N. Sea oil Industry experts and operators have warned of a ‘domino effect’ of early decommissioning begun by Fairfield’s announcement that it would start decommissioning its Dunlin field five years earlier than expected due to low oil prices.
As platforms and fields cease operations it is expected that costs will rise for the remaining fields – which could cause a ‘domino effect’ of early decommissioning as costs rise and oil price remains low.
Gunnar Olsen, Business Development Director, Total E&P UK, said: “It’s a sign that many of the meetings I’m going to that the first issue on the agenda is decommissioning.
“Dunlin will shut five years before plan, which will mean all the other fields going into Sullom Voe [oil terminal] will have increased operating costs.
The domino effect is now a significant challenge. If some of these fields are shut in, it will affect the whole basin.”
Fiona Legate, oil research analyst at Wood Mackenzie, commented: “The maturity of the UK North Sea has really started to show and with the fall in the oil price, companies are placing a lot more scrutiny on projects and fields and taking a view on whether they can continue to produce economically. We expect to see more announcements like Fairfield’s.
“That has been quite costly and pipeline operators have passed that cost on to the users. For smaller producers, who have to pay this cost on top of their tariff to use the system, it has been damaging to their economics.
“So we are likely to see some fields cease production earlier than expected,”
The problem is of particular concern in mature areas such as the Northern North Sea, where interdependence is high.
Andy Bevington, director of UK operated assets, Centrica, said: “The A-fields are tied into an historic processing and operating services agreement with Conoco and in ter
ms of the domino effect, that’s just a cost share for all the operators, so as they fall away your costs go up and up.”
Fairfield’s Dunlin cluster in the Northern North Sea shut down just last month with chief executive David Peattie citing low oil prices and challenging operational conditions as contributing factors.
The Dunlin Alpha platform is to continue to export oil from third parties into the Brent system pipeline until decommissioning gets underway, but the decision puts pressure on its neighbour EnQuest to find a work-around, as its Thistle and Don fields currently export oil via Dunlin.