned.
Innes is convinced process improvements, rather than techniques, will deliver more substantial cost savings for operators and generate major opportunities for suppliers.
She also says some operators were already “on the journey” and could see the value of collaborating and putting together a campaign.
Decommissioning work will undoubtedly come in peaks and troughs, in just the same way exploration and production activity has done over the years.
But there is an inevitability about decommissioning. All operators know that they have an obligation to do it.
And the bottom line is that plugging and abandonment is the biggest ticket item when it comes to field decommissioning. It accounts for more than 45% of the total bill. That’s around £6.8 billion over the coming decade. OGUK data suggests the current P&A rate is around 160 wells a year.
As the most expensive aspect of oilfield decommissioning, it is well P&A that offers the best opportunity for streamlining and cost reduction, especially if operators pool their well stocks together.
According to Innes, it also offers the best opportunity for the UK-based supply-chain to genuinely build a strong and exportable position in this segment of the decommissioning market.
There’s work to be done on that score, as genuinely indigenous British companies lack the vessel firepower of a Helix Energy Solutions (US) or an Island Offshore (Norway), who have demonstrated that ship-based P&A can be more than a match for cumbersome, expensive drilling rigs.
“Though well abandonment costs come in around 45%, we see significant opportunity for reducing that just by being cleverer about the way things are done,” says Innes.
“This year we’ve been carrying out an analysis of the market and it’s clear that operators need to put together campaigns, aggregate their well decommissioning work.
“They need to go to the marketplace with bigger portfolios rather than take a bits and pieces route to P&A. It is much better to mobilise a vessel having secured a steady flow of well-stock work over a long period of time. This makes both fiscal and financial sense.
“We’ve been assessing the scale of the opportunity and we’re convinced that it’s massive.
“For example, the supply-chain has been saying to us, ‘operators have this stock of suspended wells and we really can create good programmes’.
“It doesn’t matter whether we’re working with a single company or several in consortium, we can put together campaigns that will work efficiently for everyone involved.
“However, the bit that they’re struggling with is getting sight of the well data from the operators, which is necessary if they are to construct coherent proposals.
“There’s a piece of work that we’re currently doing and which we hope to publish towards the end of this year which will present additional information of the kind they need.
“There’s plenty of suspended wells data already available on the OGA’s website. However, we also know that it’s difficult to access and so we’re working on pulling it together to assist the supply-chain and demonstrate that the opportunity really is there.
“What we’ll be able to say is: ‘Here’s the data on existing suspended wells which we expect to be decommissioned within the next two years, though, where special circumstances apply, we might extend that to five years.’
“By doing this we’ll get a cost-effective campaigning model actually moving.
“Also, what supply-chain companies, also some operators, are saying is that they learn from well to well. The more wells the better as this means the crews carrying out the work become increasingly more accomplished as each campaign advances.”
The challenge of constructing efficient well P&A programmes is in reality an old chestnut.
Go back a decade and a very particular issue was getting to grips with the very large number of exploration and appraisal wells that had sat untouched for decades, some from the first and second UK licensing rounds.
So has that really old well stock been largely death with? Not quite, it seems.
“There is still a legacy of those open water wells,” Innes says. “Last year we reported that there were around 190-200 of that type.
“However, it has reached the stage where operators are realising that they cannot keep wells suspended indefinitely. They must deliver on their licence obligations and decommission them properly.
“We’re currently having conversations with a number of operators and reminding them of the opportunities to pool wells requiring P&A into a campaign and offer them to the supply-chain, while at the same time suggesting that service companies be proactive and come forward with really attractive proposals designed to get campaigns happening.”
What about integrity? After all, it is well known that many wells are in poorer condition than had been assumed and therefore could present significant environmental challenges if not sorted out.
Innes says: “Operators are under an obligation to survey suspended wells and the information we have is that there is clearly a question around access to data so that a clear picture can be built.
“In general, the cost of decommissioning an E&A well is not as significant as a development well. Operators tell us that because they’ve never produced commercially, such wells pose a lower level of environmental risk, which is why some at least have not been plugged and abandoned as promptly as they should have been.”
How does the OGA liaise with the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED), the Oil & Gas Technology Centre (OGTC), Oil & Gas UK (OGUK) and other relevant organisations, including in Norway, on the quality of decommissioning work carried out and development and performance of the supply-chain?
“Clearly there’s the issue of environment in all of this and of course OPRED has a particular interest in this,” says Innes.
“The way that manifests itself is in relation to the roles that different competent authorities play in the consenting and approvals process.
“The OGA is responsible for consenting to how an operator wishes to decommission a well — the standards to be applied.
“We will look to OGUK’s guidance on P&A unless companies have their own industry standard. There is also an external well examiner process for verification purposes. HSE too has a role in terms of well examinations, while OPRED takes a view on the consenting process.
“The critical thing for me is the OGUK standard, which was updated relatively recently. All of the above parties were consulted during that process.
“We’re all aiming for the same thing: Everyone wants each well to be decommissioned in a permanent way without any future issues.
“Much of the technology applied in P&A is tried and tested. However, OGTC is looking at trialling a new approach and I have a well manager in my team who is connected to all of this. The OGA also has a wells taskforce, a wells decommissioning one, too.
“From an OGA perspective, the biggest P&A cost efficiency gains are more likely to come through process improvements to campaigning rather than techniques used.
“This means making sure that the right vessel and tools needed for the job are selected, that thorough deskwork regarding each well to be plugged and abandoned has been done and that the right crew has been selected for the job. They are key to achieving good, cost efficient well P&A programmes.”
Broadly, how good is the UK supply-chain? The Innes view is that it is good and wants to become even better at what it does.
What that supply chain wants is not one-off contracts such as one operator for six wells, then another operator for three wells. For a start this is the costly route.
“Every small campaign involves mobilisation and demobilisation costs,” Innes explains. “It is clearly much better if several operators come together, allow the supply-chain to set a timeline and develop a contract framework that pays sufficient attention to associated risk and reward. To my mind, this needs to be improved.”
Who plays the brokering role in all of this?
“There are operators already on this journey who can see the value of collaborating and putting together a campaign,” says Innes while declining to cite examples of best-in-class.
“There are operators who are challenging the costs and who are really efficient in the way they engage with the supply-chain.
“There are also conversations going on with operators who want to do things differently, but who are not necessarily currently doing it. They might be strapped for cash but still have ambitions to get better at decommissioning.”
Of course, as touched on earlier, the UKCS road has never been a smooth one.
The acceleration of decommissioning over the past couple of years has to be viewed against one of the toughest trading environments ever experienced by the UK oil and gas industry.
There really is a growing tally of fields that have been squeezed till the proverbial pips squeak.
Though OGUK issues an annual decom report, Innes told EV that the OGA expects to publish a tally and analysis of the wells currently standing in the P&A queue that could be decommissioned at any point.
“The question of how many is a really important one,” Innes says. “There are lots of variables, lots of supply-chain companies that are interested.
“Even in a market of around 200 available wells, what the supply-chain is telling us is that progress will depend on well type, vessel and rig availability, who may be partnering with whom, and so-on.
“But at this point we don’t have the type of data needed for us to judge whether these 200 wells amount to a year’s worth of programme or longer.
“What I can say, even just taking the central North Sea (CNS) and considering its current well-stock, there is a major opportunity. There is a big portfolio of subsea wells.
“These really lend themselves to doing a campaign, because there is no need to interfere with the production facilities.
“The CNS alone offers a long-curve market opportunity of more than 40 years for a really healthy supply-chain. Overall, there really is a massive opportunity for the supply-chain on the UKCS.
“And, aside from working with OGUK, the best thing the OGA can do for the supply-chain is formulate the business opportunity for them and get it actively delivering.”
Innes has been involved with UKCS decommissioning for five years and she reports that, during that time, the pace of overall activity has really stepped up hugely.
“Fourteen projects have been approved so far this year alone,” she says. “When I started it was running at around five or six approvals for a couple of years.
“Obviously the number varies from year to year and some approvals are for partial removal of infrastructure, such as the storage tanks at Thistle.”
Take a look at the OPRED website and one will quickly discover the scale and pace of decommissioning that is now happening on the UKCS.
It’s latest listing shows a sizeable hopper of applications for whole/partial removal of production installations and related infrastructure.
That list currently comprises Topaz, Balmoral, Brenda, Nicol, Glamis, Stirling, LOGGS PR, LOGGS PC, LOGGS PP, LOGGS PA, North Valiant PD & associated pipelines – LDP5, Huntington, Tern topsides, North Cormorant topside, PL301 Heimdal to Brae pipeline, Hewett, Gaupe, Fulmar & Auk North preparation work scopes, Kingfisher, Buchan & Hannay, Ensign field installation & pipelines, Dunlin Alpha, Windermere; Brae Alpha, Brae Bravo, Central Brae, West Brae and Sedgwick; plus the Brent Bravo, Charlie & Delta concrete gravity based structures; also Atlantic & Cromarty.
Oil & Gas UK has calculated that the UKCS will be the busiest offshore province worldwide for decommissioning over the current decade, with over 2,600 wells to be decommissioned across the North Sea.
And the UKCS decom cost over the period … around £15.2billion, according to OGUK’s 2019 update.
“What we see happening is that more and more operators are getting prepared for decom,” reports Innes.
“However, a source of frustration for the supply-chain can be that, even though an operator may have approval to decommission a field, the window for actual removal operations getting under way can be very wide, so enabling the operator to produce even more hydrocarbons from the asset than was initially anticipated at the time the decom plan was put together.”
It’s as ever was. Why would one force an operator to decommission when the oil price is high and further profitable barrels can be extracted before finally pulling the plug?