OGUK’S DECOMMISSIONING INSIGHT 2019 – THE CLAXTON EXECUTIVE SUMMARY
EXPENDITURE AND PROGRESS
The report states that cumulative decommissioning expenditure on the UKCS is anticipated to reach £15.2 billion over the next decade — consistent with 2018’s Decommissioning Insight forecast of £15.3 billion. However, forecast activity across the North Sea regions has fluctuated this year. Increased merger and acquisition activity in the central North Sea has led to a reduction in the expected workload over the ten-years; however, workloads in the northern and southern North Sea are predicted to increase. The report reveals more work is being carried out for similar rates of expenditure, suggesting efficiency improvements are the source of some of the gains of the past few years.
- Decommissioning remains a small part of overall expenditure
- Forward projections assume less volatile market conditions
- Production efficiency at its highest level for a decade
- Decommissioning presents a significant supply chain opportunity at home and abroad
- Well decommissioning activity is a major feature.
In the UK Government’s Budget 2018, the Chancellor issued a ‘call for evidence’ on how to establish the UK as a global hub for decommissioning. The Department for Business, Energy and Industrial Strategy (BEIS) launched this consultation earlier in 2019 and OGUK worked with members to form an industry response. This response incorporated a wealth of industry experience that reflects both operator and supply chain perspectives, and OGUK’s decommissioning forum actively contributed to the submission, providing an insightful perspective on how the UK can make the most of its decommissioning capabilities.
Wood Mackenzie estimates that £67 billion will be spent globally on decommissioning over the next ten years. The UK is expected to be the largest contributor, accounting for 28 percent of overall global expenditure, as illustrated by the chart below:
In summary, to be a global hub for decommissioning, the UK must focus on developing several areas:
- Supply chain
- A global reputation.
Strategic cost reductions
The supply chain is key to delivering decommissioning projects for the major operators and helping contribute to the industry’s overall target of 35% cost reduction. Claxton’s key priority in achieving strategic cost reduction is targeting resources where they can earn the best return, rather than just cutting costs. While the answer may differ by project, as an organisation we also pride ourselves with continuous improvement. In a nutshell, it’s finding ways to reduce product costs through any means possible, which in turn, importantly, saves money for our clients.
NORTH SEA FOCUS
With 2,624 wells, over 1.2 million tonnes of topsides to be removed, and almost 675,000 tonnes of substructures to be decommissioned over the next decade, there is a considerable quantity of work to carry out. It is essential that the nations around the North Sea continue to collaborate and develop a cost-effective way to carry out this work but also reap the full extent of the global opportunity that success in this regional market offers.
Reducing decommissioning costs by 35%
Drawing on OGUK’s Economic Report 2019, as a mature basin, the activity takes place across the oil and gas lifecycle on the UKCS, from exploration through to decommissioning. The report highlights the industry is more than halfway to the government target of reducing decommissioning costs by 35%.
The UK government recently called for evidence under the banner of Strengthening the UK’s Offshore Oil and Gas Decommissioning Industry. The consultation had two central themes:
- How the UK decommissioning industry could further improve its ability to serve the UK market, support MER UK and reduce the overall costs of decommissioning
- What could be done to encourage the domestic industry to export its decommissioning expertise abroad and position Scotland, together with the rest of the UK, as a world-leading hub for decommissioning? OGUK believes that a strategic approach should be adopted, building a global decommissioning capability in three phases:
- Excelling in the UK market
- Competitive regionally
- Targeted international ambition
Based on industry demand and the need to gain efficiencies, Claxton and the Acteon group of companies have experience in delivering effective turnkey packages to fit clients’ bespoke needs. Claxton’s expert engineers will recommend a tailored solution, based on specific project requirements from our array of rig-based and rigless decommissioning technology and methodology. Efficiencies can be achieved through simultaneous operations (SIMOPs) and removing the need for a jack-up rig, using our rigless technologies. These alternative approaches have already achieved significant cost reductions for clients projects all around the world.
NOT THE END, BUT A NEW BEGINNING
Referring to Michael Tholen’s foreword, decommissioning is not the end of our industry; it offers a new beginning. As outlined above, four years ago, the industry stepped up to the challenge to cut decommissioning costs by 35% and it is well on the way to achieving that. OGUK suggests that the industry must apply the same collective determination and pioneering capabilities to deliver the net zero carbon challenge. Re-use of old facilities for carbon capture and storage presents new opportunities, not just to create new value from old assets but also to help deliver that net-zero future that we as an industry have committed to deliver as part of Roadmap 2035. Decommissioning with the net-zero agenda at the forefront of our minds will be the next big step; where we lead, others will follow.
Futureproofing and collaboration
In an ever-changing market, Acteon Group, this year, added subsea cutting expertise to its Claxton brand with the acquisition of Proserv’s international Field Technology Services and Survey business units.
The Field Technology Services business offers cutting, friction stud welding and pipeline maintenance services from bases in Stavanger (Norway), Houma (USA), Singapore and Aberdeen (UK). These additional services and facilities have been integrated into Acteon under the Claxton brand, enabling the rapid globalisation of Claxton’s complementary well decommissioning, riser and conductor and surface pressure control offerings.
Claxton’s decommissioning capability now covers the following areas:
- Platform well abandonment
- Subsea well abandonment
- Conductor stump recovery
- Infrastructure removal
Decommissioning Case Study Pack
The Claxton offshore decommissioning case study pack showcases our vast experience of delivering successful decommissioning projects.