Dismantling the oil industry: Rough North Sea waters test new ideas

A workman on board an oil platform in the Clair Ridge oilfield in the North Sea, 45 miles off the coast of Scotland. (AFP)
Updated 27 November 2018

Dismantling the oil industry: Rough North Sea waters test new ideas

  • Aging oil fields in UK could be worth up to £17 billion
  • Platforms removed piece by piece in lengthy process

LONDON: Scottish marine salvage group Ardent is adapting the tanks it used to refloat the Costa Concordia, the cruise ship wrecked off the Italian coast in 2012, to decommission North Sea oil platforms.
It is one of several companies trying new ideas to win business in the market for dismantling disused oil platforms.
In Britain’s aging oil fields alone, the opportunities could be worth up to £17 billion ($21.85 billion) before 2025, according to industry body Oil and Gas UK. The ideas could then be deployed to other maturing fields such as in the Gulf of Mexico and southeast Asia.
Ardent says it needs at least two companies to sign up for a project to get off the ground. Well-Safe, another company offering a new approach, also needs several operators to commit.
So far, Ardent has found it challenging to persuade companies to be the first to sign up.
“Everyone is queuing to be second,” said Ardent’s Decommissioning Director Stuart Martin.
Oil companies are keen to reduce costs in a part of the market dominated by major global players such as TechnipFMC , Schlumberger, Saipem and AllSeas.
Beyond the floating tanks, Ardent has also joined forces with oil services firm WorleyParsons and technology and shipping group Lloyd’s Register, to bring a one-stop-shop service.
This could save money by cutting out the need for lots of different contractors. Well-Safe proposes coordinating decommissioning work across companies to share equipment and staff.
“You got to give Well-Safe and the others a real tip of the hat. We all want them to win. It’s in the best interest of the industry,” said Jim House, CEO of Neptune Energy, which is planning decommissioning for its Juliet and Minke fields in the North Sea.
Oil platforms are usually removed piece by piece and taken to the shore using complex vessels. The floating tanks that Ardent used to lift the Costa Concordia, are much cheaper to use, industry experts say.
“This technology could have significant potential cost efficiencies,” the Oil and Gas Technology Center, which is funded by the British government, said in a report.
But Ardent says it would need contracts for at least two buoyant tanks to go below current costs per ton of steel removed and three to get below its target cost reduction of around a third. Britain’s industry regulator, the Oil and Gas Authority, has set a target of 35 percent cost cuts compared with 2015 levels.
Well-Safe’s main lever for cost reduction also depends on several operators committing to contracts.
Ardent is also proposing to oversee a project from production to scrapping the metal onshore. Worley Parsons would operate the platform and maintain the equipment and Lloyd’s Register would plug the wells.
“It’s a lot about an emerging set of companies and we don’t yet know which is going to be the winning model,” said Boston Consulting Group’s Philip Whittaker.
With other fields maturing and drying up across the world and some experts expecting demand for oil to peak in the 2030s, the North Sea is a test bed for new decommissioning projects.
If a company can plug oil wells without leaks and remove thousands of tons of steel platforms and pipelines, some 50 years old, in the rough, deep seas between Scotland, England and Norway, they should be able to do it anywhere.
Industry body Oil and Gas UK, expects oil companies to spend £17 billion ($22.05 billion) on removing around 1,600 wells, 100 platforms, and 5,500 kilometers of pipelines in the next seven years. Some 840,000 tons of material will be returned to shore to meet environmental regulations.
“We’ve got a mature basin with a steady flow of work,” said Joe Laesk, decommissioning manager at Oil and Gas UK.
“Those resources and expertise can be exportable globally.”
The Gulf of Mexico has had decommissioning projects in its warm, calm waters for years but Southeast Asia is a new hot spot, with more than 1,500 platforms and 7,000 subsea wells expected to be uneconomical by 2038, according to the BCG.
That is followed by Latin America, West Africa and the Middle East Gulf.
With so much potential, more established players are also trying different approaches to make decommissioning cheaper.
Service vessel group Allseas is experimenting with new ideas. It specializes in subsea construction but is converting huge ships to lift structures as heavy as 48,000 tons in one haul.
“We lift in a matter of hours and we’re gone,” said Allseas President Edward Heerema.
The first job for Allseas’ Pioneering Spirit, the biggest construction vessel in the world, was in the Norwegian North Sea removing Repsol’s 13,500 ton Yme production unit.
Shell also used it to remove its 24,000 ton Brent Delta platform in 2017.
“We have taken substantial costs out of our major decommissioning project, the Brent, and we will continue to do so,” said Steve Phimister, head of Shell’s North Sea upstream.
“The whole industry needs to do that by innovating.”


Saudi Arabia, Iraq confirm full commitment to OPEC+ agreement- statement.

Updated 6 min 21 sec ago

Saudi Arabia, Iraq confirm full commitment to OPEC+ agreement- statement.

  • Both countries ministers said efforts by OPEC+ to meet their output cuts will enhance market stability

RIYADH: Saudi Arabia and Iraq on Monday confirmed their full commitment to the OPEC+ agreement.
Saudi Minister of Energy Prince Abdulaziz bin Salman, and Iraqi Oil Minister Ihsan Abdul Jabbar Ismail held discussions on developments in the oil markets, the improved global demand for oil, and progress in implementing the current OPEC+ agreement to reduce production.
OPEC and its allies led by Russia, a group known as OPEC+, agreed to cut oil output from May by a record 9.7 million barrels per day (bpd) after the coronavirus crisis destroyed a third of global demand.
The record cuts are now due to run to the end of July, before tapering to 7.7 million bpd until December.
But some OPEC members have not fully delivered on their agreed production cuts since May.
During a phone call, the Saudi minister commended Iraq’s performance within the framework of the agreement, as the country’s level of commitment in June reached nearly 90 percent.
Prince Abdulaziz thanked the Iraqi minister for his efforts in reaching the target, and expressed his confidence that Iraq will continue to improve its level of compliance with the oil cuts.
Ismail said Iraq would continue to improve compliance with the cuts to reach 100 percent by the start of August, pledging to compensate from July to September for the overproduction in May and June.
Both ministers also said that efforts by OPEC+, and the participating countries in the agreement, to meet their output cuts would enhance market stability and speed up their balanced recovery.

  • With Reuters