An ageing asset doesn’t mean unmanageable, unprofitable and inoperable.
There is still potential to be realised from the UK Continental Shelf (UKCS), despite the challenges of the current climate. In terms of oil alone, it is estimated that there are around 25billion barrels to be recovered.
Global demand for energy continues to escalate and fossil fuels will carry on contributing to the mix.
The UK Government is also committed to supporting the sector, as we have seen from the prior administration’s positive response to Sir Ian Wood’s 2014 state of the industry report.
First, however, there are some significant hurdles to overcome, especially around the use of ageing infrastructure approaching, or operating beyond, its intended design life.
This is an issue at Lloyd’s Register Energy’s heart as an independent provider of risk management solutions to the oil, gas and power industries.
The issue could not be more pressing for a sector that now finds itself in an era of low prices.
According to Oil & Gas UK’s latest economic report, published in February, revenues fell to just over £24billion last year, the lowest since 1998.
That situation presents industry with a fundamental question. Are the offshore platforms, wells, pipelines and associated equipment in place in the North Sea economic to operate, especially the ever ageing assets?
Clearly, such equipment must achieve a drastic reduction in costs to remain profitable, while not compromising on safety.
Despite the familiar brutal conditions of the North Sea, the sector is in new territory because not only has much infrastructure surpassed its original field life following successful asset life extension, but late life operations, mothballing and decommissioning are now a focus.
To compound matters, oil & gas companies in the North Sea have assets in their portfolios that are operating at various stages of their life cycle, requiring each asset to be managed on an individual basis.
There is no denying this has led to a challenge in how operators bridge the gap between late life operations and cessation of production.
Decommissioning is expensive in the current climate with the total expenditure on offshore assets over the next decade forecast to be £14.6billion – £1.5billion per annum according to the Oil & Gas Decommissioning Insight 2014 report.
Significantly, during this phase of the lifecycle, production gains shouldn’t be ignored as there are reserves that can be recovered, however asset management techniques must be tailored and appropriately applied to ensure cost effective operating.
Sir Ian Wood’s report and documents such as the HSE’s The Ageing and Life Extension Inspection Programme (KP4) have promoted awareness of the issues and risks associated with operating ageing offshore plants.
Independent technical authorities such as Lloyds Register have an important role to play here in promoting a change in industry mind-set to one of proactive late-life asset management.
Most operators, for instance, are still resourced for fields operating at peak capacity and apply historic operating models; they haven’t reduced staffing levels or adjusted inspection and maintenance regimes in line with decline in production. This is a common major challenge in managing late-life asset operations.
With huge financial investment involved, in a marketplace of tighter margins, identifying where best to concentrate inspection, maintenance and other core operational activities will be vital to success.
We have seen a commitment to late-life asset management prove hugely beneficial in a number of high-risk, capital-intensive sectors, such as aviation and transport.
Such an approach finds innovative ways, including adopting risk profiling strategies, creating multi-disciplinary teams and effective data management, to maintain operations by focusing on cost delivery with limited investment to maximise resource recovery from ageing assets, while at the same time reducing risks.
Key to this is identifying the critical assets and equipment that are required to achieve both profit and safety objectives and then determining how best to safeguard them.
The right strategies aside, the use of technology will also assist greatly. Software such as LR’s fully integrated risk-based inspection solution, for example, addresses the issues caused by external factors, such as corrosion, scaling and fatigue, on an asset-by-asset basis, allowing operators to identify critical equipment, increase reliability and determine the optimum maintenance approach.
In addition, better data management will help, translating an abundance of information into useful knowledge to support informed decision-making.
Elsewhere, the oil & gas industry is confronted with similar challenges, such as in the Southern North Sea, Irish Sea and Gulf of Mexico. And the sector is not alone in using ageing equipment; today mature assets across industries make up over 70% of world production.
It is clear that industry conversations and collaboration between operators, service companies, verifiers and regulators must begin as soon as possible, to realise the full value of the UKCS. Oil & gas networking events, such as the one Lloyd’s Register Energy held in Aberdeen last month, and which brought industry leaders together to discuss late life asset management, are vital.
In devising solutions, it is important to recognise that every business is unique and that agendas vary between the different companies operating in the region.
Despite the current climate, the North Sea will continue to contribute to the UK’s growing energy needs and help bolster its economy.
Rebecca Allison and Tim Walsh are at Lloyd’s Register Energy