OGA oil regulator publishes new guide to £50bn N. Sea decommissioning market – and urges 35% cut in costs

Oil and gas platform in offshore industry

The UK oil and gas regulator has published a combined strategy and decommissioning guide to help a ‘largely unfamiliar’ industry manage the ‘funeral phase’ of the North Sea industry – which it estimates to be worth some £50 billion.

While managing the decline and decommissioning of the sector, the OGA’s Decommissioning Strategy  also aims to maximise economic recovery from the remaining resources in the North Sea.

The 18-page report underlines what the UK industry can do to successfully complete decommissioning projects, as well as use the time to innovate, upskill and reduce costs throughout.

An OGA spokesman said: “The oil and gas industry in the UK is largely unfamiliar with large scale decommissioning projects, but much can be learned and transferred from other sectors and industries.

“Innovation and transformation are underway in the industry and will continue to be important for ultimate success, but more immediate incremental improvements and challenges to traditional approaches can also bring significant results.”

The guide lays out the Top 3 OGA Decommissioning priorities:

  1. Cost certainty and reduction in a technically competent, safe and environmentally responsible manner
  2. Decommissioning delivery capability in terms of supply chain expertise and capacity, effectively supported by appropriate business models, contracting arrangements and industry alignment
  3. Decommissioning scope, guidance, and stakeholder engagement by working with the Department for Business and Energy  and other relevant parties to identify and evaluate opportunities to optimise and define parameters for decommissioning scope and to improve industry engagement with the organisations that regulate the decommissioning process.

The OGA spokesman added: “Estimates of scope, complexity and cost vary but there are over 250 fixed installations, over 250 subsea production systems, over 3,000 pipelines and approximately 5,000 wells, all of which require to be decommissioned.

“The current mid-point cost estimate for UKCS decommissioning to 2050, prepared by an independent industry expert for the OGA and DECC, is approximately £47 billion (in today’s money), with a stated uncertainty range of +/-40%.

“Significant uncertainty surrounds this estimate and range, and validations will be required.  We have adopted a cost reduction target of at least 35% below the mid-point as the MER target.”

Laura Claxton
Laura Claxton

Meanwhile, Claxton – which operates out of Aberdeen and Gt Yarmouth – has been awarded a contract with Statoil to provide ‘rigless recovery’ of seven abandoned wells on the Huldra platform in the Norwegian North Sea.

Work is scheduled to commence in December 2016 with the project due for completion within 21 days. Claxton is responsible for a full scope of decommissioning work including project planning, severance, and full multiple string recovery.

Conductor and casing severance for the Huldra project will be performed using the latest evolution Claxton recovery tower and its abrasive cutting system ‘SABRE’. The SABRE unit and all ancillary equipment are NORSOK compliant to Z-015, with the recovery tower having a safe working load of 300Te with a modular system footprint design that minimises rig-up time and complexity.

Laura Claxton, Managing Director, Claxton, said, “We performed the world’s first rigless platform well abandonment campaign on the Esmond, Forbes and Gordon field in the North Sea in 1995 and have completed more than 280 cutting and recovery projects since.

“This experience allows us now to provide the most comprehensive decommissioning packages for our clients. Being awarded this contract with Statoil reinforces our leading position in the decommissioning market and demonstrates that clients value our experience, strategic technical approach and capabilities.”

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed