Sustained lower oil prices, further impacted by the COVID-19 pandemic, have placed decommissioning firmly on the plans for operators and service companies in the oil and gas industry.
In many parts of the world, decommissioning is increasingly seen as a normal part of business, sitting alongside exploration, new field development and in-field investment.
The opportunities in decommissioning are significant. The emerging global decommissioning market has been valued at $85billion (£67billion)*. Key locations include offshore North America, Latin America, South East Asia, Africa and North Asia. However it is in Europe – specifically the North Sea – where decommissioning spend is expected to be greatest in the years ahead.
Some 43% of the $85billion global decommissioning spend will be made in the North Sea. As a mature basin, the region leads the way in decommissioning knowledge, skills and expertise. Performance standards are unequaled and the UK’s decommissioning work breakdown structure (WBS) guidelines set a global performance framework that many other countries follow. The world is looking to the UK for capability and competency.
In a recent overview of UK North Sea decommissioning, global consultancy group Wood Mackenzie predicted 90% of operator spend will be on abandonment expenditure versus just 10% on capital expenditure by 2029. That time-frame could be shortened due to the impact of COVID-19 and this year’s oil price crash as assets reach the end of their economic viability earlier.
In the UK, there is a Government target to reduce the cost of decommissioning by 35%. A 19% reduction has been reported from 2017 and 2020.
For Bureau Veritas, a world leader in testing, inspection and certification services, decommissioning has been a strategic part of the business for many years. The company was providing a range of services for clients long before the industry defined them as ‘decommissioning’.
Today, the company provides a comprehensive decommissioning offering to clients across the project life-cycle – an end-to-end compliance solution from the planning phase right through to shutdown, removal and monitoring – around the globe.
The services are provided by Bureau Veritas and Bureau Veritas Solutions Marine & Offshore (BV Solutions M&O), which was established two years ago as an independent organisation from BV’s classification and certification activities. BV Solutions M&O brings together services and people from different domains within Bureau Veritas to create an international, proactive and dedicated capability, offering value to clients through technical services and solutions.
The decommissioning offering has been created as a holistic collation of all services that can be utilised in a project. The range of services available extend from environmental impact assessments through to structural integrity studies, lifting plans, stakeholder management, downstream waste management assurances, safety case management of change, monitoring of recycling processes and everything in between. Specific services are also pertinent to floating assets and decommissioning yards.
The adoption of advanced technologies such as digital twinning will support the industry’s focus on lowering decommissioning costs. The company’s Veristar AIM3D system within normal asset operations improves visibility and understanding of the asset, allowing operators to make the right choices faster to improve efficiency, safety, integrity, performance, return on investment and carbon footprint reduction.
Veristar AIM3D, developed in partnership with Dassault Systèmes, provides a true, as is, four-dimensional picture of an asset’s condition instantly, everywhere on any platform or device, at any time.
Research from Bureau Veritas suggests Veristar AIM3D could save between 9% and 15% on total decommissioning project costs. Data which has been shared with the UK industry regulator the Oil and Gas Authority, shows Veristar AIM3D could save operators in excess of £2 million on project costs for assets with topsides of 10,000 tonnes, increasing to more than £8.5 million for assets with topsides up to 40,000 tonnes.
However, different regions in the world require their own, bespoke decommissioning solutions. The regulatory environment and maturity of the individual markets will have a bearing on the services required.
For example, the North Sea is a highly regulated and mature market focusing on reducing the cost of decommissioning for operators and the UK taxpayer, while in Brazil, which will make up 11% of global decommissioning spend, decommissioning regulations only came into force in April 2020. The Brazilian market is therefore focused on navigating theses new regulations and starting decommissioning.
Decommissioning in the US, which is predicted to make up 13% of global spend, is regulated by the Bureau of Safety and Environmental Enforcement (BSEE). The country also has a ‘rigs to reefs’ program administered by the National Oceananic and Atmospheric Administration (NOAA) that saves a significant portion of decommissioning costs, although 50% of savings must be returned to specific environmental programs. In South East Asia, which will see 12% of global spend, operators are fully responsible for the funding of decommissioning, and while COVID-19 and the 2020 price crash have caused a slow down in decommissioning, work is expected to increase next year.
In many cases, Bureau Veritas has supported governments in the creation of regulations, providing a unique understanding of local requirements.
The strength of the Bureau Veritas global network, combined with a deep understanding of local market maturity and regulations, ensures clients receive bespoke solutions to meet their needs – wherever they are.
Recent examples of the diverse range of successful decommissioning projects undertaken by the company include a feasibility study for the Port of Dundee, certification of a new facility to ISO30k standard at a shipyard in Malaysia, verification and sampling for major North Sea decommissioning projects and marine assurance support for a multitude of projects including a recent North Sea floating production, storage and offloading vessel (FPSO).
In the Gulf of Mexico, MatthewsDaniel, a Bureau Veritas group company and a global leader in loss adjusting and marine services, has been involved in the removal of many assets since 1992 and has undertaken a number of notable industry firsts. These include the first ever decommissioning and reefing of a spar (Red Hawk: the world’s only cell spar) and the installation and decommissioning of the Independence Hub (the deepest installation in the world at the time).
From receiving limited attention just a few years ago, decommissioning has a very real presence in the market – as are the business opportunities available. To understand these and the unique challenges decommissioning presents, partnering with a specialist that thoroughly understands this niche sector from nearly 200 years of global and local experience can only serve to strengthen businesses offering.
Read the latest issue of the OGV Energy magazine HERE.
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