Remove or reuse? Making a decision on decommissioning offshore oil platforms
However, the need to decommission as low cost as possible has forced operators to look at alternatives to complete removal. Thankfully, exploits into partial removal have proven to be a success around the world – while still keeping costs down. One alternative that has been used successfully, and something we’ve covered in a previous blog post ‘Why rig to reef is vital’, is reusing the platform post-decommissioning for artificial reefing. While the operator is still left with an asset they are liable for, preserving and sustaining the ecological habitat that has built around the platform is well received by stakeholders too.
Putting stakeholders to one side, platform owners are seeing an operational benefit to partially removing their existing platforms. Due to being a key link within their field or the field’s infrastructure, operators are keeping stripped back platforms in the sea. By keeping minimal facilities on board, they are lessening the cost of running the asset, while still keeping the facility open and an integral part of the rest of the field.
While operators may deem platforms worthless for further oil and gas exploits, alternative energy is something that has been suggested in research. Offshore wind, wave, and solar panel projects have all been put to the industry, but with no projects implemented. As with any new project, the feasibility and viability for either wind, wave or solar are unjustified. Research by business intelligence company Lumina, also suggests that there is a lack of technical feasibility on the platform, as well as interest from operators.
Using decommissioned platforms as a logistical base to complete offshore maintenance and other nearby projects have also been suggested as an alternative way to reuse the asset. While there is some interest in the Gulf of Mexico, currently the world leading region for the number of oil rigs (213), no project has been completed yet. Similar to alternative energy, this has meant that the feasibility and financial viability is somewhat unjustified. Also with current technological developments, the report from Lumina again also stated that creating aquaculture hubs would be rendered useless as the industry finds cheaper and more efficient ways to complete maintenance.
Housing instrumentation, hotel resorts and reuse for tourism activities are just three other ideas put to the industry. But with little interest and again, no economic viability guaranteed, none of these ideas has gone beyond the ideas stage.
While these reuse ideas may not be viable just yet for operators, they are still ideas to watch with anticipation in the future. Comparing both removal and reuse options currently available, clearly, removal is still the stand-out option for operators. However, there could be another option on the horizon, particularly for large operators.
The drop in oil price, the cost of rigs and field development has paradoxically made this “an economically compelling time to invest”, according to Graham Stewart, Chief Executive of the independent operator, Faroe Petroleum. Despite posting losses of £53 million last year, the company is looking at further acquisitions in the North Sea while prices are still low. With an appetite from independents to buy, extract and complete further exploration with existing platforms, larger operators could be helped in reducing their asset book and need to decommission – albeit on a small scale.
MAKING THE BEST DECISION
At a time when the operator’s cash flow needs protection, it is understandable that they are looking for alternative solutions to costly complete removals. While partial removal and reusing techniques will reduce upfront costs, operators still remain liable and are effectively delaying the decision to completely remove anyway.
However, if this change in usage provides operators with time for the industry to move upwards again, both financially and technologically too, hopefully, it will make complete decommissioning projects an easier pill to swallow in the future.
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