In today’s struggle between short-term plans and long-term strategies, decommissioning understandably slides down the corporate agenda among North Sea operators. But, as Kenny Dooley, Regional Director of Petroplan argues here, preparing now can bring huge dividends later, and elevate decommissioning from cost center to center of excellence.
Decommissioning activity is particularly sensitive to price signals: and current signals are telling operators and license holders to prioritize investment into efficient production and extending the lifecycle of existing infrastructure wherever it is safe to do so, in order to maximize reserves prior to decommissioning the assets.
But decommissioning is not a subject that can be held off for much longer. Decom North Sea suggests that there are approximately 450 rigs and wells in the North Sea due to come out of service by 2030 – with an associated cost of US$46.8 billion (£30 billion).
In fact, the region has already seen some small-scale, but nonetheless significant, decommissioning projects successfully completed. More recently, Royal Dutch Shell announced it was to begin consulting on plans to take the first of its Brent platforms out of service – which will be the biggest North Sea decommissioning project to date. Fairfield has also stated its plans to decommission the Dunlin Alpha platform, while BP and ConocoPhillips have embarked on a major project to remove a number of Southern North Sea assets by early 2020.
With the oil price hovering around $60/bbl, decommissioning in the North Sea has certainly lost some of its initial momentum. But this is an area that promises significant dividends if that momentum can be maintained: not only for individual operators, but for the North Sea oil business as a whole. The UK has the potential to become a global center of excellence in decommissioning, which could provide a substantial source of revenue for some time to come.
Preparing for the upturn
One of the factors that distinguishes this downturn from previous slumps is the recognition that long-term planning does not suddenly stop in the face of immediate crises. The current market situation will not last for ever, and ensuring a business can take advantage of an upturn in price is a fundamental aspect of surviving a downturn.
When oil prices rise, we can expect decommissioning to move back up the corporate agenda – both for financial reasons and in response to pressure from governments and environmental groups. However, forward-thinking operators already recognize that decommissioning in the North Sea brings a unique set of challenges. The most obvious of these is that decommissioning assets in the harsh environment of the North Sea is unchartered territory. It has already been demonstrated that there is currently no large body of experience and no ready cohort of decommissioning experts waiting for a phone call.
So the pool of talent from which the relevant expertise and experience can be drawn is already limited. Even engineers who have experience of decommissioning platforms in the Gulf of Mexico and other shallow waters, may not have skills that are directly transferable for a North Sea project. That’s before the decommissioning agenda smashes up against another universal truth of an oil price downturn: the permanent reduction in available headcount for the UK North Sea. When margins are under pressure and production is squeezed, there is a risk that a percentage of the workforce relocates overseas or leaves the industry for good.
UK decommissioning projects might be a low priority now, but with the talent pool diminishing, finding the talent to carry them out isn’t. It requires an extensive network of candidates who have experience in a wide variety of roles and situations in order to build the right kind of skill base.
Securing the right people to complete a safe and compliant decommissioning project places significant pressure on recruitment and HR departments. It requires time and resourcefulness to understand and develop the attributes, experience, and knowledge required. It requires a creative approach to aligning expertise, experience and personal attributes with the requirements of the new roles – the right skills are available, but they may not be in the most obvious of places. Finally, it requires an extensive database of candidates to back up this more creative and consultative approach.
Inevitably, there will be some cross-over from similar roles in other areas of the industry, and with time, it will be possible to get the right fit between people and projects. Project managers, project engineers, supervisors, NDT technicians, and planning engineers will all be needed in newly formed decommissioning teams. Plugging and abandonment experts and environmental consultants with specific experience could also be a rich source of candidates.
Another solution is to work with engineers who have decommissioning experience in other areas, such as the renewables sector. This is a much bigger step to take and raises questions around qualification and certification. These discussions are not yet being had by individual operators, or even industry bodies – but when the conversation turns back to decommissioning, operators who have the richest sources of potential contractors will be the ones to benefit.
Center of excellence
For many, the decommissioning debate has come at just the wrong time. The combination of aging assets, high exploration costs, and a spectacular drop in oil prices is just the triple whammy everyone wanted to avoid. But there is a positive side. This could pave the way for creating a center of excellence in the UK for decommissioning practice. In fact, this is the real prize on offer: the reward for forward-thinking, strategic planning, and smart recruiting. Graduates entering the decommissioning industry now could spend their entire career in decommissioning.
The North Sea may be the first harsh environment requiring extensive decommissioning, but it won’t be the last. The short-term goal is to decommission 450 rigs by 2030. The long-term vision goes far beyond that. The blank slate causing recruitment problems now can be the foundation on which a whole new industry sector is built. That’s good for the workforce, it’s good for operators, and it’s good for UK plc.