Decommissioning

As offshore assets age, oil and gas companies face a wave of decommissioning obligations, with expenditures estimated to exceed US$200 billion in coming decades. Decommissioning is not simply demolition. It requires plugging and abandonment of subsea wells. It requires reverse engineering structures in order to dismantle them safely and efficiently. It requires the destruction or recycling of substantial waste products, including hazardous chemicals. It also may require substantial environmental remediation.

Decommissioning represents not just an operational challenge but also a legal one. The global dispersion of facilities and their offshore location necessarily implicates a complex and overlapping set of international, regional, national, and intranational legal regimes. Decommissioning activities inevitably will entangle oil and gas companies in a wide range of disputes, including with host governments, regulators, business partners, and contractors.

As offshore assets age, oil and gas companies face a growing wave of decommissioning work. This wave could accelerate depending on market conditions, particularly the future erosion of oil and gas prices. If the transition to alternative energy sources and other economic factors push prices down, assets will reach the end of their economic lifespan more quickly. Assets that can be operated economically in a ~$100-per-barrel environment may not be economical in a ~$60-per-barrel environment.

Decommissioning is not simply demolition. It includes all activities necessary to manage and dispose of installations and platforms and to restore the environment. It includes pre-abandonment surveys, development of a decommissioning plan and its submission for regulatory approval, plugging and abandonment of wells, dismantling and removal of topsides, subsea structures and pipelines, and disposal of associated waste. It requires reverse engineering

structures in order to safely and efficiently dismantle them. It requires the destruction or recycling of substantial waste products, including hazardous chemicals. It also may require substantial environmental remediation.

The cost and scope of decommissioning operations varies widely depending on the type and location of the structures at issue. Small structures in shallow waters sometimes can be decommissioned for several hundred thousand dollars. A complex web of large and heavy structures in deep water are more challenging and can involve costs running into the billions of dollars.

The scope of anticipated future decom activity is massive. Global decommissioning expenditures between 2010 and 2040 have been estimated at more than US$210 billion. An estimated 2,000 offshore projects will require decommissioning between 2021 and 2040.

Dales Marine Services Ltd (Dales Marine), an EU List approved supplier of vessel decommissioning, announces the successful decommissioning and recycling of MV Oceanic Pintail. MV Oceanic Pintail, launched in 1987, was owned by the Nuclear Decommissioning Authority and operated by its transport business Nuclear Transport Solutions.

MV Oceanic Pintail arrived at the Dales Marine's Leith dry dock facilities in mid-November 2020, and Dales commenced with decommissioning operations at the end of that month.

Cargo vessels like the Oceanic Pintail are designed and constructed to counter harsh environmental

and climatic conditions. Unfortunately, at the end of their serviceable life, they can often be contaminated with unsafe substances that can make decommissioning vessels a complex and hazardous process.

Dales Marine is very experienced in conducting vessel decommissioning safely and responsibly at their Leith dry dock. The dry dock is regularly used for decommissioning ships and is set up to accommodate these types of projects.

On 24 November 2020, MV Oceanic Pintail was issued a ready to recycle certificate, de-pollution, soft stripping, and removal of the accommodation were completed by Dales Marine at the end of March.

The vessel was then prepared for and manoeuvred into the dry dock for the hull's final disposal, which commenced early August. Dales Marine removed the last piece of MV Oceanic Pintail from the dry dock on 15 September, and the completion certification was issued.

The contract for the project was for the removal and disposal of the vessel, with the client, Nuclear Transport Solutions,

stipulating that 98% of the vessel's materials had to be recycled in line with their commitment to environmental responsibility Dales Marine exceeded the target and recycled 100% of the vessel’s materials.

Throughout the decommissioning process, Dales worked closely with its contractors discussing how best to remove the waste material from site for recycling. By working with contractors, they found several solutions to streamline the process. Detailed reports of materials removed, recycled, or repurposed were supplied regularly to the client. Finally, by working closely with contractors, Dales ensured that any waste that wasn't recyclable was either repurposed, resold or went as waste for energy schemes.

Michael Milne, CEO, Dales Marine Services, said: "Our team's decommissioning expertise and experience have been invaluable in our achieving the 98% recycling targets. Dales prides itself on being a high achiever in its recycling and greener approach. For this project, having the support and strong working relationships with our contractors and suppliers has allowed us to work together in finding the best solution for improving how we went about recycling or repurposing waste materials from the vessel.".

The Offshore Decommissioning Market size is expected to grow from an estimated USD 5.2 billion in 2021 to USD 8.0 billion by 2027, at a CAGR of 7.4%. Aging offshore oil & gas infrastructure and maturing fields are driving the offshore decommissioning industry. Low oil prices of the past couple of years have made it even more difficult to maintain low production mature reserves, driving companies to accelerate decommissioning plans for such oil & gas fields.

The well plugging & abandonment is expected to be the largest contributor to the offshore decommissioning market.

The market has been segmented by service type, water depth, structure, removal type, and region. The market has been further segmented, by service type, into project management, engineering and planning, permitting and regulatory compliance, platform preparation, well plugging and abandonment, conductor removal, mobilisation and demobilisation of derrick barges, platform removal (includes topside, jacket removal, subsea), pipeline and power cable decommissioning, materials disposal, and site clearance.

The well plugging and abandonment service segment accounted for the largest share of the market in 2020 and is also projected to grow at the fastest pace during the forecast period. Well plugging & abandonment involves the safe and permanent closure of production or exploration wells and is one of the biggest and most critical activities in any decommissioning project.

The shallow water subsegment is estimated to have the highest growth rate in the Offshore Decommissioning Market.

Based on depth, the market has been segmented into shallow water and deepwater segments. The

application of offshore decommissioning in shallow water projects is estimated to lead the market, both in terms of market value and growth. The shallow water basins on the UK Continental Shelf and the Norwegian North Sea will play a major role in driving the Offshore Decommissioning Market.

Shallow water operations are typically less expensive compared to deepwater operations, and a majority of the old and aging offshore installations are in shallow waters. Thus, the market for offshore decommissioning will be the largest in shallow water projects.

Europe is expected to be the largest Offshore Decommissioning Market.

Europe was the largest market, by value, for offshore decommissioning in 2020, driven mainly by activities in the UK, Norway, and Netherlands. The UK offshore industry leads other regions in terms of well-developed and mandatory decommissioning guidelines. The production of oil, gas liquids, and liquid products in the UK Continental Shelf (UKCS) peaked at around 1,027.5 million barrels in 1999. Ever since the country has struggled to offset the decline in production with both onshore and offshore fields. With a large number of fields in the country near the end of their lifecycles, the market in the UK is projected to be the largest for offshore decommissioning during the forecast period. Authorities in the region are taking active steps to commit operators to decommission old infrastructure by providing expertise, policy support, and financial incentives.

Some of the top service providers in the Offshore Decommissioning Market include Heerema Marine Contractors (The Netherlands), Royal Boskalis Westminster N.V. (The Netherlands), Petrofac (Jersey), Oceaneering International (US), Baker Hughes Company (US), Halliburton (US), and Schlumberger (US).

The Norwegian Competition Authority (NCA) has not had any objections regarding the creation of a decommissioning joint venture between AF Gruppen and Aker Solutions.

Aker Solutions informed that the transaction was subject to due diligence and final board approvals, expected to be completed during the fourth quarter of 2021.

To remind, Aker Solutions and AF Gruppen signed the letter of intent to merge the two companies’ existing offshore decommissioning operations into a 50/50 owned company on July 1, 2021.

The merger will create a global player for environmentally friendly recycling of offshore assets and provide a significant contribution towards a sustainable, green transition of the offshore sector.

It is worth noting that the recycling of steel from decommissioned oil platforms represents a significant contribution to reducing greenhouse gas emissions compared with ordinary steel production.

The business concept is based on solving a significant societal challenge by removing and recycling decommissioned oil platforms. The unit aims to recycle as much of the materials from the decommissioned offshore platforms as possible.

Decommission of the offshore market has a vast untapped potential globally, with approximately 10,000 operational platforms. The North Sea alone holds a significant potential with an expectancy of more than 900,000 metric tons of top deck to be removed during the period from 2020 to 2029. This applies to the British, Norwegian, Danish, and Dutch sectors.

As for AF Offshore Decom, it managed to achieve a source separation rate of 94 percent for the recycling of structures where the main component is metal. Reusing steel results in 70 percent less CO2 emissions than ore-based production, which corresponds to an emission reduction of 1 kg CO2 per kilo of recycled steel.

According to Aker Solutions, it will take operators approximately 100 years to deplete liabilities for current assets. Thus, a further ramp-up of pace is necessary, leading to a positive contribution to the demand for this type of service. The joint company will have an order backlog of approximately $292 million.

SPONSORED BY

www.wellsafesolutions.com