In today’s struggle between short-term plans and long-term strategies, decommissioning understandably slides down the corporate agenda. But, as Kenny Dooley, Regional Director of Petroplan argues here, preparing now can bring huge dividends later, and elevate decommissioning from cost centre to centre of excellence.
Decommissioning oil and gas assets is an activity that is particularly sensitive to price signals. Current signals are telling operators to prioritise investment into efficient production and extending the lifecycle of existing infrastructure, in order to maximise reserves prior to decommissioning assets.
But decommissioning is not a subject that can be held off for very much longer. Decom North Sea suggests that there are approximately 450 rigs and wells in the North Sea due to come out of service between now and 2030 – with an associated cost of £30 billion.
In fact, the region has already seen some small-scale but nonetheless significant decommissioning projects successfully completed – when the oil price was more favourable. More recently, Royal Dutch Shell announced it was to begin consulting on plans to take the first of its Brent platforms out of service. 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 a barrel, 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 industry as a whole. The UK has the potential to become a global centre of excellence in decommissioning, which could provide a substantial source of revenue for some time to come.
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 crisis. The current market situation will not last forever, and ensuring a business can take advantage of an upturn in price is a fundamental aspect of surviving a downturn.
So, when the price ticks up again, we can expect decommissioning to move back up the corporate agenda. However, forward-thinking operators already recognise that decommissioning in the North Sea brings with it a unique set of challenges, and that early preparation is essential if those challenges are to be met.
The most obvious of these is that decommissioning in the harsh environment of the North Sea is something of a blank slate. Projects already completed were on a much smaller scale than will be required in the future. 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.
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 will always be a risk that a percentage of the workforce relocates overseas or leaves the industry for good.
The UK’s decommissioning projects might be a low priority right now, but 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.
In these circumstances, securing the right people necessary to complete a safe and compliant decommissioning project places significant pressure on HR departments. It requires time and resourcefulness, both to understand and develop the attributes, experience and knowledge required by the recruiter, and the real experience on offer from potential contractors. 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.
There will inevitably 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. For example, it is likely that project managers, project engineers, supervisors, NDT technicians and planning engineers will all be needed in newly formed decommissioning teams.
Another possibility is to work with engineers who have decommissioning experience in other areas, such as renewables. This is obviously a much bigger step to take, and raises questions around qualification and certification, and how far these can or should be transferable. These discussions are not yet being had by 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.
For many, the decommissioning debate has come at just the wrong time. The combination of aging assets, the high cost associated with exploration activity, and a spectacular drop in price is just the triple whammy that everyone wanted to avoid.
But there is a positive side. This could pave the way for creating a centre 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 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 that is 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.