20160404_Decommisioning_ v04

Decommissioning

in the North Sea: A Challenging Opportunity

Bart Cornelissen & Michael Hompes

March 2016

Discussion

Document

© 2016 Deloitte The Netherlands

Executive Summary

The North Sea will provide an $18 billion decommissioning opportunity towards

2025, however major capability, resource and innovation gaps exist today...

20160329 Decommissioning in the North Sea1

Decommissio-

ning in the

North Sea is

an $18 billion

opportunity

• The North Sea has ~1350 installations in operation (2015)

• The asset base in the North Sea is ageing with a weighted average age of +20 years

• Persistent weakness in oil price accelerates decommissioning activity, as oil fields fail to

generate sufficient revenue to cover operating costs

• The accelerated decommissioning activity provides an $18 billion North Sea opportunity

between 2015-2025

• Despite the fact that the decommissioning market poses tough challenges, it also provides

opportunities to be captured by industry players alike

Suppliers lack

experience,

innovation

capabilities

and resources

• Overlooking all decommissioning activities; major supply chain bottlenecks in

Infrastructure and Equipment can be identified

• Driling Rigs, Removal Vessels and Ports, Harbours and Yards are critical supply chain

elements likely to impact on the delivery of cost effective decommissioning

• The capability gap of suppliers is high; on average only 25% of suppliers have

decommissioning experience

• 88% of forecast spend is captured in Well Abandonment, Suspension Live and Removal while

suppliers have relatively high deviation from desired capability

• A major wave of decommissioning could result in severe constraints in infrastructure and

delays in delivery capability and drive up costs


Executive Summary

...collaboration and bundling of activities could provide up to 30% in synergies,

but only with a distinct strategy to optimize each stage in decommissioning


Collaboration

between

operators and

suppliers is

essential for

success and

capturing

synergies

• A number of areas in the decommissioning supply chain overlap in scope; by collaborating -

between operators and suppliers - synergies can be captured

• Combined abandonment could improve project economics by ~25-30%

• Supplier collaboration is also one of the most important strategies CPOs focus on

• Despite the fact that in O&G we have a long tradition of collaboration, we have a low

perception of success or even struggle to do this successfully altogether

• To turn this around, we might want to learn from other industries and focus on building

trust relationships, mutual benefits and being proactive

Decommissio-

ning is

strategic;

value should

be maximized

at every stage

of late-life

assets

• In order for decommissioning to develop, a distinct approach from E&P should be realized

recognizing the differences in drivers

• Late-life production operations, preparation for CoP and decommissioning are all parts of the

same path and one should maximize value at every stage

• With a segmented portfolio, operators can make deliberate choices based on clear

decision criteria, on which assets to keep, divest or to decommission

• To further develop and optimize the decommissioning sector, requires intensified

collaboration of all stakeholders involved across the lifecycle

• Decommissioning is inherently strategic in nature as choices have to be made at every

stage by both E&P operators impacting its Oil Field Services suppliers


Topics for discussion


Context 4

Challenges 11

Opportunities 18

Going Forward 26

Appendix 32


Context



The North Sea has ~1350 installations in operation (2015) of which the majority

in Norway and in the UK with larger and heavier installations due to deep water

Context


Note: 1. Installations in UK and Norway are larger and heavier due to deeper waters

Source: OPSAR data (2015) - OSPAR is the mechanism by which 15 Governments & the EU cooperate to protect the marine environment of the North-East Atlantic

Operational installations in the North Sea (2015) Sum of Weight (M tonnes) in the North Sea (2015)

87%

Denmark

636%

90%

11%

Norway

651

16%

73%

151

42%

UK

489

Netherlands

52%

Fixed steel

Others

Subsea steel

Floating steel

Others

Gravity-based concrete

77%

23%

United

Kingdom1

5.4

45%

55%

Norway1

5.7

0.8

56%

0.3

Denmark Netherlands

46%54%

0.4

Topside

Sub-structure

5% 11% 36% 48%

# % Percentage of total


The asset base in the North Sea is ageing with a weighted average age of +20

years; The Netherlands has the oldest installations exceeding 24 years

Context


Source: OPSAR data (2015)

Average Age of Operational installations in the North Sea (2015)

17.515.916.814.5

18.121.224.122.8

20.6

28.0

21.0

37.4

27.7

16.0

25.2

17.0

17.0

23.6

16.2

20.3

19.0Floating steel

Fixed Steel

Denmark


Norway

Total Weighted Average

United KingdomNetherlands

Subsea steel

Floating concrete

Others

N=4

N=1

N=1

N=57

N=16

N=3

N=132

N=341

N=8

N=273

N=359

N=10

N=10

N=79

N=29 N=18

N=2

N=63 N=151 N=651 N=479

Country Weighted Av. AgeWeighted Av. Age


Subsea and Fixed Steel form ~94% of North Sea installations; Subsea Steel is

relatively younger than the more evenly spread age of Fixed Steel

Context


Source: OPSAR data (2015)

Distribution of Age of Operational installations (count) in the North Sea (2015)

13

1616

25

114

221

149

124

57

1

443841

6877

43

2 312

3

26

273

825311 2 5325

26 to 3021 to 25

68

11 to 15 16 to 20 31 to 35

80

36 to 40

Age categories

46 to 50 unknown41 to 456 to 100 to 5

32

53

Floating Steel

Others

Subsea steel

Floating concrete

Fixed steel


Older operational installations


50010050 350200 5500 450150 300 400250

20%

80%

100%

60%

40%

0%

600

Persistent weakness in oil price accelerates decommissioning activity, as oil

fields fail to generate sufficient revenue to cover operating costs

Context


Duration of Oil Price Declines Since 1986 (WTI, Peak to Trough – % of Peak Price)

Source: Federal Reserve Bank of St. Louis; MonitorDeloitte analysis

# Days

March '86

December '88

December '08

March '98

January '07

February '16

(ongoing)


Context

The accelerated decommissioning activity provides an $18 billion North Sea

opportunity between 2015-2025; with increasing spend towards 2025 (+300%)

Expected North Sea decommissioning spend per facility type ($ b)

1.0

1.3

2016

1.0

20182017

1.3

0.7

2015

+302%

2.1

2021 2025

1.2

2020

2.9

2023

3.2

2024

2.4

2022

1.1

2019


Source: Rystad, Decom North Sea, Monitor Deloitte analysis

Fixed and floater

Extended reach

Subsea tie back

FPSO

Semi

Steel platform

Concrete GB

Factors that influence final

decision to decommission

• Expected reserves

• Production profile

• Hydrocarbon price and quality

• Operational expenditure

• Decommissioning costs

• Development plan

• Legislation

• Unexpected/accidental

damage

• Tear and wear of production

infrastructure


Despite that the decommissioning market poses tough challenges to overcome,

it also provides opportunities to be captured by industry players alike

Context


Challenges Opportunities

• Great uncertainty about timing and costs

• Many suppliers are struggling to address the

market

• Strong capabilities are in short supply in

decommissioning

• Severe constraints in infrastructure and (global)

delivery capability

• The industry has not developed a standardized

procedure for abandonment

• High pace of decommissioning activity

• Industry players can de-risk decommissioning by

collaboration and strengthen their financial position

• Innovate successfully with alternative uses of

offshore infrastructure

• Decommissioning expertise can be exported

• Socio-economic opportunity for the sector

Source: MonitorDeloitte analysis, McKinsey, BCG, ARUP and a collaborative study from Scottish Enterprise, Decom North Sea and Accenture

Dir

ec

tL

on

g-t

erm

Challenges and opportunities for decommissioning in the North Sea


Challenges



The decommissioning market poses tough challenges to overcome...

Challenges





market


decommissioning


delivery capability











Dir

ec

tL

on

g-t

erm



Challenges

Overlooking all decommissioning activities; major supply chain bottlenecks in

Infrastructure and Equipment can be identified

Boskalis Offshore Energy - Decommissioning Insights13

Decommissioning activities

Project mgmt. Well Abandonment Running, making

safe, and

preparation

Topside and

substructure

removal

Subsea and site

remediation

Topsides and Substructure

Re-use & Recycling

Skills

• Proj. mgmt. team

• Corporate and

commercial support

• Decom PMO

• Engin. appraisal

• Environ. assessm.

• Compl./ Certification

• Stakeholder mgmt.

• Navigation interface

• Finance and legal

• Engineering (P&A)

• Well & P&A mgmt.

• Operations support

• Rig upgrade capab.

• Waste mgmt.

• Rig & rigless design

• Waste disposal

• Well Insp. & Interv.

Specialist Services

• (Detailed) engin.

• Offshore oper.

• HV & LV engin.

• Platform services

• Integrity mgmt.

• Health and safety

• Waste mgmt.

• Disposal routes

• Sampling services

• Detailed Engineering

• Naval Architecture

• Offshore Operations

• Transportation

• Vessel Crew

• ROV Pilot & Support

• Offshore Operations

• Geotechnical engineering

• Waste Material Characterization

• Onshore Dismantling

• Onshore environm.

• Waste Management

• Hazardous material mgmt. and

disposal

Infra-

structure

and

equipment

• Vessels: Survey

Geotechnical data,

Geophysical data,

environmental

• Navigational Aids

• Vessels: Intervention

and transport

• Waste treatment and

storage

• Rigs and Rigless

Solutions

• Decom materials

• Cement, Resins,

Silicone Rubber

• Vessels: Standby,

Support (AHTS, DSV,

Tugs), Survey

• Cutting technologies

• Subsea discon. and

removal tools

• Logistics base: marine,

aviation, onshore

• Vessels: Removal,

AHTS, CSV, SSBV’s,

survey and rock

dumping / backfill

• Transportation barges

• Vessels: ROV, support,

DSV, Stone placement,

AHTS

• Suction dredging

• Onshore Cranage

• Cutting Equipment

• Handling Equipment

• Onshore Space

• Quayside Strength

• DW Access Channel

• Dry Dock

• Metal Recycling

Supply

chain

• Engin. consultants

• Proj. mgmt. consult.

• Integrity prof. serv.

• Envir. consultant

• Legal and accountant.

• Survey contractors

• Tier 1 contractors

• Nav. consultants

• Drilling contractors

• Vessel operators

• Specialist Consult. and

contractors

• Rig/Rigless Contractors


• Vessel Operators

• Specialist contractors

• Survey Contractors

• Tier 1 Contractors


• Heavy-Lift Vessel

contractors

• Support Vessel

contractors

• Specialist consultants


• Vessel contractors

• Survey contractors

• Envir. consultants

• Specialist Contractors


• Onshore yard oper.

• Ports & harbor oper.

• Civil contractors

• Demolition contr.

• Waste & recycle contr.

Source: ARUP

Potential Bottlenecks


Challenges

Driling Rigs, Removal Vessels and Ports, Harbours and Yards are critical supply

chain elements likely to impact on the delivery of cost effective decommissioning


ActivityWell Abandonment Topside & Substructure

Removal

Topside & Substructure Reuse

& Recycling

Bottleneck Drilling Rigs or Rigless Alternatives Removal Vessels Ports, Harbours and Yards

Rationale

• Rigs or Rigless Alternatives

are fundamental aspects of

well abandonment not

replicable

• Significant pressures from

E&P activities

• Competition for resources due

to global deployment

• The market is volatile and the

spot prices vulnerable due to

market demand

• Removal Vessels are a critical

part of the decommissioning

process

• Vessels with lift capacities of

up to 500 tonnes and higher

are also utilised for E&P and

offshore wind markets

• Capital costs of new vessels

require a substantial

commitment to invest

• Development lead time is long

(+5-10 years)

• Impact on removal costs

through increasing vessel

costs

• Capital cost of upgrading

major infrastructure can be

substantial

• Timelines can be extremely

protracted (up to 10 years)

Contractors are reluctant to make commitments without certainty

in terms of timing of the North Sea decommissioning market

Potential Supply chain bottlenecks

Source: ARUP


The capability gap of suppliers is high; on average only 25% of suppliers have

tangible decommissioning experience

Challenges


Suppliers with Capability vs. Supliers with Experience per phase

31%

41%

28%32%33%

45%

37%

47%48%

6%

32%31%

16%

23%

47%

22%19%

28%

Continuing

Liability

DisposalSuspension

Live

Preparation

for CoP

RemovalSuspension

Cold

Cleaning &

Decom

missioning

Well

Abandonment

Disconnection

% Suppliers

with Stated

Decommissioning

Experience

% Suppliers

with Stated

Decommissioning

Capability

Source: A collaborative study from Scottish Enterprise, Decom North Sea and Accenture

-20%

# % Decommissioning Experience - Capability

-28% -15% +2% -10% -16% +3% -9% -25%

Av.

25%


00.5

11.5

22.5

33.5

4

Preperation ofCoP

Suspension Live

WellAbandonment

Cleaning &Decommissioning

DisconnectionSuspension Cold

Removal

Disposal

ContinuingLiability

Industry Desired Capability Av. Supplier Capability

Challenges


0%

1%

20%

0% 7%

5%

43%

23%

1%

% Forecast Spend


88% of forecast spend is captured in Well Abandonment, Suspension Live and

Removal while suppliers have relatively high deviation from desired capability

Av. Supplier Capability, Desired Capabilty with % Forecast Spend

• Taking spend to be an indicator of

demand; Well Abandonment

(44%), Suspension Live (24%) and

Removal (20%) have high

Forecast Spend

• Deviation between Av. Supplier

Capability and Industry Desired

Capability is large for Well

Abandonment and Removal

considering their expected

Forecast Spend size (although all

deviations are relatively similar)

Observations


A major wave of decommissioning could result in severe constraints in

infrastructure and delays in delivery capability and drive up costs

Challenges


Forecast of decommissioning capacity constraints, Northern North Sea (October 2014)

3

2

4

6

2

12

8

4

3

4

Weight (Te)

1600-

4000

>16000<1600 4000-

8000

8000-

16000

Source: KPMG

Topsides and substructures

to be Decommissioned

Available Vessels

-2 +3 - -6 -9

# Installations to be decommissioned – Available Vessels


Opportunities



...but decommissioning also provides opportunities to be captured by industry

players alike

Opportunities





market


decommissioning


delivery capability











Dir

ec

tL

on

g-t

erm



A number of areas in the decommissioning supply chain overlap in scope; by

collaborating - between operators and suppliers - synergies can be captured

Opportunities


Decomm-

issioned

Project Management, Logistics, MRO/Integrity, Overheads, HSE Management, Business/Safety Case Management,

Stakeholder Management, Inventory & Waste Management, Risk Management & Contingency Planning

Late Life

Operations

Preparation for

Decommissioning

DisposalWell Abandonment

DisposalCleaning &

Decommissioning

Disconnection

Removal

Disposal Disposal

Continuing Liability

Stage One Stage Two Stage

Three

Stage Four

Gate 1 Gate 2 Gate 3

Modifications &

UpgradesCoP

Hydrocarbon Free Materials Onshore

Milestone

MRO Decision

Making Changes

Modifications &

Upgrades


Recommended Decommissioning Supply Chain Phase Map

Lifecycle activities

Phase


Opportunities

Combined abandonment could improve project economics by ~25-30%


12

5459

12

76

PMB

5

DC Tot.

19

Mob/

De-mob

195

Tot.

19

A

19

Final costLear-

ning

43

Mob / Demob

Decommissioning

Proj. mgmt.

Learning

~ 25-30%

reduction

Source: McKinsey

Economics of decommissioning from combined abandonment of projects ($ m)

Repetition helps operators and contractors in recognizing risks of decommissioning, where the cost of an

overrun can easily be >80% of the planned budget compared to ~40% for development projects

Proj.

1 time mob/demob

instead of 4 times

Project management

and engineering -40%

-10% decommissioning

costs


Opportunities

Supplier collaboration is also one of the most important strategies CPOs focus

on to deliver value

22

Note: The survey combines the opinions of 324 procurement leaders from 33 countries across several industries

Source: The Deloitte Global CPO Survey

CPO Focus (% of Survey Respondents)

14

17

21

25

29

30

31

32

39

43

Restructuring existing relationships

Reducing transaction costs

Increasing level of supplier collaboration

Increasing competition

Reducing total life cycle/ownership costs

Reducing demand

Restructuring the supply base

Specification improvement

Outsourcing of non-core procurement

Consolidating spend


Opportunities

Despite the fact that in O&G we have a long tradition of collaboration, we have a

low perception of success or even struggle to do this successfully altogether

23

Source: Deloitte Survey of UKCS operators and oilfield services companies (August 2015)

Successful collaboration efforts by company (2015)

Oil Field Services

66%

Operators

90%

Collaboration is an integral part of business (%)

Less than 25%

28%

17%

22%

Operators

Unsure

50-74%

100%

25-49%

75% or more

22%

Oil Field Services

11%

100%

32%

30%

14%

5%

19%

Success rate

% o

f re

sp

on

de

nts

% o

f re

sp

on

de

nts

20160329 Decommissioning in the North Sea


Opportunities

To turn this around, we might want to learn from other industries...

24


Source: The Deloitte Global CPO Survey (2015), Deloitte Survey of UKCS operators and oilfield services companies (February 2016)

10

21

31

35

36

46

59

77

Techn. media &

communications

Consumer business

Business & profess. services

Manufacturing

Government & public sector

Financial services

Healthcare & life sciences

Energy & resources

% of CPOs driving innovation with suppliers



Opportunities

...and focus on building trust relationships, mutual benefits and being proactive

25


Source: The Deloitte Global CPO Survey (2015), Deloitte Survey of UKCS operators and oilfield services companies (February 2016)


29%Trusted relationships

with the other party

24%

Significant resources invested

1%

Importance of collaboration

communicated 9%

4%

Business strategy

encourages collaboration9%

Actively sought out

opportunities to collaborate 20%

Mutual benefit for you

and the other party

Other

Individual performance measures

linked to rewards 3%

Be

ha

vio

ur

Pro

ce

ss

es

Reasons for successful collaboration (% of responses)


Going Forward



In order for decommissioning to develop, a distinct approach from E&P should

be realized recognizing the differences in drivers

Going Forward


Exploration & Production Decommissioning

Economics • Driven by first oil• Driven by reducing overall costs, with drivers bias towards

defer spend

Projects• Projects may not proceed if they do not achieve

investment hurdles• Project legally obligated to proceed

Scale • Future market scale uncertain • Future market scale relatively uncertain

Market• Very mature market which has been evolved since

first activity in the 1960s

• Immature market with a small number of projects and

operators having delivered a decommissioning project to

date

Scope• Scope of project can be vary based on technical and

commercial drivers

• Scope of project is largely fixed and includes removal of

all infrastructure

Safety &

Asset

integrity

• Safety and asset integrity driven, to ensure operation

and production is sustained uninterrupted

• Safety driven. Asset integrity only relevant to maintain

critical functions necessary for the removal process and

limit environmental impact

Profitability• Perceived by the supply chain as having higher

margins and offering more challenges

• Perceived by the market as lower margins and less

interesting

Drivers Exploration & Production vs. Decommissioning

Source: ARUP


Going Forward

Late-life production operations, preparation for CoP and decommissioning are all

parts of the same path and one should maximize value at every stage

28

Develop a clear

late-life operator

strategy

Maximise

operations value

from productive

asset wind-down

Apply best-

practice capital

project

approaches to

decommissioning

Develop a

supportive

regulatory

environment for

the North Sea

• Plan ahead

• Identify late-life assets

• Commit to the chosen operating strategy

• Reduce headcount at late-life assets

• Manage demand and use new procurement techniques to help

radically reduce external spend

• Concept optimization

• Contracting strategy and contractor management

• Risk management

• Apply lean principles

• Pooling resource

1

2

3

4

Source: McKinsey

Four drivers achieving decommissioning excellence

Drivers

Regulatory bodies have a crucial role to play:

1. Requirements operators need to meet

2. Exploring roles governments can themselves play

Achieving

decommissioning

excellence in the

North Sea

ActionsObjective


With a segmented portfolio, operators can make deliberate choices based on

clear decision criteria, on which assets to keep, divest or to decommission

1. Traditional Sale

• Sell late-life assets to third parties

• Transferring the decommissioning liability as part of the deal

• Option is proving difficult: potential buyers are becoming choosier and

field economics have worsened

2. Liquidity Maximising Sale

• Selling late-life assets while maintaining decommissioning liability

• Number of potential buyers will be far higher (than in a traditional sale)

• Selling price should be far higher, allowing sellers an immediate cash

injection that they can roll into other value-creating investments

• Decommissioning liabilities will remain on company balance sheets

3a. Operated decommissioning

• Run assets until the end of their lives

• Then execute decommissioning using internal capabilities and

traditional contracts with suppliers and service companies

3b. Outsource

• Under-explored and -utilized approach/option; the outsourcing of ultra-

late-life operations and decommissioning execution to service firms

Going Forward


3a. Operate

3b. Outsource

1. Traditional

Sale

2. Liquidity

Maximising

Sale

Ow

ners

hip

Sell

Transfer Liability

Own

Maintain

The Strategic Options for Decommissioning

Source: KPMG

Late-life operator strategy1


To further develop and optimize the sector, requires

collaboration of stakeholders across the lifecycle

Going Forward



Recommendations across the lifecycle

Integrate planning Practice collaboration

& bundling

Plan & execute earlier Develop talent &

resourcing

Leverage supply

strengths

• Optimise integrated

planning within

operators and across

the operator-supplier

interface

• Better planning will reap

benefits and facilitate

other benefits

• Launch further

initiatives to encourage

collaboration & bundling

of supply activities

• Articulate and

emphasise its benefits

to key industry

stakeholders

• Earlier activity will:

−Reduce the potential for

complexity and integrity

issues

−Improve the operational

performance of the

decommissioning projects

−Bring forward supplier

decommissioning demand

and revenues

−Reducing financial, time,

operational and HSE risks

for operators

−Allowing suppliers to

develop their capabilities

• Develop talent

• Ensure proper levels of

resourcing to ensure

supply can meet

forecast demand by:

−Improving visibility of

resource demand

−Launching training

initiatives to transfer

existing skills

−Engaging more with

universities

−Creating more

decommissioning specific

work positions

• Encourage the

utilisation of strong

suppliers in other areas

of supply weakness

• Leveraging supply

strengths will increase

the overall capability,

capacity and revenue of

the supply chain, lessen

the likelihood of supply

chain bottlenecks and

encourage collaboration

and skills transfer from

one phase to another

Productive asset wind-down2

Apply capital project approaches3

Develop a regulatory environment4


Going Forward

Decommissioning is inherently strategic in nature as choices have to be made at

every stage by both E&P operators impacting its Oil Field Services suppliers

31

Key recommendations

Exploration & Production

(Operators)

Impact on Oil Field Services

(Suppliers)

Decommissioning

Strategy

• Plan ahead and develop a clear late-life operator

strategy

• Be brutally realistic on the long-term performance

potential of the asset and the company’s

willingness and ability to invest

• Suppliers can help analyse the value and risk trade-

offs of different decommissioning concepts and test

their resilience to potential risks or uncertainties

Operating Models

• Late-life assets need to achieve a drastic reduction

in costs to remain profitable

• Maximise operations value from productive asset

wind-down

• Apply lean principles; to improve frontline

productivity and speed of execution

• Effective decommissioning requires smooth

handover; suppliers can facilitate this removing

interface risks

Capabilities &

Expertise

• Apply best-practice capital project approaches to

decommissioning

• Build dedicated internal capabilities

• Implement an integrated end-to-end risk approach

to bring robustness to projects and avoid additional

costs for both parties

• Engineer pragmatic risk-based standards and

design an optimized plan for fulfilling HES

requirements

Collaboration

• Determine the role of regulatory bodies to support

the collaboration and develop a supportive

regulatory environment for the North Sea

• Ensure adequate on-site supervision of

contractors

• Pooling resources and (cross-)projects can improve

project economics by scale, maximize learning

(cross-projects) and minimize cost and errors


Appendix

32 20160329 Decommissioning in the North Sea


Through collaboration between operators and oil-field-services, abandonment

costs can be reduced by up to 40 percent

Appendix


Model of abandonment cost reduction

Source: BCG

Categories Potential cost

reduction

Actions Examples of actions

Program

design and

management

Planning and

execution

Contracting

5%

15%

20%

• Establish abandonment standards and HES requirements that

are fit for purpose

• Build dedicated internal capabilities

• Ensure adequate on-site supervision of contractors

• Perform site diagnostics ahead of project execution

• Employ long-term planning

• Attach greatest priority to routine wells with lower abandonment

costs

• Standardize procedures and communication tools

• Integrate decommissioning, rejuvenation, and workover

activities

• Share tools and equipment between maintenance and

decommissioning campaigns

• Request contractor liability for downtime

• Negotiate performance-based agreements

• Pursue long-term agreements

• Retain best-performing crews

Engineer pragmatic risk-

based standards

Design an optimized plan for

fulfilling HES requirements

Optimize planning through

site diagnosis

Build a queue of work

Standardize execution

Capture execution synergies

Optimize contract terms

Carefully select contractors


Appendix

In each phase of the decommissioning supply chain recommendations can be

made to address the challenges and harness the opportunities

34

Recommendations across the decommissioning supply chain

Cleaning &

DecommissioningWell abandonmentSuspension LivePreparation for CoP

• Encourage ‘late life’ mindset

• Define late life process

• Encourage a more diverse

supply base

• Develop standardized

decommissioning project

planning template

• Integrate with other phases • Plan and execute earlier

• Integrate plans

• Broadcast the challenge

• Talent and resource focus

• Integrate with other phases

• Analyse cost/benefit of

earlier cleaning

• Analyse cost/benefit of

onshore cleaning

• Integrate with other phases

Disconnection

• Integrate with other

phases

• Learn from other

regions

• Test place in the

market

Suspension

Cold

• Packaged offering

research

• Integrate with other

phases

Removal

• Develop innovative

approach

• Create disposal

linkages

Disposal

• Bring disposal

contractors into the

decommissioning

process earlier

• Optimise yard demand

• Research and

leverage learnings and

synergies from

salvage and nuclear

Continuing

Liability

• Develop service

offering

• Bundle with other

phases



Appendix

Addition of lifecycle activities spanning the full duration of decommissioning;

many activities are common to multiple or all phases in the lifecycle

35

Lifecycle activities

Activity Description

Project management• Includes planning, time and cost forecast, contracting/subcontracting, budget management, business

case management, contingency planning

Logistics • Includes offshore and onshore mobilization, support vessels

MRO/Integrity• Includes maintaining structural integrity to HSE defined standards and to suit decommissioning strategy.

Will differ from operational MRO due to different commercial considerations

Overheads • Includes staffing, utilities/power, accommodation

HSE Management • Includes upgrades, provisions, equipment, studies and safety case to meet HSE defined standards

Stakeholder

management

• Includes engaging with internal, partner, community and regulatory stakeholders to inform, manage

expectations and prevent reputational damage

Inventory

management

• Includes directing and tracking movement of material/equipment inventory from operational asset to

disposal/reuse/recycling

Waste management• Includes directing and tracking movement of waste/HAZMAT inventory from operational asset to

disposal/reuse/recycling, including characterization and environmental accounting



Source articles

• BCG Perspectives (December 2015): Asset abandonment in upstream oil – A growing threat to the sector

• KPMG (March 2015): Decommissioning Strategy – A new imperative for E&P firms

• McKinsey & Company (February 2015): From late-life operations to decommissioning – maximising value at

every stage

• ARUP (September 2014): Decommissioning in the North Sea – Review of decommissioning capacity

• A collaborative study from Scottish Enterprise, Decom North Sea and Accenture (May 2013): Decommissioning

in the UKCS – Mapping the supply chain, identifying SWOTs and making recommendations to optimise a key

industry growth area

Appendix


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