1. Robert Gordon University, Aberdeen
The Scott Sutherland School of Architecture and Built Environment
BSc (HONS) in Quantity Surveying
“An investigation into the current and future challenges of decommissioning in the North
Sea.”
Sam George – 1103549
January 2016
2. “An investigation into the current and future challenges of decommissioning in the North
Sea.”
Sam George – 1103549
January 2016
Word Count: 10,893
This report is submitted in partial fulfilment of the requirements for the degree of BSc (HONS) in
Quantity Surveying at Robert Gordon University, Aberdeen.
3. The content of this dissertation is the result of my own investigation, except where stated
otherwise. It has not been accepted for any degree, nor been concurrently submitted for any other
degree within or outside Robert Gordon University. I take full responsibility of the authenticity,
sources and originality of the content used in this dissertation.
Name: ………………………………….. Matric Number: …………….
Signed: ................................................ Date: .......................
4. v
ABSTRACT
Decommissioning is a sector of the oil and gas industry that has not been prominent in the past but
is estimated to pick up greatly over the coming decade as a large number of North Sea installations
reach the end of their economic production lives. It has been estimated that the total cost of
decommissioning in the North Sea could reach a huge £70 billion (Decom North Sea, 2015b).
There have undoubtedly been challenges in the process to date and this work aims to investigate
what these challenges have been and if new ones look set to occur as the decommissioning sector
starts to grow.
Interviews with three industry professionals were undertaken to get a grip on the various
viewpoints from those actively involved in decommissioning. This information was then analysed
and cross referenced with a range of literature.
The findings show that the most prominent challenges currently are cost and a lack of information
sharing within the industry. The cost issue relates to difficulties obtaining accurate cost estimates
with companies therefore struggling to fund decommissioning projects. The lack of information is
a frustration that is preventing the industry from obtaining benchmark figures and the transfer of
knowledge, stemming from the industry’s natural tendency to be confidential.
It is clear that the decommissioning sector needs to find solutions to overcome these challenges, or
at least minimise their affects. Findings suggest that a great increase in knowledge sharing within
the industry should help to eliminate these challenges. Decommissioning is going to play a large
part in the future of the oil and gas industry and it must be prepared to cope with this burden.
5. vi
ACKNOWLEDGMENTS
I would like to thank my supervisor, Dominic Ahiaga-Dagbui for all of his constructive feedback
and advice.
I would also like to thank all the industry professionals who so willingly took time out of their busy
schedules to assist me with my research.
6. vii
Table of Contents
CHAPTER 1 - INTRODUCTION AND BACKGROUND.......................................................... 2
1.1 INTRODUCTION............................................................................................................................ 2
1.2 AIMS AND OBJECTIVES............................................................................................................... 2
1.3 MOTIVATION ............................................................................................................................... 3
1.4 BACKGROUND ............................................................................................................................. 3
1.5 METHODOLOGY .......................................................................................................................... 3
1.5.1 LITERATURE REVIEW 4
1.5.2 INTERVIEWS 4
1.6 PROJECT STRUCTURE................................................................................................................. 4
CHAPTER 2 - LITERATURE REVIEW...................................................................................... 5
2.1 INTRODUCTION............................................................................................................................ 5
2.2 WHAT IS DECOMMISSIONING?................................................................................................... 5
2.3 DECOMMISSIONING PROCESS .................................................................................................... 6
2.3.1 PIECE SMALL 6
2.3.2 PIECE LARGE/REVERSE INSTALLATION 6
2.3.3 SINGLE LIFT 7
2.4 DECOMMISSIONING IN THE NORTH SEA.................................................................................... 8
2.4.1 THE SIZE OF THE TASK 9
2.4.2 REGULATORY FRAMEWORK 10
2.5 POTENTIAL CHALLENGES OF DECOMMISSIONING IN THE NORTH SEA................................ 10
7. viii
2.5.1 SUPPLY CHAIN/SKILLS 11
2.5.2 COST 11
2.5.3 TECHNICAL 11
CHAPTER 3 – RESEARCH METHODOLOGY....................................................................... 15
3.1 INTRODUCTION.......................................................................................................................... 15
3.2 WHY USE INTERVIEWS?............................................................................................................ 15
3.3 THE INTERVIEWS IN THIS REPORT .......................................................................................... 15
CHAPTER 4 – FINDINGS AND DISCUSSIONS....................................................................... 17
4.1 INTRODUCTION.......................................................................................................................... 17
4.2 QUESTION 1: WHAT WERE THE MAIN CHALLENGES YOU HAVE FACED ON PREVIOUS
DECOMMISSIONING PROJECTS?..................................................................................................... 17
4.3 QUESTION 2: HOW DID YOU OVERCOME THESE CHALLENGES?............................................ 18
4.4 QUESTION 3. WHAT ARE SOME OF THE CHALLENGES IN TERMS OF: .................................... 19
4.4.1 A) AVAILABLE TECHNOLOGY? 19
4.4.2 B) AVAILABLE PERSONNEL/STAFF TO EXECUTE THE JOB? 21
4.4.3 C) ACCURATELY COST ESTIMATING A DECOMMISSIONING PROJECT? 23
4.5 QUESTION 4: WHAT DO YOU THINK COULD BE SOME OF THE MAIN CHALLENGES IN THE
FUTURE AS THE VOLUME OF WORKS RELATING TO DECOMMISSIONING INCREASES IN THE
NORTH SEA?.................................................................................................................................... 25
4.6 QUESTION 5: AS DECOMMISSIONING IS RELATIVELY IN ITS INFANCY IN THE NORTH SEA,
HOW DO YOU MAKE SURE YOU’RE TRANSFERRING LESSONS AND EXPERIENCES FROM ONE
PROJECT TO ANOTHER? (HOW DO YOU MAKE SURE YOU’RE BECOMING MORE COST EFFICIENT,
COST-EFFECTIVE AND SAFE?) ........................................................................................................ 26
CHAPTER 5 – CONCLUSION .................................................................................................... 29
5.1 DATA COLLECTION................................................................................................................... 29
5.2 FUTURE RESEARCH................................................................................................................... 29
9. x
LIST OF FIGURES
Figure 1: A graph showing the average age of North Sea installations (Source: Decom North Sea,
2014) .................................................................................................................................................. 5
Figure 2: A module being lifted away from an installation (Source: CrossTalks, 2014)................... 7
Figure 3: Topside removal in a single lift (Source: Arabian Oil and Gas, 2014)............................... 8
Figure 4: Locations of North Sea Installations (Source: Decom North Sea, 2014) ........................... 9
Figure 5: A well plugged at various points (Source: Statoil, 2012) ................................................. 12
Figure 6: Drill cuttings being transported away by the drilling mud (Source: Rigzone, 2016) ....... 13
Figure 7: Drill cutting piles on the seabed (Source: Decom North Sea Conference, 2014)............. 13
Figure 8: Design image showing the Pioneering Spirit transporting an entire structure (Source:
Allseas, 2015)................................................................................................................................... 37
10. xi
LIST OF ABBREVIATIONS AND NOMENCLATURE
UKCS – United Kingdom Continental Shelf
DECC – Department of Energy and Climate Change
OGA – Oil and Gas Authority
OSPAR – Oslo/Paris Convention for the Protection of the Marine Environment
E&P – Exploration and Production
11. 2
Chapter 1 - INTRODUCTION AND BACKGROUND
1.1 Introduction
A mention of the Oil and Gas Industry eighteen months ago would have conjured images of wealth
and success, particularly here in Aberdeen. However, the falling oil price over the last year or so has
wiped that image away on the most part and replaced it with constant talk of redundancies and
downscaling. Despite this, it can be said that when one door closes another opens.
Decommissioning within the Oil and Gas Industry has been described by Oil and Gas UK (2015) as
“redundant oil and gas installations being taken out of service.” Large scale decommissioning in the
North Sea has always been on the horizon but now, with many fields starting to dry up after years of
exploitation, and profit margins on oil production slashed, this process may come about on a large
scale slightly earlier than planned.
1.2 Aims and Objectives
The aim of this report is to determine what the challenges have been to date in North Sea
decommissioning, and whether these look set to change as the rate of decommissioning increases over
the coming decades.
This will be achieved by:
Using literature to contextualise and establish the scope North Sea decommissioning
Using literature to establish the common methods of decommissioning
Using literature to identify supply chain, cost and technical challenges
Using interviews to obtain primary data on past decommissioning challenges and the resulting
solutions
Using interviews to obtain primary data on the scope of the challenges in relation to available
technology, the supply chain and cost estimation in decommissioning
Using interviews to obtain primary data on predicted future challenges in decommissioning
Using interviews to obtain primary data on how information and knowledge is shared in the
industry
12. 3
1.3 Motivation
The motivation behind this report stems from both my interest in the Oil and Gas Industry, and my
desire to pursue a career within it. On top of this, the transitional period that the industry is currently
going through has brought with it a greater focus on decommissioning.
When the oil was plentiful and the price of a barrel was high the focus was understandably on
extracting the oil but with times changing there is a view that decommissioning is the future of the Oil
and Gas Industry and it is this that grabbed my attention and made me want to base my research
around such a topical subject.
1.4 Background
Since 1966 the North Sea has seen upwards of 45,000km of pipelines, umbilical and cable installed,
and since 1967, 556 steel piled structures (Oil and Gas UK, 2013). 88 of these structures have since
been successfully decommissioned (Decom North Sea et al.2014).
The rate of decommissioning in the North Sea is set to increase greatly in the near future with
estimated expenditure set to average £1.5 billion per year for the next ten years (Strategic
Decommissioning Consultants Limited, et al. 2015). This will without doubt be a challenging period
for the industry but it provides motivation for those disheartened with the current state of affairs, and
should inspire a young generation as well as attracting talent from other industries, from all over the
world.
1.5 Methodology
The methodology used in this reports consists of:
Literature Review
Interviews with industry professionals
13. 4
1.5.1 Literature Review
A literature review will be undertaken to look in greater depth at what has been written around the
challenges that have and are being faced in decommissioning. This will help to establish the problems
before refining my understanding of the issues and providing a base for further research through the
means of interviewing various industry professionals.
1.5.2 Interviews
The industry professionals interviewed are actively involved with decommissioning work which
allowed an understanding to be gained of how decommissioning projects are tackled and if this
process is set to change in the future to cope with the increase in decommissioning work that is
expected. Similarities with any literature will be noted.
1.6 Project Structure
This project will be in the form of a report following a traditional structure:
Chapter 1 – Introduction
Chapter 2 – Literature Review
Chapter 3 – Research Methodology
Chapter 4 – Findings and
Discussions
Chapter 5 – Conclusion
14. 5
Chapter 2 - LITERATURE REVIEW
2.1 Introduction
Decommissioning is essentially an end of life, non-profit procedure for operators and
therefore completing a project as quickly and cheaply as possible, yet still adhering to
environmental requirements can prove to be a challenge in itself. Decommissioning in the oil
and gas industry of course has its challenges, as does every industry. In this chapter, the
context and process of decommissioning in the North Sea will be detailed. This will help to
determine some of the potential challenges and opportunities associated with
decommissioning in the North Sea.
2.2 What is Decommissioning?
Offshore decommissioning can be described as the sealing of insertions in the seabed and the
removal and displacement of infrastructure used in the oil extraction process, with the aim
being that there is as little impact on the environment as possible (Society of Petroleum
Engineers, 2015).
The next few decades will see an increase in decommissioning activity as a number of
facilities reach the end of their production lives having been operating for up to 40 years in
some cases, and need to be removed from the North Sea in an efficient and safe manner
(Decom North Sea, 2015a).
Figure 1 below is a graph showing the average age of North Sea installations. It is clear to see
that United Kingdom assets have the oldest average age which goes a long way to explain
expected increase in decommissioning (Decom North Sea et al., 2014).
Figure 1: A graph showing the average age of North Sea installations (Source: Decom North Sea,
2014)
15. 6
2.3 Decommissioning Process
The options for the removal of a North Sea asset should be analysed prior to extraction to
ensure the most appropriate method is selected (Andrew, 2014).
Three methods used for the decommissioning of offshore infrastructure that will be focused
on in this report are as follows:
Piece Small
Piece Large/Reverse Installation
Single Lift
2.3.1 Piece Small
A decommissioning project using the piece small method involves an asset being
deconstructed offshore. To begin with all non-metals, harmful waste, cables and electrical
items are removed (AF Gruppen, 2015). Then through careful cutting and disassembling, into
pieces small enough to fit in containers which are then lifted onto supply vessels and taken to
shore (Arup, 2014). Once onshore the materials are separated, broken down further and any
waste is disposed of appropriately (Shetland Decommissioning, 2016).
The piece small method of decommissioning an offshore asset appears to be a relatively
simple procedure, albeit labour intensive and time consuming. Considering the evidence from
above, it would seem that the piece small method would be best suited to some of the smaller
structures in the Southern North Sea as on a larger platform in the North it is likely to become
inefficient both in terms of time and cost.
Refer to Appendix 1 for the advantages and disadvantages of piece small decommissioning.
2.3.2 Piece Large/Reverse Installation
Piece large decommissioning, more commonly known as reverse installation is when an oil
rig is dismantled module by module through the use of a heavy lift vessel, in the reverse order
of installation (Climate and Pollution Agency, 2011). Figure 2 below shows the removal of a
module from a North Sea installation (Mathonniere, 2014). As further modules are removed
the structural strength and stability of the remaining structure must be monitored in order for
it to be maintained and therefore safe (Veolia et al., 2015).
16. 7
Figure 2: A module being lifted away from an installation (Source: CrossTalks, 2014)
The modules are then transported to land based yards by vessel or barge where they are
inspected and if suitable sent for re-use, or they are broken down further and the materials
sent for recycling or waste disposal (Decom North Sea et al., 2015). The yards must have
deep water and large quays to allow the heavy lift vessels in without seabed clearance issues
(AF Gruppen, 2015).
While the theory behind the reverse installation method makes great sense, it would appear to
be limited to a certain type of structure and not a universal process that can be used on a
structure regardless of its construction. The modular way of building an offshore structure
was primarily enlisted during the 1970s and 1980s (Nixon, 2013). Undoubtedly there will be
ways of adapting this method to cope with structures that were not installed in a simple
modular fashion, but over time there must be the possibility of this method dying out once all
the older modular installations have been removed.
Refer to Appendix 2 for the advantages and disadvantages of reverse installation
decommissioning.
2.3.3 Single Lift
Decom North Sea et al. (2015) explain that the single lift method of decommissioning is
relatively self-explanatory in that the topside of an installation is removed as a whole, in one
lift, and that the jacket can also be removed through this method. Figure 3 shows the topside
of a North Sea installation being removed by the single lift method (Enzer, 2014).
17. 8
Figure 3: Topside removal in a single lift (Source: Arabian Oil and Gas, 2014)
The structure is then transported by barge or heavy lift vessel to a suitable yard (Decom North
Sea et al., 2014) where it can be cleaned of saltwater build up, broken down further or sent for
re-use, and disposed of or recycled (Nixon, 2013).
It appears that the theory behind the single lift method of decommissioning is extremely
logical from what has been stated above. The process is very simple and has a number of
advantages. However, the success of this method long term seems reliant on the type and
number of suitable vessels available. The current heavy lift vessels would appear better suited
to the smaller, lighter, gas-producing installations in the Southern North Sea where the weight
of the structure is less, but to be able to remove the topsides and jackets of the larger
installations in the North a larger boat with a heavier lift capacity is required.
Refer to Appendix 3 for the advantages and disadvantages of single lift decommissioning and
Appendix 4 for the new Allseas heavy lift vessel, Pioneering Spirit.
2.4 Decommissioning in the North Sea
With a number of North Sea installations coming to the end of their efficient production lives,
it is important to understand the scope of what lies ahead over the coming decades. As a
result, the following will be looked at:
The size of the task
The regulatory framework
18. 9
2.4.1 The Size of the Task
Decom North Sea (2015) state that the North Sea is home to upwards of 600 installations used
in the production of oil and gas, with around three quarters of these being situated in UK
waters. They go on to explain that on top of this there is an estimated 10,000km of pipeline
and around 5000 wells or drill cutting piles on the seabed. To process the produced oil and
gas there are 15 onshore terminals currently in use (Decom North Sea, 2015a). To date, only
about 12% (88) of installations in the North Sea have been decommissioned (Decom North
Sea et al., 2014).
Figure 4 shows the location and age of all the
North Sea installations. The green represents
decommissioned assets (Decom North Sea et al.,
2014).
Figure 4: Locations of North Sea Installations (Source:
Decom North Sea, 2014)
The Oil and Gas UK Decommissioning Insight Report (2015) explains that 2014 saw the
majority of planned decommissioning projects completed with a total spend of £800 million
on the United Kingdom Continental Shelf (UKCS).
For the ten years up until 2024 the expenditure on decommissioning has been forecast at
£16.9 billion, £2.3 billion higher than the 2014 figures showed (Oil and Gas UK, 2015).
This increase could be as a result of the falling oil price leading to a greater number of
installations not making money on the resources they are producing, meaning it is more
financially viable to take them out of use and prepare for them to be decommissioned. These
thoughts are echoed in the predicted decommissioning cost over the next decade. The £16.9
billion total equates to just under £1.7 billion a year on average, over double the
decommissioning cost of 2014. However, it could be argued that this figure will come down
if the oil price starts to increase, and those installations on the borderline between being in the
red and the black start to produce more significant profits.
Refer to Appendix 5 for supporting evidence on the scale of future North Sea
decommissioning.
19. 10
2.4.2 Regulatory Framework
A report by Bureau Veritas (2011) delivers a concise compilation of the regulations in place
for decommissioning on the UKCS with the aim of assisting operators in ensuring they abide
by these regulations throughout a project. It is noted that there are separate regulations for
platform decommissioning, pipeline decommissioning as well as a set of general regulations
that apply to both (Bureau Veritas, 2011).
Legislation states that all offshore installations must be decommissioned once they reach the
end of their production lives, and that all equipment must be removed from the seabed unless
there is an environmentally viable reason for leaving it there (Bureau Veritas, 2011).
So despite companies being forced into decommissioning, a process they are undoubtedly
reluctant to pursue due to the time and cost involved plus the fact it does not generate any
profit, they have no choice but to comply with the framework of regulations. It would be easy
to relax these regulations and let the companies have more control over how they
decommission an asset, but that could risk a repeat of the Brent Spar fiasco as companies will
aim to do minimal decommissioning work with dumping on the seabed a likely outcome.
Refer to Appendix 6 for further information on OSPAR and the regulatory framework in
place for North Sea decommissioning.
2.5 Potential Challenges of Decommissioning in the North Sea
A complicated process like decommissioning understandably comes with its challenges. The
industry is under no false illusion of anything otherwise and is aiming to both overcome and
minimise these challenges as the decommissioning sector progresses and becomes more
prominent over the coming years.
The three areas where there are notable challenges in the industry that will be looked at
further are:
Supply Chain/Skills
Cost
Technical
20. 11
2.5.1 Supply Chain/Skills
A report by The Royal Academy of Engineering (2013) suggests that without a vast increase
in the number of trainees and graduates starting careers in the decommissioning industry and
those already in the industry learning new skills, there will be a great deficiency of skilled
workers in the United Kingdom. The paper suggests that the main reasons behind the shortage
of skilled personnel are due to the lack of resources, lack of retention and the image of
decommissioning (Royal Academy of Engineering, 2013).
Refer to Appendix 7 for an insight into the supply chain/skills challenges and solutions to
overcome them.
2.5.2 Cost
The cost estimation of decommissioning projects is known to be an extremely difficult task
for a variety of reasons, as suggested in a report by the Royal Academy of Engineering
(2013). Firstly, there are a variety of unknown factors and constantly changing aspects when
it comes to decommissioning (Royal Academy of Engineering, 2013). When a structure is
installed it cannot be expected for the materials to be in the same condition when it comes to
be decommissioned, some 40 odd years later. This is especially relevant to subsea equipment,
the extent and condition of which can be vastly unknown without a significant sum of money
being spent on inspection prior to cost estimation. The report suggests that the ability to keep
cost estimation realistic is largely down to the experience of those involved in the estimation
process, and this can be a difficult task when those with this knowledge change jobs, retire or
were not even available in the first place (Royal Academy of Engineering, 2013).
Refer to Appendix 8 for supporting information on the cost challenges of North Sea
decommissioning.
2.5.3 Technical
There are of course a number of technical challenges within the decommissioning process and
prominent issues are found within the following two areas:
Well Plugging and Abandonment (P&A)
Drill Cuttings
21. 12
2.5.3.1 Well Plugging and Abandonment (P&A)
Well plugging and abandonment can be defined as the permanent closure of a well following
the reservoir being fully drained (Schlumberger, 2015). An article by Rigzone (2016) states
that the process is one of the significant contributors to decommissioning costs and this is
related to both the complex procedure as well as the importance of getting the plugging
process right to prevent leaks in the future.
The process of permanent P&A involves the pouring and setting of cement or machined plugs
at points throughout the depth of the well to seal it off and prevent leakage (Reid, 2010).
Figure 5 shows the various points throughout the length of the well at which plugs are
installed (Statoil, 2012).
Figure 5: A well plugged at various points (Source: Statoil, 2012)
Reid (2010) goes on to explain some of the various challenges involved in the P&A process
including damage to the wellhead preventing access to the well, something which could have
been ignored at the time production was ceased. This could also be the case with the
condition of the walls of the well which could have suffered from serious corrosion which
would need to be rectified prior to plugging (Reid, 2010). Maslin (2014) reiterates this by
stating that the varying condition of the wells is one the biggest challenges facing the
industry. The lack of vertical access and information from when the well was created can
also lead to difficulties creating a directional flow for the cement insertion procedure (Reid,
2010).
22. 13
Wilson (2014) explains that on top of the physical challenges of the process there are
challenges for both operators and service companies finding staff with specific experience in
decommissioning and well P&A. This would seem a priority area to address because even
with all the right resources a job is unlikely to be executed correctly without the right team
backing it.
2.5.3.2 Drill Cutting Issues
Moore (2014) explains that drilling muds are used for a variety of reasons during the process
of drilling wells including the lubrication and cooling of the drill bit, the removal of drill
cuttings from the well, the upholding of well walls and they act as the hydrostatic head, which
is the height of a freshwater column that applies pressure at a certain depth (Schlumberger,
2016). The author goes onto explain that most muds are water based but 10-15% diesel or
other chemicals are usually added to aid performance.
Figure 6 shows the drill cuttings being transported away from the drill-
head amongst the drilling muds (Rigzone, 2016).
Figure 6: Drill cuttings being transported away by the drilling mud (Source:
Rigzone, 2016)
A report by OSPAR (2009) suggests the drill cutting issues that relate to decommissioning
stating that piles of drill cuttings containing traces of chemical lubricants from the drilling
mud accumulate on the sea bed around the well. Figure 7 shows these accumulations on the
seabed (Moore, 2014)
Figure 7: Drill cutting piles on the
seabed (Source: Decom North Sea
Conference, 2014)
23. 14
Over time these chemicals can start to seep out into the surrounding marine environment. The
report goes on to express the concerns over the seepage being accelerated following
disturbance from trawlers and decommissioning activity.
The natural assumption is that to prevent contamination to the surrounding environment
disturbance to the piles needs to be avoided altogether but interestingly studies have been
undertaken to assess the spread of contamination during the dredging process in Norway, and
being trawled over by nets in the United Kingdom and the results showed that although
contamination was spread, it was not enough to create serious concern. However the report
does state that the results are purely indicative and the same results cannot be assumed in the
future (OSPAR Commission, 2009). This is of course a positive result, but with the increased
rate of decommissioning that is expected in the North Sea, it certainly seems to be an area that
requires regular monitoring.
24. 15
Chapter 3 – RESEARCH METHODOLOGY
3.1 Introduction
In order to gain an insight into decommissioning from those actively involved in the industry
a series of interviews were conducted. A set of five questions were established and each
interviewee was asked the same questions. By not altering the questions for each interview,
comparisons can easily be made between the answers provided by each participant.
3.2 Why use interviews?
In this instance interviews were chosen as the choice of primary data collection due to the
nature of the information that was hoping to be obtained. A questionnaire sent out to multiple
people may have received a greater response, but the answers were likely to be shorter with
less time spent on them, and therefore less beneficial to the research.
Kvale (2005) explains that a research interview is not merely conversation back and forth and
that the interviewer is in control of the direction the conversation takes. This suits the
interviewer as it enables them to obtain the information they require and keep the
conversation on the right track.
Valenzuela et al (2008) explain some of the advantages of the interview method of research.
These include the fact that an interview is more personal than a questionnaire and the
interviewer can work with the respondent to get the information they require. To add to this,
the interviewee may feel more comfortable expressing past experiences and feelings while
speaking in an interview than writing them down in a questionnaire so the interviewer is
likely to get a more in depth response.
3.3 The Interviews in this Report
Three interviews were undertaken to provide information for this report. The compiled
information was then compared and general themes became clear. The following questions
were asked:
1. What were the main challenges you have faced on previous decommissioning
projects?
2. How did you overcome these challenges?
25. 16
3. What are some of the challenges in terms of:
a) Available technology?
b) Available personnel/staff to execute the job?
c) Accurately cost estimating a decommissioning project?
4. What do you think could be some of the main challenges in the future as the
volume of works relating to decommissioning increases in the North Sea?
5. As decommissioning is relatively in its infancy in the North Sea, how do you
make sure you’re transferring lessons and experiences from one project to
another? (How do you make sure you’re becoming more cost efficient, cost-
effective and safe?)
These questions were selected as they were not overly complicated and difficult for the
interviewee to answer, yet gave me precise information that was directly related to my field of
research.
Only five questions were asked because it was felt that greater amounts of information from
fewer questions would be more beneficial than less information from more questions as the
results would likely be from a questionnaire. Five questions were enough to cover the scope
of my research.
The three individuals partaking were chosen because they are all at different stages in their
careers, with varying backgrounds, which enabled the scope of decommissioning to be
covered from various points of view.
26. 17
Chapter 4 – FINDINGS AND DISCUSSIONS
4.1 Introduction
To gain an insight into the views on the current and future challenges of decommissioning
from within the oil and gas industry, interviews were undertaken with a number of
professionals actively involved with decommissioning. The expectations of these interviews
were that the information received from within the industry would both back up and
contradict the original views of the challenges associated with decommissioning projects.
Three interviews were undertaken. One was with a senior project engineer from a large
exploration, development and production company who gave me an insight into the
challenges he faced on a previous decommissioning project, and also predicted ones that may
present themselves in future projects. The founding member of Decom North Sea was
interviewed and shared his knowledge, experience and frustrations with the industry. It is
worth noting that this individual did not answer questions 1 and 2 as he felt that having not
worked for an operator his answers would not be sufficient. The final interview was with a
former decommissioning manager at the world’s largest exploration and production company,
now working as a cost estimator contractor in the decommissioning sector.
Please refer to Appendices 9, 10 and 11 for each individual interview transcript.
4.2 Question 1: What were the main challenges you have faced on
previous decommissioning projects?
Interviewee A’s view is that the most predominant challenge experienced on
decommissioning projects he has been involved in, is cost. As has been mentioned previously,
decommissioning is a non-profit, end of life process and therefore operators want to complete
it with as little expenditure as possible. A scope of works is negotiated with the various
stakeholders including the operator itself, environmental organisations, governments and
fishermen to name a few. It is about the various parties coming to a compromise here.
Naturally the operator would rather undertake no work and have no expenditure, while
environmental organisations would rather the whole installation was removed completely
which certainly wouldn’t be cost viable. A solution is then formed which has as little effect
on the environment as possible and often results in some of the infrastructure on the seabed
being left as it would cause more harm to the environment to attempt to remove it.
It comes as no huge surprise that in industry, cost is the main challenge for operators when
decommissioning an installation. It seems that outwith the industry there is the perception that
27. 18
large operators are quite ruthless and only really care about making money, yet from this
interview it can be deduced that they are willing to make compromises to prevent any harm
being done to the environment. However, this may be short term pain for long term gain as by
not following environmentally friendly practices operators run the risk of tarnishing their
reputation which could have devastating effects, especially when the industry is going
through what could be its worst downturn in 45 years (Douglass, 2015).
Interviewee C felt that the main challenges he had experienced on previous decommissioning
projects were cost and time uncertainty. He explained that the lack of completed projects in
the North Sea has resulted in there not being enough data to provide accurate benchmark
figures. He also admits that even information and costs from completed projects have not
been recorded well enough and aren’t readily available using people’s natural instinct to
keeps things confidential as reasoning. He expressed his frustration on the matter. The time
uncertainty issue was then addressed and it was suggested that it occurs from a combination
of when the production of an asset is set to end, when production from that asset is no longer
economically viable and the inflation costs associated with the variation in oil price. These
factors combined with people delaying projects to prevent further expenditure create the
challenges in the industry and prevent the supply chain from preparing for the demand. If oil
companies keep putting off a project, contractors are unable to commit and wouldn’t risk
investing heavily in new equipment without a clear idea as to if or when it will be required.
There was an undeniable sense of frustration from Interviewee C in regard to the difficulties
with information sharing and how this hinders the whole industry working together. The view
of there being significant cost challenges in the industry is shared with the first interviewee,
although they appear to have different takes on how the challenges are posed. Interviewee A
focuses on there trying to be a compromise between stakeholders on the scope and therefore
cost, while Interviewee C stresses that the lack of information means the supply chain cannot
be prepared and this combined with a fluctuating market means there is little cost or time
certainty in the industry.
4.3 Question 2: How did you overcome these challenges?
The ways in which this operator tries to overcome these challenges are also explained by
Interviewee A. Any challenges experienced on a project are discussed with the stakeholders.
This interaction aims to bring about a solution so the problem does not occur again, in a way
that suits all the parties involved. The mission statement of this operator is ‘doing it right’ and
by engaging with the stakeholders they aim to increase their trust that the job is being done
correctly; trust which is vital moving forward to new projects.
Trust was brought up previously and is maybe not something that would naturally spring to
mind when discussing decommissioning. It is extremely important that the work carried out is
28. 19
done well to build up the trust of the stakeholders and even the general public, the vast
majority of whom are taxpayers and are indirectly contributing to decommissioning projects
via the government. If a job is seen to be completed ineffectively then trust is lost and the tax
payer may question the expenditure on decommissioning.
Interviewee C states that to overcome the challenges of cost and time uncertainty a lot of
work was undertaken to try and improve the level of information sharing within the industry.
He goes on to explain that Oil and Gas UK publish general data about North Sea projects that
have been submitted to them anonymously. This general data is seen as a start but not
particularly useful to contractors who require more specific information about projects. He
explains both sides of the story though and how oil companies are reluctant to publicise
information containing dates, because they understandably don’t want to be held to those
dates. He finishes by explaining that the introduction of benchmark figures is trying to be
pushed to help with the cost challenges.
The answer to this question again suggests that the information sharing within the industry
needs to be improved dramatically if the challenges in relation to cost and timing certainty are
to be reduced. Interviewee C and the companies he is associated with are clearly trying to
push this but for serious change to come about it seems that pressure must be applied from all
corners of the industry for there to be a significant change. The solutions appear to be there,
they just need to be better implemented.
4.4 Question 3. What are some of the challenges in terms of:
4.4.1 a) Available technology?
In relation to the available technology in the decommissioning sector, it is suggested by
Interviewee A that there is not enough up to date technology to assist in overcoming some of
the industry’s most prominent challenges. Interviewee A feels that one of the main challenges
in the removal of installations is in the plugging and abandoning of wells. He states that the
well walls often require refurbishment to fix leaks and prevent corrosion build up. Essentially
the wells need to be refurbished to make them safe and leak-proof so that they can be
abandoned. Current technology means the re-activating of drilling rigs on platforms is
required for this job and this can cost millions. The drilling rigs themselves may also need to
be refurbished. The consensus from this particular operator is that technology needs to be
developed to allow the refurbishment of wells without the need to spend vast amounts of
money on re-activating drilling rigs.
It seems that operators have a rather frustrating situation on their hands in relation to the lack
of technology available to assist with the decommissioning process. To ensure that their wells
29. 20
are abandoned safely to comply with the environmental side of the agreed scope of works,
great amounts of money have to be spent on refurbishment, money which they will not get
back. It is therefore extremely understandable that operators are crying out for new
technology that will minimise expenditure at this stage in the process. This may also create a
gap in the market for companies with the means to create and develop such technology as it is
something that has the potential to be required industry-wide. It does seem likely that some
suitable technology will be created as the rate of decommissioning in the North Sea increases.
Up until this stage decommissioning hasn’t been overly frequent and the demand appears to
have not been there, but over the coming years the demand will undoubtedly increase
dramatically. The prominence of the well P&A challenges stated by Interviewee A relates
back to those discussed in Chapter 2.
Interviewee B explains that he feels the view within the industry is that on the most part the
required technology is there. He goes on to explain that lifting technology is an area that is
being heavily focused on currently with some new project vessels under development. These
vessels would have the potential to bring about great change in the decommissioning process
but Interviewee B wonders how many of these vessels will actually be built as they are
extremely expensive so require astronomical investment. In regard to these vessels,
Interviewee B explains that they aren’t purely for decommissioning purposes and in fact that
their primary function is as a pipe laying vessel that will be used worldwide. He then goes on
to explain that the plugging and abandonment of wells is an area which requires an influx of
funding to improve technology to drive down the costs of the process which currently amount
to around 40% of the total decommissioning costs. As it stands, a lot of the same equipment is
being used in the P&A of wells as was used to install them initially so this individual feels
technology to aid this process would be welcomed.
Having investigated the new vessels that are currently under construction, and discussing
them previously, they certainly appear to be a fantastic innovation that would simplify the
removal of jackets and topsides so it was interesting to receive the mixed feelings on them
from Interviewee B. The points made by him were extremely valid referring to whether or not
there will be sufficient supply to cope with an increased demand. The fact that these boats are
not primarily for decommissioning will not make securing one for a job easy. Interviewee B
also mentioned the fact that if one of these boats is over working in the Gulf of Mexico it is
unlikely to come over to the North Sea for a lone decommissioning project where the prices
are high. He felt that to get one of these vessels over to the North Sea may require planning so
that it can complete multiple projects in a single trip.
The technical challenges with the well P&A process mentioned in the interview relate back to
what was discussed in Chapter 2, as well as what was suggested by Interviewee A. It is one of
the most challenging and costly areas of a decommissioning project and it is natural to
presume that there must be new technology available to streamline the process to both
simplify it and reduce the costs.
30. 21
Interviewee C stated that he felt the main challenge in relation to available technology was
contractors being unable to take the risk and invest in new technology. He goes on to explain
that the majority of companies simply cannot afford to take these risks, but there are certain
ones wealthy enough to go out on a limb like Allseas, owner of the Pieter Schielte vessel
mentioned in Chapter 2. Interviewee C explained some of the steps the owner took to try and
make sure his 2 million euro investment was safe. Essentially he would announce whenever
he had or was planning to make a significant step forward in the project. This would put off
the competition as they were certain he had gone ahead with each step and that it wasn’t
worth them risking such vast amounts of money to try and compete. Interviewee C goes on to
express that this has not created a traditional market, just a small number of companies trying
to undercut each other.
Interviewee C’s answer focusses largely on how bigger; wealthier companies can afford to
take the risk and invest in new technology. The answer is based around Allseas and the tactics
used by the owner to fend off competition leaving the company as an innovative market
leader, of sorts. The statement made regarding whether this market is exactly that or not is
rather interesting. When one considers a market there is the assumption of many companies
and large demand from clients creating that market, so what the interviewee feels is largely
true in the case of Allseas. It is likely they will have the demand but without the competition,
which may be a recipe for success.
4.4.2 b) Available personnel/staff to execute the job?
Interviewee A’s response when asked about the challenges in acquiring the right personnel to
execute decommissioning projects was rather interesting yet completely logical. As originally
predicted, when the industry was booming the majority of workers wanted to be involved in
new exploration and extraction projects and the problem was retaining workers as much as it
was finding the right workers in the first place. However, since the fall in the oil price
workers have been enlightened about the increasingly prosperous future of decommissioning
within the industry and have therefore started to make the jump across. So looking to the
future, with decommissioning set to increase rapidly, the predicted skill shortage may not be
so prominent, at least while the oil price is low.
With the skill shortage within decommissioning being such a large issue in the past it seems
natural that as the workload increases the skill shortage will only become worse. However, as
seen in this interview that is simply not the case and the falling oil price has made many of
those involved in the industry rethink their career paths. Despite this, the likelihood is that the
oil price will start to rise again in the not too distant future, due to the nature of the industry,
and new developments will start or continue and without trainees and graduates moving into
decommissioning the skill shortage of the past will be prominent again. It is also important to
keep up the current interest in decommissioning so that those employed in this sector now can
be retained and won’t be tempted to move or return to other industry sectors if the market
31. 22
picks up. A lot of interviewee A’s answer relates back to what was suggested in the literature
from Chapter 2.
The response of Interviewee B when asked about the staffing challenges in the industry was
that it is a relatively serious issue but it isn’t to do with the lack of numbers but more to do
with a lack of knowledge and experience from those that are employed. Interviewee B felt
that this could be down to poaching of employees. He explained that operators like to delay a
decommissioning project for as long as possible but eventually reach a point where they have
no option but to start on it. So when they are planning the job they start to put the team
together and become aware of the fact that they don’t have the right personnel on board. This
is when employees of large contractors are approached and tempted into working on the
project. He goes on to explain that in the past people in the oil and gas industry had no
interest in working on decommissioning projects but that this has picked up significantly
since the falling oil price has left many people unemployed and people can see the future
within the decommissioning sector.
This relates back to what was said by Interviewee A in that the current market has created an
influx of available employees for roles in decommissioning teams, but while it may be nice to
have plenty of people willing to work in the sector, it seems more important that the right
people for the job are selected and not those with minimal experience on a decommissioning
project trying to pass themselves off as an expert. It also appears that if employees are
poached from the large contractors, as was made out in the interview, then these contractors
would have to undergo the same poaching process to fill the positions, which means the
sector is essentially going round in a vicious circle. It seems more logical to get the current
employees trained up as best possible before resorting to looking for those working
elsewhere.
Interviewee C also admits that acquiring the right personnel is a challenge, explaining that
there is a lack of people with specific decommissioning-related training. However he does
state that the skills required to work in decommissioning are quite transferable, and not
specific to the sector. He goes on to explain that the way a decommissioning project is
executed, and the objectives of it are different but that the parts are all the same. Interviewee
C almost urges the industry to be slightly more careless when it comes to decommissioning. It
doesn’t matter if items get dented and scratched that are just going to be melted down once
they are onshore. He goes on to warn that over-engineering decommissioning could inflate
the cost and increase the timeframe of projects.
It seems logical that people can just be retrained in decommissioning because at the end of the
day it is the same industry that they have worked in and anyone with an idea about the
installation process of an asset should have basic knowledge of how it will be removed. The
analogy of viewing decommissioning like a demolition project is interesting, but it seems it
32. 23
can only really be viewed in that way for components that are to not set to be reused in the
future.
As with many of the challenges discussed, the implication is that due to the relative infancy of
the decommissioning sector it is extremely important to have as much experience backing a
project as possible. This should have a knock on effect as those with less experience learn and
develop their knowledge. This however does seem to contradict what has been said about the
skill shortage in the industry, with new graduates and trainees being encouraged to move into
decommissioning. Ultimately it is a fine line between having a young team with not enough
experience and an ageing workforce moving closer to retirement. It therefore leads one to
believe that the optimum scenario for a workforce is a mixture of those with experience
working alongside those who are young and inexperienced, but eager to learn. This seems the
most likely solution to bring about progression within the decommissioning sector.
4.4.3 c) Accurately cost estimating a decommissioning project?
As mentioned previously, there can be difficulty cost estimating decommissioning projects
due to the lack of experience in the industry, and the relative unknown of what is on the
seabed. Interviewee A’s views on this are that getting an estimate that is as accurate as
possible is largely down to taking on board experiences from previous projects and learning
from any errors made. For a particular project, the team was made up of people with
experience working for various operators on decommissioning projects and the collective
knowledge meant that a reasonably accurate estimate could be produced. Current figures
suggest that the final project cost will be 13% higher than what was estimated in 2011. This
may seem a lot but in the grand scheme of a large scale decommissioning project, it can be
deemed as a relatively accurate original estimate, especially when the oil price crash over the
last year or so is taken into account. Market data in the form of data sets are now readily
available as a result of the contracts placed by this particular operator.
It seems natural that the accuracy of a cost estimate will increase as the experience of those
cost estimating increases. For the project mentioned above, the operator was fortunate enough
to have a team with experience working for a range of operators on previous
decommissioning projects. This can relate back to the issues about skill shortages and staff
retention mentioned in Chapter 2. By employing and retaining the right members of staff,
with the right experience, decommissioning projects should start to become estimated more
accurately. If a more accurate cost is known upfront then an operator will be able to budget
more precisely going forward and there isn’t as great a risk of significant cost overruns
occurring.
Interviewee B’s view on the cost estimating challenges is that there are two main points
companies should focus on: deciding upon the scope of the works and then pricing the agreed
33. 24
scope of works, something which he feels that operators and the industry as a whole are not
competent at. He backs this up by stating that on average, the final cost of completed
decommissioning projects has been 40% more than the initial estimate that was agreed upon
to allow the project to go ahead. Interviewee B then goes on to explain that it is employees of
the operator that create the scope of works, but that these people are maybe not ideal for this
task, and that contractors, cost engineers or even quantity surveyors would be better suited as
the creation of a scope of works and costing that scope is more in line with their profession.
He feels that the skills and knowledge have so far not been utilised as well as they could in
the decommissioning sector.
Interviewee B explains that interview techniques will differ depending on the project. He
compares the differences that exist between cost estimating for the decommissioning of a
single asset and a chain of assets often owned by a larger operator. A single asset would have
the goal of completing the job in the allocated timeframe, as close to the original cost estimate
as possible, but when decommissioning a chain of assets there would be the intention of
reducing the cost and streamlining the process as the programme is ongoing. Interviewee B
ends his answer to this query by stating that people should look at decommissioning as an
industry-wide project and not as an individual project as the process of decommissioning is
not competitive and knowledge sharing should be encouraged, something which Decom
North Sea are trying to implement.
It is an interesting view that maybe operators are not tasking the right people to create the
scope of works and estimate the costs, yet it seems completely logical that those doing this
kind of work in their profession may be better suited to such roles. This however can relate
back to the staffing issues mentioned above in that those with a history of cost estimating may
not be employed by an operator and may therefore be poached from another company,
leaving that company down an employee and forcing them to do the same, creating that
vicious circle, something which cannot be productive within the industry. An option here may
be to look towards the construction industry where quantity surveyors may possess some of
the necessary skills and be willing to change industries.
Interviewee B’s point regarding the different approaches required for different projects is
interesting. Where a smaller company may have a single asset, they need to have their process
and cost estimate as accurate as possible before beginning the project as once the asset is
removed the project is essentially completed. Larger operators who own multiple assets can
look at the project as more of a long term development, aiming to reduce the costs and
simplify the process as the project goes on. It seems, however, that this could be inefficient
with much wasted time and money at the early stages of the project.
Interviewee C briefly explained that currently initial cost estimates are extremely vague and
could be as much as 200% off from the final cost.
34. 25
There was no real surprise to hear that the estimates have not been very accurate, in line with
the information from the other interviewees, but to hear the extent of these inaccuracies was
quite shocking and this certainly seems to be an area that needs vast improvement
immediately.
4.5 Question 4: What do you think could be some of the main
challenges in the future as the volume of works relating to
decommissioning increases in the North Sea?
The next point to be asked to Interviewee A was where it was thought the challenges would
lie as the rate of decommissioning-related work increases in the North Sea. Cost was
mentioned again but the main focus appeared to be on involvement from the government,
however it is apparent that the two are related to one another. It is explained by Interviewee A
that a large portion of decommissioning costs are funded by the United Kingdom
Government. This funding is based on backdated tax receipts. The income produced by each
asset can be retrieved to finance approximately three quarters of the project cost. It is
expected that the government will aim to monitor its spending on decommissioning projects
more closely so that the tax payer is not left with any unanswered questions in regards to
where the money is going. It is therefore likely that the challenges faced in the future will be
largely dependent on the government’s influence.
It comes as no surprise that cost is likely to be one of the future challenges in
decommissioning. It is however interesting to understand the extent of the government’s
financial assistance within the industry. The individual interviewed felt that cost and
government involvement are set to become the main challenges as decommissioning activity
increases. These two aspects appear to be related to each other because the smaller the
financial assistance from the government then the greater the cost for the operators and
therefore the greater the financial challenge. The reverse of this may be an unlikely scenario
with the government closely auditing the extent of the financial assistance, but if this
assistance was to increase or even be maintained then it would seem that the financial
challenge would not be so great.
Interviewee B expressed that some of the challenges looking forward will be the same as
those already existing, with getting the right people with the right experience and knowledge
working in the industry an on-going challenge. He feels that the future may be based around
the oil and gas industry as a whole and how it copes during this downturn. The redundancies
could force valuable employees away from the industry meaning it will lose that knowledge
and experience that is so desperately required. On top of this he feels multinational companies
could move away from the North Sea if the industry doesn’t pick up. He goes on to reiterate
the difficulties there may be securing heavy lift vessels to operate in the North Sea when they
have long term contracts all over the world which it would seem uneconomical to
35. 26
compromise. He predicts that there will be a shortage of yards big enough to cope with
decommissioning of large structures, leaving the industry in a capacity crisis of sorts.
The predictions of Interviewee B seem to portray the future challenges of the
decommissioning industry as great stumbling blocks but they should not be factors that will
seriously inhibit the development of the decommissioning sector. It seems natural for there to
be various challenges facing a relatively new area of the oil and gas industry that is set to see
a great increase in activity over the coming years. Without the availability of the new
generation of heavy lift vessels, structures will still be able to be removed but the lack of
sufficient decommissioning yards is of more concern and it appears this may be an area that
will require great investment to supply the demands of the developing industry.
Interviewee C feels the most prominent challenge moving forward is the market becoming
overloaded as a result of companies putting off decommissioning for as long as possible then
all commencing projects at the same time resulting in increased competition for equipment
and services. It is suggested that by reducing the extent of the work this may help the problem
but this is only really possible by leaving equipment on the seabed which is not seen as
acceptable by many members of the public and environmental agencies.
A very valid point is certainly made here that relates back to points made by interviewee C
earlier about companies repeatedly pushing back decommissioning projects as far as possible.
Why companies do this is understandable, but they need to look further into the future to
realise that what they are doing at present is not working. It also seems that the idea of
reducing the scope of works by leaving more equipment on the seabed is idealistic but
probably not realistic.
4.6 Question 5: As decommissioning is relatively in its infancy in
the North Sea, how do you make sure you’re transferring lessons
and experiences from one project to another? (How do you make
sure you’re becoming more cost efficient, cost-effective and safe?)
In the case of Interviewee A’s employer, ‘lessons learned’ sessions are held after a project
completion where the project is reviewed in detail. The parts of the project that ran smoothly
are noted and those where there were difficulties are discussed with the aim of finding a
solution to prevent any issues in the future. It is stressed that the timing of these sessions is
extremely important. If they are held too long after a project completion then the team
members may no longer be present in that location or company, and the memories of the
project won’t be fresh in people’s minds. However if the session is held too soon after a
project completion there may not have been time to assess the major successes or failures
within the project.
36. 27
As with so many aspects of the decommissioning sector, there is a fine line between having
an extremely beneficial project review session and a relatively useless one. It may not seem a
particularly important activity in the grand scheme of the project that has been completed, but
for an industry that is set to experience huge growth in the not too distant future, it has never
been more important to recognise what has been done well so it can be done well again in the
future, and analyse the areas of the project where there is room for improvement because the
same mistakes cannot afford to be made repeatedly. By reviewing a project in detail after its
completion then improvements can be made for the next project. Not only does this help the
operator, but it helps to bring about progression in the industry. Previously it was mentioned
that there has been a lack of knowledge sharing in the industry, but if all operators were to
have these review sessions and come up with solutions to solve any issues, then share them
with the industry it seems hard to imagine than anything other than progression would occur.
Interviewee B stresses that the sharing of knowledge within the industry is vital so that
mistakes are learnt from, efficiency improved and costs reduced. He goes on to explain that
the developing partnership between Decom North Sea and Oil and Gas UK is really trying to
push this idea. Interviewee B then explains that the introduction of a concise data
management system would go a long way in the recording and sharing of relevant
information and experiences, and that the current database isn’t sufficient to provide this. It is
argued by this individual that the mind set of operators is that as the knowledge, skills and
capabilities of the people develop, and the technology is improved, the market demand will
represent this progression, but this is not something he agrees with. He believes that a greater
understanding of the market itself must be had by the operators before the supply chain can
risk investing heavily in the development of new technologies. He admits that progression has
started to be seen in this area, but that it is no easy task which could be down to operators not
willing to put their reputation on the line. If oil production is stopped and the company then
spends money on decommissioning where there is no financial gain, unrest may be sparked
amongst the shareholders. This in turn results in such operators keeping plans close to their
chest and unwillingness to share them with the decommissioning sector.
It would seem, based on interviewee B’s explanation, that there is a sense of naivety amongst
operators in that they can sit back and wait for the supply chain to go out on a limb and create
new products and technologies to cope with the progression of the industry with minimal
input from themselves. Even without an absolute understanding of the industry and market it
is plain to see that the supply chain wouldn’t risk investing heavily without the operators
providing a clear insight into where the market is moving and the products and services that
will be required. The air of frustration shown from interviewee B in regards to the lack of
information sharing within the industry is completely understandable. Operators appear to be
set in their ways of keeping as much as possible secret, which may be logical in the
competitive development sector of the industry, but decommissioning is not a competitive
process. Operators will not make money from removing an asset and it therefore seems
logical for the industry to share knowledge and experience so that the process can be
streamlined in terms of both cost and the resources required. There also does not appear to be
37. 28
any need to worry about the reputation of the company when it comes to commencing
decommissioning. The shareholders will have always been aware of the fact that eventually it
would not be economically viable to continue operating certain assets so it should not come
as a surprise to them when that time comes. It could be argued that by completely
decommissioning projects in an environmentally safe manner the reputation of operators
amongst the general public will be enhanced.
Interviewee C admits that to date information sharing has not been good enough, preventing
transfer of knowledge from one project to another. He feels this may partly be down to The
Department of Energy and Climate Change (DECC) not being as strict as they should be in
acquiring information from oil companies that can be made readily available to the industry,
and had they been stricter then the industry would be in a much better state. He explains that
knowledge can be transferred within a company very well through the likes of lessons learned
sessions but that this does not help the industry. He goes on to describe the circumstances
where a decommissioning team worked on two projects one after the other and that the
second one was completed much more efficiently as any mistakes from the first one were
learnt from. This leads on to the idealistic view that one team could complete all
decommissioning projects in the North Sea but of course this is not a viable solution.
Interviewee C then predicts that the Oil and Gas Authority (OGA) may move in to try and
bring about change whether companies like it or not.
A more forceful approach from an authoritative organisation may be what is required for the
industry to progress. The lack of information sharing may seem unusual from an outsiders
perspective and there will be reasons from within the industry as to why they behave like they
do, some of which have already been discussed, but something has to give of progression is to
be seen in the industry.
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Chapter 5 – CONCLUSION
An influx of decommissioning in the North Sea is something the oil and gas industry will
need to address imminently. As predicted, a number of challenges are present throughout the
process, and there will continue to be challenges in the future, but at this transitional phase it
seems that the industry needs to pull together to make the process as efficient as possible.
Initial opinions were that the most prominent decommissioning challenges would relate to
cost and timing, and these were issues that were maybe not so vital when the
decommissioning was sporadic. Research in the form of a literature review and interviewing
of industry professionals has suggested that to an extent these predictions were true; cost is,
and looks set to always be, a challenge for the industry. With decommissioning not generating
any profit and initial cost estimates often wildly inaccurate, the costs associated with
decommissioning an asset can turn out to be daunting for operators. This then relates to the
issues of timing, with operators delaying decommissioning for as long as possible which can
cause further problems such as overcrowding of the marketplace. However, the lack of
knowledge and information sharing within the industry was one major challenge that was not
foreseen prior to research, yet one that seems essential to overcome if the industry is to move
forward.
5.1 Data Collection
The interview method of research was important to establish an idea of the views from within
the industry. It was interesting to learn that none of the individuals spoken to mentioned any
challenges with the physical decommissioning process itself. This highlights the importance
of getting the perspective from within the industry because those outwith it may just make
such presumptions.
The data obtained from these interviews was then compared and cross referenced with
information from a range of literature. It was important to take into account the views of both
those in the industry and those focused on research in the same field, so that a more rounded
analysis could be undertaken.
5.2 Future Research
The research that was undertaken was focused primarily on finding what the challenges
associated with decommissioning were. However if future research with a similar purpose
was to be completed it could be suggested that it should be focused upon the issues of cost
estimating and sharing information within the industry, the two main issues that have been
39. 30
identified from this research. Further research into these fields may help to bring about
solutions to minimise their affect upon the industry.
5.3 Recommendations
It can be deduced that the two main challenges of cost estimating and sharing knowledge
within the industry are heavily related. To improve the accuracy of cost estimations
benchmark figures are a good starting point, but without substantial sharing of knowledge,
information and experience within the industry, these benchmark figures cannot be obtained.
This issue with cost estimating could be combatted by employing those with substantial
knowledge of decommissioning, or those with a history of cost estimating to carry out the
procedure. In this tough financial market companies can no longer afford to produce vastly
inaccurate cost estimates then have to find huge amounts of additional money when it comes
to actually carrying out the project. Alternatively, some form of software could be developed
with assistance from those who have great knowledge and experience of decommissioning.
To improve information sharing within the industry, conferences could be held that address
this issue and stress the importance of it. If a member of the general public can see this from
interviewing an industry professional then there is no reason why oil companies cannot see
this too.
5.4 Final Thoughts
Decommissioning is certainly a sector of the oil and gas industry that is currently receiving a
lot of attention and this may be down to people viewing it is as the future of the industry. This
could be perceived as a negative and the beginning of the end but this is not necessarily true.
For at least a generation it looks set to provide a potential career for many people, whilst also
offering hope to those made redundant in the current crisis. Decommissioning is essentially
just looking at the industry from a different angle. The oil and gas industry is based on the
extraction of natural resources and for that reason was always going to slow, and that is where
decommissioning steps in to speed it up again, albeit in a different manner.
For a sector in its infancy there are undoubtedly challenges, but those that have come to light
certainly seem like they can be overcome. New challenges will then appear of course, but that
is just the evolution of this industry. Naturally, with an industry based largely in the North
Sea, nothing is simple.
40. 31
The increase in decommissioning does not signal the end of the exploration and production
(E&P) side of the industry by any means. The huge fall in the oil price may have halted it but
in a cyclic industry like oil and gas it will bounce back and E&P work will increase again.
Age, however, is something that is not on the side of many installations in the North Sea, and
as reluctant as operators may be, decommissioning is an unavoidable process. It should not be
all doom and gloom; the sector will provide great opportunities for individual careers and
company growth. Echoing what was said at the start of this report, when one door closes
another one opens.
41. 32
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44. 35
APPENDICES
Appendix 1.
Advantages and disadvantages of piece small decommissioning.
AF Gruppen (2015) suggests a number of benefits to using the piece small method. These
include the fact that there is no need for heavy lift vessels or crane barges to be used as the
installation is cut down small enough for the on-site cranes to cope with the weight when
transferring containers onto the supply vessels. This too helps keep the project costs to a
minimum as hire costs for heavy lift vessels can be extremely expensive (MacFarlane2013). It
can also be considered safe both in terms of carrying out the work and in the effect upon the
environment. Weather is not a definitive factor for the piece small method either which makes
it very flexible. What may be the most significant advantage of this method though is the
ability for it to run alongside well plugging and abandonment (P&A) and other subsea
decommissioning work therefore reducing the overall programme duration (AF Gruppen
2015).
Some potential disadvantages with piece small could be that there is a limit to the size of
items that can be dismantled from the structure for re-use or re-sale (Decom North Sea et
al.2015). With the mass of materials on the structures soon to be decommissioned, re-use and
recycling should be promoted as much as possible and it would seem that the piece small
method is a possible inhibitor of this. Another downfall could be to do with cost. Piece small
may utilise cutting skills that have been used onshore for years with success (AF Gruppen
2015), but by doing the cutting process offshore there is the added cost of paying offshore
wages. This may not seem like a huge issue but piece small would appear to be a labour
intensive method so with a large team offshore working for long periods of time it may add
up.
Appendix 2.
Advantages and disadvantages of reverse installation decommissioning.
Some advantages of the reverse installation method are that there is a vast array of heavy lift
vessels available to perform the modular removal, to separate the modules is a straightforward
process and multiple modules can be stacked up and taken to shore in one go, giving a saving
on transport costs. If the structure is made up of large modules, only very few heavy lifts will
need to take place (BOMEL Ltd2001).
45. 36
However there are some limitations with this method. To start with, the re-installation of
lifting points must take place on all the modules, and equipment may have to be moved to
allow sufficient access area for the crane (BOMEL Ltd2001). As mentioned previously, the
structural stability must also be repeatedly reassessed as modules are removed so there is the
potential for the structure’s centre of gravity to be off which could cause it to topple over in
extreme circumstances (Veolia et al.2015).
Appendix 3.
Advantages and disadvantages of single lift decommissioning.
Nixon, B. (2013) then goes on to suggest a number of advantages to the single lift method. He
states that there is potential to save on costs with the use of this method, as well as
minimising the technical input, the environmental impact and the risk involved in the process.
One particular disadvantage, also suggested by Nixon, B. (2013) is that there are a number of
heavy lift vessels, suitable to cope with the weight of large structures, which are still subject
to funding and not complete to operate yet which suggests a potential lack of vessels will be
available to cope with demand for single lift decommissioning projects. He also notes that
there is a short time frame in the summer when the weather is calm enough to perform single
lifts. This adds increased pressure to the project and also relates back to the availability of
vessels as they are likely to be in high demand during the summer months.
Appendix 4.
Further information on the Allseas Pioneering Spirit vessel.
Allseas have supplied the demand for a bigger heavy lift vessel with the creation of the
Pioneering Spirit, a twin-bow vessel which is 382m long and 124m wide and designed for
pipe-lay projects as well as decommissioning (Allseas 2015). The Pioneering Spirit has the
ability to lift, store and transport both the topside and jacket of a structure which could prove
to be revolutionary in the progression of the decommissioning sector. The sheer size and on-
board technology means that bad weather isn’t as great a concern as with smaller vessels, and
project time can be reduced due to the lifting techniques.
46. 37
Figure 8 shows a design image of the Pioneering Spirit vessel transporting a topside across its
double-bow and a jacket on its stern, having removed each section in a single lift (Allseas
2015).
Figure 8: Design image showing the Pioneering Spirit transporting an entire structure (Source: Allseas,
2015)
Appendix 5.
Further information on the size of the North Sea decommissioning task.
A report by the Royal Academy of Engineering, (2013) suggests that the total expenditure on
decommissioning in the North Sea over the next 30 years could top £30 billion proving that
the planned projects mentioned above won’t be possible without serious expenditure from oil
companies and the government. Decom North Sea follow this up by publishing an estimate
that the total cost of decommissioning in the North Sea could reach a huge £70 billion
(Decom North Sea 2015b). This figure seems to really sum up the scope of decommissioning
in the North Sea as a staggeringly large task.
The report then goes on to explain that over the next 30-40 years the UKCS is set to see the
decommissioning of 470 installations, with 79 or 17% of these taking place in the next decade
(Oil and Gas UK2015). Although 17% isn’t an overwhelming amount, it seems that the next
decade is where the industry really needs to get a grip on the decommissioning process,
making it as efficient as possible and ironing out any recurring issues so that when the
projects start coming thick and fast in the future, the industry is equipped and really to not
only cope, but excel in their completion.
47. 38
Appendix 6.
Further information on OSPAR and the regulatory framework in place for North Sea
decommissioning.
Banner (2015) explains that the regulations for decommissioning in the UK have been
conceived by the Oslo/Paris Convention for the Protection of the Marine Environment
(OSPAR). The OSPAR 98/3 regulations became part of the UK Petroleum Act in 1998 and
ensure that companies take responsibility for the costs of decommissioning (Banner 2014).
Section 29s are legal notices of liability and are issued to all the companies involved in an
offshore asset, including both installations and pipelines, by the Offshore Decommissioning
Unit of the Department of Energy and Climate Change (Banner 2014).
Appendix 7.
Further information on the challenges to do with the supply chain/skills in the industry, and
solutions on how to overcome them.
The lack of resources is suggested by The Royal Academy of Engineering (2013) to be as a
result of funding for apprentice schemes being cut with companies streamlining in this
challenging market. It may be short sighted but by preventing spending at this end of the
spectrum it prevents job losses to those already on their career paths at the other end. This can
be the same for graduate schemes where funding has also been reduced. A degree does not
mean real life experience so time and money must also be spent on graduates to mould them
into their roles. The report also puts forward the idea that a lack of retention is due to
competition from both within the industry and from other industries (Royal Academy of
Engineering2013). Individuals may be offered employment in a preferred location or on a
better wage that may entice them away. It is also suggested that the image of
decommissioning does not have the same pull factor for graduates and those already
employed in the industry (Royal Academy of Engineering2013).
Ideas are put forward in the report on how to combat these issues. These include enhancing
the concept to those with experience and graduates alike that there are successful career
opportunities to be had within the decommissioning sector (Royal Academy of
Engineering2013). This involves highlighting the fact that there are environmental and
ecological sub-sectors within decommissioning where individuals may prefer to focus their
career based upon their interests or experience, rather than the cost, safety and engineering
aspects of decommissioning (Royal Academy of Engineering2013) . The report also puts
forward the suggestion that colleges, universities and the appropriate governing bodies could
run courses for anyone thinking of pursuing a career in decommissioning, to give them an
insight into the various aspects of decommissioning and how it works, as well as improving
48. 39
business awareness of the subject both within and outwith the industry (Royal Academy of
Engineering2013).
Appendix 8.
Supporting information on the cost challenges of North Sea decommissioning.
A report by The Royal Academy of Engineering (2013) explains that supply chain costs can
experience fluctuations based on the market. When the development side of the industry was
booming then supply chain costs for these services were undoubtedly high with
decommissioning related ones lower, but with the industry in its current state it is probable
that the situation is quite the opposite, with companies in the supply chain for
decommissioning likely to start increasing costs gradually as this sector becomes prominent.
Again however, this fluctuation may be based around the oil price.
Appendix 9.
Interview transcript from Interviewee A.
Question 1: What were the main challenges you have faced on previous
decommissioning projects?
Cost is the main challenge for decom. The scope of the decommissioning project is set and
agreed along with the various stakeholders (ex. internally, government, environmental bodies,
fishermen, etc). This is a balancing act between the two extremes of full removal and leaving
everything in….the balancing act being the competing stakeholder requirements.
Environmental bodies would insist upon us removing everything, but that is the most
expensive option……..so we counter that along the lines of what solution causes the least
disturbance/harm to the environment – this can result in us gaining approval to leave more of
the equipment on the seabed – to remove it would now cause more harm to the environment
than leaving it as is.
Question 2: How did you overcome these challenges?
By engaging with the key stakeholders – speaking to them, listening to them. Part of CNR’s
mission statement is to ‘doing it right’ and we abide by that. It’s important that the
49. 40
stakeholders trust us that we are in fact ‘doing it right’…….if that trust goes then we will not
be trusted that our proposals are appropriate.
Question 3: What are some of the challenges in terms of:
A) Available technology?
Key challenges lie with how we plug and abandon the wells. The reservoir can be approx.
2km below the seabed level, so the hole that is drilled all the way from the platform to the
reservoir creates a route for the oil and gas to flow from the reservoir to the platform for
processing and separation. At the end of the well’s life this route must be closed up such that
none of the remnant hydrocarbons in the reservoir can come back to the surface. This isn’t an
easy job to do……can be complicated by the age of the well, and the walls of the well
corroding and leaking. The existing technology means refurbishing the drilling rig on the
platform (can cost millions) – seems crazy to spend all that money renovating a structure that
you are going to remove two years later! We look for technology that stops us needing to
reactivate the platform drilling rig – not many technologies out there just now that do that but
we still look……….if you can think of a way of sorting this it’ll make you a millionaire!!
B) Available personnel/staff to execute the job?
This was more a problem prior to the oil price crashing last year. Then we had problems not
just getting folk, but retaining them. Folk wanted to work on new build development projects.
Since the oil price crashed a lot of people have shown much more interest in getting involved
in decom.
C) Accurately estimating the costs associated with a decommissioning
project?
This all depends on the level of information you have from projects completed. We were
fortunate in that we had people who had knowledge from other operators so we were able to
develop a fairly accurate cost estimate for the Murchison project. Indeed, we reckon that there
will be approx. 13% increase on what the project estimate was in 2011 to what the final cost
will be – that’s pretty good going. On top of that, we now have market data through the
contracts we have placed so we now have a fairly robust data set to call upon.
Question 4: What do you think could be some of the main challenges in the future as the
volume of works relating to decommissioning increases in the North Sea?
50. 41
Cost and government involvement. A large proportion of decommissioning costs are funded
by the UK Gov, based on historical tax receipts (ie the tax revenue generated by the asset can
be recovered to fund say 75% of decom costs). We would expect that the government will get
more and more involved with auditing spend on decom projects, to ensure accountability to
the UK tax payer. That influence form government will steer where projects end up.
Question 5: As decommissioning is relatively in its infancy in the North Sea, how do you
make sure you're transferring lessons and experiences from one project to another?
[How do you make sure you're becoming more efficient, cost-effective and safe?]
We do that by running lesson learned sessions. We review what went well and what didn’t go
well and where we can improve. The timing of these events is important as well. If you leave
it too late then the team involved may have disbanded. If you leave it too long memories can
fade. Also, if you do it too soon then you can be too close behind a lesson and you don’t
capture the full impact of the lesson to be learned. Getting the right balance with these things
dramatically improves the quality of the lesson learned session.
Appendix 10.
Interview transcript from Interviewee B.
Question 3: What are some of the challenges in terms of:
A) Available technology?
The general consensus is that the tools, technology and equipment needed are generally
available. One big area of discussion is lifting technology which is currently being addressed.
There are some new build concepts that could potentially revolutionise the industry but mega
investment is required, millions and millions of dollars so how many will we see? Are they
going to become the tool for the job in the North Sea? They are not just being built as
decommissioning vessels – they are pipe laying vessels primarily and will work all over the
world. Is it a tool that will be used? One area where mega investment is required is in the
plumbing and abandoning of wells, a big ticket when it comes to cost. Over 40% of
decommissioning cost is related to the plumbing and abandonment of wells and issues around
that certainly lend themselves to new ideas, new technology, new tools as the condition of
these wells is often very poor and they are not well documented. There is certainly a need for
new technology and skills. The processes of cleaning, separation etc use the same tools as
were used initially in the construction of the wells.
