Energy - Decommissioning 2002-4

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Offshore Decommissioning 2002


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OffshoreDecommissioning

Opportunities for Scottish BasedBusinesses

2001

(Including Update at March 2002)

Prepared by Eric Faulds Associates on behalf of


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Index Page

1.0 Introduction 2

2.0 Executive Summary and Recommendations 3

3.0 Decommissioning Background 8

4.0 Numbers, types, locations and weights of offshore 10installations.

5.0 Market Drivers. 14

6.0 Business Sectors. 18

7.0 Steel Platforms 19

8.0 Concrete Gravity Based Structures. 34

9.0 Subsea installations. 37

10.0 Drill cuttings 38

11.0 Pipelines 41

12.0 Well Plug and Abandon 44

13.0 Reuse of Offshore Installations 46

Internet References 50

Appendix A 51

All rights reserved. No part of this publication may be reproduced, stored in aretrieval system, or transmitted in any form or by any means, electronic,

mechanical, photocopying, recording or otherwise, without the prior writtenpermission of the publisher.


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1.0 Introduction

During the next couple of decades decommissioning of offshore structures will be

another major opportunity for Scotland. It is vitally important that we understand the

size and nature of the opportunity and develop the appropriate strategy to maximise

the economic impact to Scotland.

Scottish Enterprise Energy has commissioned this study as a first step in identifying

the opportunities and informing the industry of the same. Our next task will be

engaging other public sector partners as well as industry in appropriate dialogue to

determine the future course of action.

The focus of this report is on the decommissioning of offshore platforms. In addition

the report will cover other decommissioning sectors such as pipeline

decommissioning and drill cuttings where the information and knowledge available is

somewhat limited. Re-use of installations for new purposes will also be considered.

There is a paucity of reliable information on which to base predictions regarding the

development of the North Sea decommissioning market. This is in part due to the fact

that there has been very little experience of decommissioning to date and no

experience of removing very large offshore structures in any part of the world. In

addition, there are no regulations in place regarding aspects such as drill cuttingsand pipeline decommissioning. History has shown us that the predictions of likely

costs of major new engineering projects, where there is no previous experience, are

likely to be seriously underestimated. It is reasonable to expect the same situation

will occur in decommissioning, particularly for the early decommissioning projects.

A variety of public domain information as we ll as proprietary data have been used in

the preparation of this study. There is some lack of consistency in the data due to

the different sources but despite this we believe it is sufficiently reliable for the

purposes of this report.

Scottish Enterprise hope that this study would make a valuable contribution to the

subject of decommissioning of offshore facilities, and it would lead to maximisation of

economic benefits from this opportunity, to Scotland.


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2.0 Executive Summary

The offshore decommissioning market is still in its infancy and as a result there are

uncertainties regarding what the total market requirements may be and how the

market might develop. However, there are also a number of certainties. The cost of

decommissioning will be very high. We estimate that the total for the entire North Seais unlikely to be less than 20 billion and could easily be 30 billion. This expenditure

will be spread over a period of some 20 to 30 years and most importantly, it is a

market that is absolutely ce rtain to occur and it will occur on Scotlands doorstep.

We also believe that the underlying commercial drivers behind the decommissioning

market will ensure that it will be a relatively predictable market without the cyclical

swings in demand experienced in the development of the North Sea.

In terms of potential decommissioning market value, the tonnage of platforms to be

removed provides a good indication of the likely cost. In terms of tonnes of steel

contained in the offshore platforms, the approxima te split between countries is shown

in the pie chart below:

England

10%

Scotland

43%

Norway

38%

DK

2%NL

7%


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The total decommissioning market can be broken down into a number of distinct

activities. Whilst there is no North Sea track record for decommissioning it is difficult

to be precise about the total value of the market. The chart below gives the order of

magnitude of the UK Sector Costs.

Order of Magnitude UK Sector

Decommissioning Costs

02,0004,0006,0008,000

10,00012,00014,00016,000

Total

Pipe

lines

SteelPla

tforms

WellP

&A

ConcretePla

tforms

DrillCuttings

million

Cost estimate range

It is generally not recognised that plugging and abandoning wells will account for a

substantial part of the cost of decommissioning an offshore production platform. This

will be a significant expanding market that will require an increase in specialist

expertise and equipment. We envisage that companies already operating in Scotland

will be able to expand to meet these requirements and lead the way in developing

lower cost and more reliable techniques. There may also be opportunities for new

players.

The requirements for dealing with drill cutting waste deposited on the sea bed

beneath many of the installations off the Scottish Coast have not yet been

determined but there is little doubt that there will be significant market opportunities

for companies in the removal, handling and treatment of both drill cuttings and the

associated contaminated water.

There is likely to be a significant market in pipeline decommissioning which will be

dominated by the need for offshore marine equipment and diving services. However,

until the decommissioning requirements are better defined there are no obvious near

term business opportunities apart from the removal of small diameter flowlines and

cables associated with the decommissioning of subsea installations.


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The greatest near term market opportunities will be associated with the

decommissioning of fixed offshore platforms. The key question is how can Scottish

business ensure that it secures a large slice of this cake?

Approximately sixty to seventy percent of the cost of removing an offshore platform is

associated with the offshore heavy lift contractor and currently the heavy lift

equipment is owned and operated by Dutch and Italian companies. The vesselstypically operate out of The Netherlands or Norway. If the status quo remains then

Scotlands slice of the cake for platform removal will be limited to the supply of

offshore labour, diving vessels and onshore disposal.

The worldwide market for heavy lift vessels is increasing and with the additional

requirements of North Sea decommissioning, demand is likely to exceed supply and

apply upward pressure on prices. There is a perceived need for additional

competition in this market and this is expected to come from the development of a

new generation of heavy lift vessels aimed at the decommissioning market but also

capable of competing for new installation work. These new designs are being

developed in Norway and The Netherlands but there is a unique opportunity for

companies with a Scottish base not only to build these new vessels but, more

importantly, to operate them. If these new vessels can be based in Scotland then

Scotlands share of the market will be greatly enhanced since the vessels base not

only influences its maintenance and direct support activities it also influences the

operation of associated cargo barges, fabrication of necessary steelwork as well as

engineering design and project management work. The recently announced plan by

Phillips Petroleum in Norway to use the new technology vessels on the first two

removals of Ekofisk installations make it virtually certain that at least one of these

new generation vessels will be built and operated. We estimate that if one of the new

generation vessels could be based in Scotland then the value of steel platform

removal work coming to Scotland could amount to 4.5 billion and there is the

additional potential of income from the worldwide platform installation market.

Without a vessel based in Scotland the value of removal work coming to Scotland

may be as low as 1.5 billion. It will take both political and corporate initiatives to win

this prize.

There is now a general realisation that the onshore dismantling of offshore

installations will not create many jobs. Industry estimates suggest approximately 150

to 200 jobs per annum on average will be required in the UK. We anticipate that there

will be a requirement for about three decommissioning yards in the UK. Able UK,

based in Teesside is well established to dominate the Southern North Sea market


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and the deep water in Shetland along with its proximity to the Northern North Sea

fields will give the Shetland Decommissioning Company a distinct advantage over its

UK competitors. We believe however that the market could support an additional

yard located in Scotland.

A feature of decommissioning to date has been the continual slippage in the market

getting effectively underway. This has caused problems where a number ofcompanies have invested in the development of new technology only to find the start

of the market has slipped. There is no doubt that there will be a tendency for this

slippage to continue but there are a number of events planned to occur in 2001 which

are likely to be significant.

The Maureen (1) platform will be removed in mid summer and taken to

Norway. Whilst benefit to the UK may be limited it will raise awareness of the

decommissioning challenge.

It is expected that Phillips Petroleum in Norway will commence the

prequalification procedure for 3 of the Ekofisk installations in July this year

(2001). For two of the installations new technology lift equipment will have to

be used. It is expected these critical contracts will be awarded in Spring 2002.

TotalFinaElf(3) are due to publish their decommissioning plan for the Frigg

Field in the very near future. This will be a major decommissioning

programme and will include the first large platforms to be decommissioned in

the UK sector.

These events will arguably bring a renewed focus on decommissioning and with the

expectation of prequalification activities commencing this will require contractors to

seriously consider their position and plans for entry into the market.

The above summary has focussed on the major activities but given the enormous

size of the market a very small slice of the cake will represent a large volume of

business for many specialist companies.

Although the reuse of offshore facilities and equipment in newlocations has received

considerable attention and effort by decommissioning specialists, without much

success to date, the potential economic benefits suggest that this is not an aspect

that should be dismissed. There is a need to identify what markets, if any, could

utilise redundant North Sea installations.


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In addition, a number of offshore structures have been reused for new purposes with

the reuse of Brent Spar in Norway to form a new quay structure a prime example.

There have been suggestions that offshore installations could be used not only for

coastal engineering projects but also for offshore aquaculture and power generation

utilising wind and wave power. We believe that these ideas require study to

determine their merits.

It should not be forgotten that the UK government bears a significant part of the cost

of decommissioning (up to 60 to 70% in some instances) through tax rebates to the

oil companies. The use of redundant platforms to provide wealth creating

infrastructure improvements such as quaysides etc may help offset this charge on

the UK economy.

In conclusion, 2001 and 2002 is likely to see significant developments in the

Norwegian sector and investment in new technology lifting vessels. Early action is

required if Scottish based companies are to obtain a significant foothold in the

market. In particular there are new opportunities to build and operate new heavy lift

vessels, to take a lead in developing low cost well plugging technology, to develop

sea bed waste handling technology and to utilise offshore installations for renewable

energy and aquaculture purposes. All of these business areas have worldwide

applications. If business initiatives are not put in place, there is the likelihood that

Norwegian and Continental based companies will gain the lions share of the

decommissioning market in UK waters.


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3.0 Decommissioning Background.

The footings referred to above are the large heavy sections at the base of steel

jackets where the jacket is connected to the foundation piles. The maximum number

of steel installation footings that could be left partially in place under these

regulations is 34 out of approximately 600 in the North Sea.

The application of these new regulations has yet to be put to th e test although

Phillips Petroleum in Norway have proposed that derogation should be sought toleave the Ekofisk Concrete Tank structure in place.

3.1 Decommissioning Process.

The decommissioning process in the UK is governed by the requirements of the

Petroleum Act 1998. The process is clearly set out in guidance notes (14) published

by the DTI. In summary the process is as follows:

Stage 1. The Operator of the installation undertakes preliminary discussions with the

DTI. This will typically take place 3 to 5 years in advance of the expected

decommissioning date. The Operator will outline the likely timetable of future events.

Stage 2. Detailed discussions of a draft decommissioning proposal. For

straightforward cases where installations are being totally removed this is likely to be

Topsides

DEROGATION?

Must leave 55metres

water column above

remaining items

Must provide

navigation markings

YES

NO

NO

YES

YES

YES

UK REQUIREMENTSINSTALLATION

Steel Jacket10,000tonnes

Can dump or leave part

or whole in place

Can leave footings

Remove

Remove

Exceptional case

damage etc


or whole in place


or whole in place


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a straightforward process. However if the installation is large and has the potential to

be considered for derogation then the OSPAR requirements will have to be taken into

account.

Stage 3. Consultation with interested parties.

Stage 4. Formal submission of the decommissioning proposal and approval by theSecretary of State.

Stage 5.Execution of the work.

Stage 6.Monitoring of the site if applicable.

Particular points to note from the above process are that the Operator of the

installation drives the process and the regulator is the DTI who will make the final

decision regarding an Operators proposals. Although the regulations set out by the

OSPAR Convention are significant for a small number of large installations the

OSPAR Convention is not a regulator and has no decision making role in the

process. It is also relevant to note that both the OSPAR regulation and the DTI

Guidance notes require Operators to cooperate and share information on

decommissioning matters.

ALL CASES

Secretary of State

calls for formal

Submission

ADDITIONAL

ACTIVITIES

REQUIRED FOR

DEROGATION

Up to three

years before

decommission

Maximum of 32 weeks

for OSPAR consultation

process

Detailed

submission

and

consideration

of draft

programme

Consultation

with

interested

parties

Formal

submission

and approval

of

programme

Commence

main works

and undertake

site surveys

Monitoring

of

site

Preliminary

discussions

with

Government

Departments

Consultation

with OSPAR

Contracting

Parties

Assessment

of

options in

accordance

with

OSPAR


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4.0 Numbers, types, locations and weights of offshore installations

There are approximately 600 platforms located in the North and Irish Seas. The exact

number quoted by various sources varies, as there is no consistency in how

platforms are counted. For example some sources regard two platforms linkedtogether by a bridge as one platform whilst others count these as two platforms.

The platforms are located mainly in UK, Norwegian, Dutch and Danish waters.

The great majority of installations are fixed platforms comprising a steel jacket fixed

to the seabed with piles along with a topsides structure containing drilling, process

and living facilities. Approximately 4% of the total numbers are very large concrete

gravity based substructures. There are also a number of floating installations and

subsea installations

The table below shows the location of installations by type and by country.

Country SteelJacket

ConcreteSubstructure

Subsea

Floating Total

UK (UK) 227 12 56 17 312

Norway (N) 69 13 54 9 145

The Netherlands (NL) 118 2 7 127

Denmark (DK) 39 39

Germany (D) 1 1 2Total 454 28 117 26 625

It can be seen that the UK has 50% of the total number of North Sea installations

located in its controlled waters.

The cost of removing a platform increases with size and weight and therefore, for the

decommissioning market, the tonnage of materials to be disposed of is more

significant than installation numbers. Platforms tend to get larger and heavier as the

water gets deeper.

The table below gives the total weight in millions of tonnes of offshore platforms by

sector and type. Concrete substructures have been excluded.


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UK N NL DK D Total

Topsides(steel jacket platforms)

1.11 0.75 0.28 0.09


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England

10%

Scotland

43%

Norway38%

DK

2%NL

7%

National Tonnages

Sector Map showing number of steel platformsand total tonnage of steel


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The above analysis has looked at the distribution of offshore installations. There is a

lack of good data on other aspects of decommissioning such as pipelines and the

treatment of drill cuttings. As a general guide however, the UK and Scotland in

particular has the greatest share of the volume of each aspect of decommissioning.


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5.0 Market Drivers.

5.1 Timing.

The fundamental driver influencing an Operator when considering decommissioning

is that it is a very high cost outlay with no associated income.

A prime objective of both Operator and government is to maximise the production

from any field and combined with the financial penalty of decommissioning at the

end of field life there is every incentive to delay cessation of production for as long as

possible. This may be done by introducing cost saving measures in the production

and operating processes and could include selling the asset to a lower cost Operator

or by utilising new drilling and production technology or by a combination of all of

these measures.

An excellent example of field life extension is Shells Auk field, which was installed in

1974 with a life expectancy of no more than 7 years the latest prediction is that it

could produce until 2010.

Ultimately however fields will become uneconomic either through falling production

levels or through a drop in oil price. Both well production and oil price are difficult to

predict accurately and hence cessation of production dates may change from time to

time with a tendency for dates to recede.

It should be noted that a low oil price does not necessarily lead to early

decommissioning of installations since, in this instance, the Operators will be cash

constrained and will be extremely reluctant to spend money on activities that do not

generate income. Although high oil prices will tend to delay the cessation of

production of oil fields high oil prices may accelerate the cessation of production from

gas fields as consumers maximise their use of lower cost gas in preference to oil. It is

also important to note that cessation of production and decommissioning dates are

not necessarily closely linked. There may be many years between production

shutdown and the start of decommissioning.

There are however other drivers that may, in certain circumstances, tend to

accelerate decommissioning. Delaying a number of decommissioning projects could

build up a significant cash flow problem in the years ahead. Tax offsets will be


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generated and it may suit an Operator to optimise its tax position by

decommissioning earlier rather than later. Some Operators may also have fears

regarding the financial strength of some of their partners and would prefer not to

delay. It should be noted that all partners in a field are held liable for

decommissioning costs. In addition, the Government will not wish to see undue delay

which could increase financial risks if some licence owners ceased trading and there

will be pressure from fishermen and others to see the sea bed cleared of installations

as soon as practically possible.

Nevertheless, the overall trend is likely to be a delay decommissioning and this has

certainly been the experience to date.

5.2 Cooperation

With all Operators having to face the loss making business of decommissioning and

combined with the fact that it is not core business there is the basis for a much more

cooperative approach between Operators compared to new field development. In

addition, OSPAR regulation requires cooperation and DTI Guidance Notes state:

The Government is keen to encourage Industry co-operation and collaboration at the

decommissioning stage.

5.3 PoliticsAlthough different fiscal regimes exist in Norway and the UK the net effect of both isthat the Governments have to contribute a significant amount to the

decommissioning costs either directly in the case of Norway or indirectly through tax

relief in the UK.

An important consequence therefore, is that both Government and Operator

objectives are aligned as far as reducing decommissioning costs are concerned.

On environmental issues however there is the potential for divergence in that

Operators would generally prefer to see environmental issues evaluated on the basis

of sound science whereas Governments will tend to be more sensitive to emotionally

based public opinion. However, in reality, environmental considerations, although

important, are unlikely to have a further significant effect on the installation removal

market. The same cannot be said about the removal of drill cuttings and pipelines


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from the sea bed. Environmental issues will continue to play a significant role in

establishing the extent of these particular markets.

To date there has been limited political interest in ensuring that the UK maximises its

opportunities in this large new market. Most new business development has been

Norwegian based and without political pressure we will probably see Norway taking a

disproportionate amount of the North Sea decommissioning business.

Although EU trading rules do not permit Norway and the UK to protect their

decommissioning markets the Basel Convention on the export of waste which, in

essence, requires each country to dispose of its own waste could arguably be

applied to offshore decommissioning. There is therefore an expectation that although

Norway will tend to have an advantage in special situations such as Brent Spar and

Phillips Maureen, where deep water is particularly significant, the vast majority of UK

offshore installations will be decommissioned in the UK.

5.4 Effects of Drivers

It is important to appreciate that the market drivers in decommissioning are distinctly

different from new field development. Although both are high cost activities new field

development costs are offset by income to be generated from the investment.

Decommissioning costs must be met from cash available at the time of

implementation and any overrun in expenditure will have an immediate effect on a

companys annual profit. In new field development, time is normally a critical factor,

particularly once project development gets underway. In decommissioning, time will

be relatively unimportant and this is likely to have a significant influence in the way

the market develops. Generally, the longer a project is delayed the better the

financial return for the Operator in terms of net present value. The need to get a new

project completed on time tends to minimise cooperation between projects, even

within the same company. Decommissioning is likely to see much more cooperation

between companies.

The fundamental driver of high cost no income for the Operator will arguably lead

to a strong drive to create an industry with the greatest overall efficiency and hence

lowest possible cost consistent with safe and environmentally acceptable practices.

An efficient offshore decommissioning industry will require the following features:


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The best possible technology available when needed.

Competition.

Innovation.

Equipment and human resources available when needed. A predictable and smooth workflow without boom and bust periods.

The greatest single problem to date with respect to developing new technology has

been the trend for decommissioning start dates to continually slip. The development

of new heavy lift vessels has been particularly hampered in this respect with several

companies commencing development aiming for a market commencing in 2001 only

to find that it will not commence until 2003 at the earliest. Maintaining a development

team for an additional two years is clearly a significant burden.

The flexibility of decommissioning timing should however bring benefits in that it will

be feasible to delay a decommissioning start whilst a particular piece of technology is

developed if it can be shown that this will reduce cost. Another advantage arising

from the potential to delay is the expectation that it will be easier, compared to new

field development, to obtain contractual commitments from a client prior to a

developer investing capital in new hardware.

The oil industry is fully committed to the belief that competition drives down costs by

focussing on efficiency and encouraging innovation. There is no reason to believe

that the decommissioning business will be any different.

We believe that boom and bust periods will be less likely in the decommissioning

market. Our expectation is that contracts will generally be let on a multi-project basis

spread over a number of years and that the combination of timing flexibility and a

determination to keep costs down will smooth out the work flow. If a peak in demand

arises and is driving up costs then the projects will simply be delayed until supply and

demand are back in balance.


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6.0 Business Sectors.

6.1 General

Offshore decommissioning can be broken down into a number of distinct business

sectors comprising the decommissioning of steel platforms, concrete gravity based

platforms, sub-sea installations, drill cuttings, pipelines and well plug and

abandonment.

An indication of the order of magnitude costs of potential decommissioning costs for

each of these sectors is shown in the chart below. (Subsea decommissioning is

excluded as it is small in comparison to the other sectors)

Order of Magnitude UK Sector

Decommissioning Costs

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Total

Pipelin

es

SteelP

latform

s

WellP

&A

ConcretePlatf

orms

DrillC

uttings

million

Cost estimate range

It must be emphasised that the above numbers can only be regarded as rough

estimates but they do give an indication of the relative size of each sector.


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7.0 Steel Platforms.

7.1 Cost Breakdown

The estimated decommissioning cost of this sector, excluding the cost of

plugging and abandoning wells, is in the order of 4 to 7 billion for the UK

sector.

From our cost database we can derive the breakdown shown below of the

major business sectors within the steel platform decommissioning market.

Materials &

Fabrication

15%

Onshore

scrapping

4%

Design &

management

10%

Offshore

Support

10%

Offshore

Preps

10%

Marine

HLV

30%

Marine support

contracts21%

Onshore

29%

Each sector will be discussed below:


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7.1.1 Heavy Lift Vessel (HLV).

Virtually all offshore platforms were installed using heavy lift crane vessels such as

shown below. Similar vessels will be required for the removal of the installations

These specialist vessels with their unique lifting capacity up to 12,000 tonnes are, not

surprisingly, expensive pieces of equipment with costs ranging from typically

350,000 to 500,000/day and higher for exceptional lifts.

The heavy lift vessel will be the key resource during the offshore removal process.

7.1.2 Marine Support Contracts.

The heavy lift vessel will need the support of other specialist services. In particular

diving support, underwater cutting equipment, tugs, supply boats and cargo barges.

7.1.3 Offshore Preparation.

Before the heavy lift vessel can remove the topsides a considerable amount of

preparation work will have to be carried out prior to lifting. For example the facilities

will have to be cleaned of residual hydrocarbons where necessary and pipework,

ductwork, cables, structural steel etc. will have to be cut to release each section

being lifted. In addition, the lifted sections will require a thorough inspection and are

likely to need new lifting eyes to be attached to the structure which also may require

strengthening. All this work will require an offshore labour team.

7.1.4 Offshore Support.

Although some of the offshore preparation work may be able to be carried out while

the platform has adequate safety and life support facilities it is likely to reach a stage


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where a flotel (accommodation vessel) is required to provide the necessary support

to the labour team. In addition crew changing, equipment and supplies, catering, etc.

will be required to be provided via helicopter and supply boat.

7.1.5 Design and Management.

Clearly, a major decommissioning project will require an onshore team of engineers

to design a safe and efficient removal method and will need a team onshore and

offshore to manage the project.

7.1.6 Materials and Fabrication.

It is often not appreciated that there is likely to be a substantial amount of fabricated

steel required to ensure that the various platform sections can be safely lifted and

supported during transport to shore. This work will be heavy structural steel

fabrication. It is expected that this work will create many more jobs than those

created with onshore d isposal work.

7.1.7 Onshore Disposal.

Although onshore scrapping and waste disposal is perhaps perceived as a major part

of decommissioning it is in fact a relatively small part of the work as far as costs and

jobs are concerned.

When steel structures are removed they will either have to be reused, which is

considered to be an unlikely occurrence in most cases, or brought to shore for

dismantling and disposal. The basic requirements for an onshore decommissioning

site are that it must have a strong quayside with a water depth of around 9m, and

ideally over 20m, along with adequate space to layout the offshore facilities. In

addition, hard standings with a closed drain system will be required and there will be

a need for craneage and cutting plant. Existing technology will be capable of dealing

with onshore disposal.

The amount of hazardous wastes such as asbestos, radioactive material, etc. which

will come ashore with the structures will be very small relative to the total amount of

materials. However, these wastes will clearly need to be treated and disposed of in

accordance with regulations. Existing technology is capable of dealing with these

wastes. The disposal of low-level radioactive waste known as Low Specific Activity

(LSA) scale which forms on some pipework will need careful consideration by both


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contractors and authorities. In the UK there are a limited number of sites which are

licensed to remove the scale material and the UK depository for low level wastes at

Drigg does not have sufficient capacity under its current licence to take all of the

North Sea waste.

7.2 Steel Installation Technology Issues.

7.2.1 Conventional Heavy Lift Vessels.

The offshore steel platforms were generally installed by first transporting a steel

jacket structure on a barge, see photo below,launching the jacket into the sea and

pinning it to the sea bed using steel piles.

The topsides structures were placed in position using a heavy lift vessel such as the

one shown below:

In principle, it should be feasible to reverse the topsides installation process simply

by utilising a heavy lift vessel to remove the sections in the same sequence as they


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were originally installed. For the majority of offshore installations this should be

technically straightforward. There are however two problem areas worth noting.

1. The preparation of the offshore structures to make them safe to lift could be

extensive. Over the years many modifications may have taken place, such as

the installation of additional fire and blast walls following the Piper Alpha

disaster, which make the sections too heavy to lift without removing the

excess weight. Additionally all the interconnecting structural, electrical and

mechanical interconnections between each section will have to be cut taking

into account that the pipework may contain hydrocarbon residues. Efficient

cold cutting techniques will therefore be required.

2. Whilst it is feasible to lift a very large deck of up to 12,000 tonnes from a

cargo barge using two cranes acting in tandem as in the photo above, it willbe difficult to reverse the process in anything other than flat calm sea

conditions since placing a large deck structure onto a moving barge could

result in serious damage to the barge. In these cases the large decks may

have to be cut into smaller pieces or alternatively new stronger barges or

shock absorbing technology will have to be introduced.

The jacket installation process of launching the structures into the sea utilising gravity

clearly cannot be reversed for removal. Current technology requires the jackets to be

cut into lift size pieces for removal by a heavy lift crane vessel. The following issuesarise with the larger jacket structures:

A large number of underwater cuts of structural members will be required.

This could be several hundred for a large structure.

Very thick steels, up to 75mm and potentially greater, will have to be cut.

Efficient underwater cutting technology will be required.

Some jacket sections, the pile clusters in particular, will be extremely heavy

and will require complex lifting arrangements to ensure a safe lift.

Great care will be required to ensure that, as the structure is progressively

removed, the remaining structure remains stable.


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7.2.2 New Technology Lift Vessels.

There are a number of companies actively developing a new generation of heavy lift

vessels. The objective of the new vessels is to lift off the topsides of offshore

installations in a single lift and a number of the vessels also aim to remove jackets in

a single piece for transport to shore. The lifting capacity of these new vessels will be

up to 20,000 tonnes and potentially higher. The vessels will equally be able to be

used for offshore installation as well as removal.

These vessels can be compared to giant floating forklift trucks where the forks fit

under the deck and by deballasting the vessel the deck can be lifted from the

substructure.

Graphic impressions of the Pieter Schelte being designed by Excalibur Engineering

bv (6)are shown below. The picture sequence indicates how the topsides and jacket

of a large installation can be removed in two large lifts and transported to shore.

Installation of a new platform would simply reverse this process.


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A similar sequence is shown below for the Marine Shuttle (7) being designed in

Norway. There are a number of other vessels being developed essentially along

similar principles to the vessels indicated to the Pieter Schelte and the Marine

Shuttle.

The oil companies are currently studying the technical issues associated with these

vessels. However, to date no commitments have been made to use these vessels.


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7.3 Steel Installation Market Development.

The removal of the steel installations will be the most significant activity in the

decommissioning market and has received the greatest amount of study and

consideration to date. Nevertheless, as stated previously, there is virtually no

experience of the market in the North Sea and although a considerable amount of

decommissioning has taken place in the Gulf of Mexico the amount of learning that

can be transferred is limited. This is primarily due to the much greater size and

weight of the North Sea installations, particularly those in Scottish waters. The

following development predictions must therefore be treated as speculative.

The development of the North Sea construction market has been characterised by

cyclic activity where there has been an overheating of the market driving up prices

and equally there have been slack periods when there has been an overprovision of

resources.

Although there have been a number predictions of decommissioning dates and work

flow such as the one shown below showing jobs forecast published by the North Sea

Decommissioning Group (8), part of the Government/Industry Pilot Task Force.

NSDG Jobs Forecast

Decommissioning Jobs - SpreadDecommissioning Jobs Ear ly-Late Spread

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Onshore Decommissioining

Onshore Preparation

Design

Offshore Deconstruction

Well Abandonment

HLV

DS V


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27

The above would seem to predict a similar boom and bust pattern for

decommissioning. However the reader will note that the activity peaks occur at 2005,

10,15, 20 25 and 30. These round number peaks are almost certainly a reflection on

the inaccuracy of the predicted cessation of production date for each field. The fact

that decommission dates need not closely follow cessation of production is ignored.

We are firmly of the opinion that the above pattern of decommissioning will not

happen in practice because of the common goal of driving down cost and the fact

that timing is not a significant issue in decommissioning projects. If a boom period is

developing and tending to drive up prices, then projects will simply be delayed until a

better balance of supply and demand is reached. A good example of this smoothing

in practice is the published plan for the decommissioning of 14 platforms in the

Ekofisk field in the Norwegian sector. Phillips original plan to spread the

decommissioning work over four campaigns stretching from 2003 to 2015 (2). (This is

currently under review with work not now expected to commence until 2004) We

believe a more realistic pattern of decommissioning activity is indicated in the chart

below.

Potential shape of UK platform Decommissioning

Market

0

2

4

6

8

10

12

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040N

umberofplatformsdec

ommissione

perannum

As far as the near term market is concerned the prospects are as follows:

Maureen (1) A contract has already been awarded to Aker to remove this installation

in the summer of 2001 and to dismantle the installation in Norway. Like Spar,

Maureen is a unique type of structure where the deep water of Norway has highly

significant advantages compared to UK sites for decommissioning. The fact that


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Maureen will go to Norway for decommissioning should not be seen as an indicator

for future decommissioning of steel platforms.

Ekofisk (2).A huge field in the Norwegian sector where 15 installations are now

redundant. Two of the insta llations are in UK waters although they come under

Norwegian regulation. The platforms are in approximately 70 meters of water and are

typically 8,000 tonnes total weight although there are significant differences above

and below this figure. The field is operated by Phillips who have submitted

decommissioning plans to the Norwegian Government for approval. The need to

decommission these platforms is largely driven by subsidence of the reservoir and

the sea bed which has resulted in the topsides of the installations being at risk of

being damaged by storm waves. The decommissioning programme is therefore not

directly driven by production levels or oil price. The current intention is that Phillips

will formally commence the tendering process in July 2001 with an invitation to

contractors to prequalify for the decommissioning of the two installations in the UK

sector with the proviso that new lifting technology must be used and in addition they

will seek contractors for the decommissioning of the concrete tank storage

installation. It is expected that contracts will be let in Spring 2002. The requirement to

use new technology for the two UK installations and the need to build the new lift

vessels means that offshore removal is not likely to commence until 2004 o r 2005.

Frigg (3) This is another major decommissioning project consisting of 5 large

platforms plus a wrecked jacket structure. Three of the platforms are in the UK Sector

and two are in the Norwegian Sector. Three of the platforms are Concrete Gravity

Base Structures. It is anticipated that production in the field will cease in 2003 which

would suggest the earliest decommissioning date is likely to be 2005. The Frigg Field

installations will be the first large steel jacket and concrete installations to be

decommissioned in the UK Sector and must be a key target for UK companies

wishing to enter the decommissioning market.

Hutton TLP (13) This is another unique structure with an early decommissioning

date. The tension leg configuration makes this platform an excellent candidate for

reuse at other locations throughout the world and it is expected that the unit will be

sold in the near future and removed from the field in 2002 or 2003. There will also bea requirement to remove a seabed template and anchorages.

North West Hutton. This platform was expected to be an early decommissioning

project but the current high oil price has given it an extended period of economic life.

Subject to the oil price remaining high it is thought unlikely that decommissioning of

this installation will commence before 2005.


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7.4 Steel Installation - Market Opportunities

7.4.1 Heavy lift vessel.

Of all the business sectors the heavy lift vessel market is the most dominant. The

heavy lift vessel is the key piece of equipment required for removal of an offshoreinstallation and therefore has tended to take on the role of main contractor with other

sectors such as marine support, material and fabrication, onshore scrapping and

design and project management being subcontracts or part of a joint venture. The

heavy lift contractor will therefore have a strong influence over 60 to 70% of the

platform decommissioning costs.

It is important to understand the market requirements of these key players in the

decommissioning market. These are:

1. A deep water port. These extremely large lifting vessels have a minimum

draught of about 20 metres. There are no ports on the UK East coast that

meet this requirement. This limits their home port to either Rotterdam or a

number of locations in Norway. Rotterdam is the favoured location

particularly for Heerema which is a Dutch company. The choice of home port

is important since it tends to be the focus of all activities associated with the

operation of the vessel.

2. Cargo barge berths. Cargo barges to carry the structures either to or from

the installation site are an essential part of the lift vessel equipment spread.

The heavy lift companies own a fleet of these barges with additional barges

being hired from specialist supply companies when required. The company

owned barges tend to be moored in locations close to the operations centre of

the heavy lift vessels themselves which is of course outside the UK.

3. Steelwork fabrication. It is not generally appreciated that for removal (or

installation) of large offshore platforms several thousand tonnes of temporary

steelwork will have to be fabricated. These are special lifting aids and grillage

steelwork that must be installed on the cargo barges to both spread the load

on the barge and to facilitate removal of the structures from the barge. The

fact that the grillage steel needs to be installed on the cargo barge and the

lifting aids need to be available on the lifting vessel means that fabricators in

the vicinity of the vessel and barges home port tend to have an advantage.


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4. Diving and underwater vehicle support. The removal of the underwater

elements of offshore platforms will require the steel legs and bracings to be

cut. The number of cuts could amount to several hundred. Scottish based

companies are already well placed to meet this market.

5. Offshore preparations for lifting. There will be a considerable amount of

labour required to prepare the platform topsides for lifting. Modules will have

to be cleaned, the interconnecting structural, electrical and mechanical

systems will have to be cut, lifting points will have to be fitted, etc., etc.. Some

or all of this work may be undertaken by contractors already on the

installation as part of an Integrated Services Contract or it may have to be

supplied entirely by the Heavy Lift Contractor. Either way the existing

Aberdeen based service companies are extremely well placed to get this

work.

6. Engineering and Project Management. There will be a considerable

amount of engineering work required to ensure that the offshore dismantling

process undertaken by the Heavy Lift Contractor is undertaken in a safe way.

The requirement will primarily be for structural engineers. Currently this work

is undertaken by Heerema in their Leiden office and by Saipem in their

London office. There is no reason to believe that this pattern will change and

therefore there will be limited opportunity for Scottish Companies. Similarly

the contractors project management team will normally be based at the

contractors head office.

It can be seen from the above that as things stand today there is limited opportunity

for major involvement by Scottish companies to contribute to the heavy lift contractor

activities which in turn account for 60 to 70% of the platform removal market. The

supply of offshore labour and underwater vehicles and equipment will be the most

significant contributions from Scotland.

Can this situation by remedied? In our view this will not be easy. Even if a quay with

20 metres water depth were to be built it is difficult to envisage the vessels relocatingfrom their well established bases. Particularly now that the heavy lift market is

becoming increasingly more global.

There will be a greater opportunity for barge mooring and the associated structural

fabrication to be ba sed in Scotland particularly when decommissioning becomes an

established business and if cargo barges become dedicated to decommissioning


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work. The onshore decommissioning yards themselves will be an obvious possibility

to attract this business since the barges will be delivering their cargo to these yards.

There is also potential benefit for both the onshore disposal contractor and heavy lift

contractor if barges with cargo are over-wintered at the dismantling yard and the

dismantling work carried out on the barge. In this way the onshore disposal company

would save the considerable expense of taking the structures off the barge and in

return the heavy lift contractor would save on mooring costs.

Scotland is well placed to supply the necessary underwater services but to maintain

this position it is critical that the Scottish companies keep ahead of technology

development, particularly with respect to underwater cutting technology.

A more speculative but potentially much more rewarding approach for Scottish

business would be to attract one or more of the new technology lifting vessels.

Firstly there is the potential to build or fit out these new vessels in Scotland but more

significantly, as far as sustainable business is concerned, there is the opportunity to

have these vessels based in Scotland not only to serve the North Sea

decommissioning market but also the world wide installation market. By having the

vessels based in Scotland there is the potential to attract the full range of support

activities as well as the direct jobs associated with the heavy lift vessel and its

management.

In most cases these new vessels are being developed by design houses or

development companies without the necessary expertise to operate the new vessels.

They must link up with established construction companies before they can become

a credible force. There is clearly an opportunity for established Aberdeen based

offshore construction companies to link with the providers of the new vessels.

7.4.2 Onshore Disposal.

We believe tha t the myth that decommissioning would be the saviour of the Scottish

fabrication yards has largely been dispelled. However we consider it important to

emphasise that the value and jobs potential of onshore decommissioning is relatively

small. In a recent study as part of the Pilot Task Force (8) it was estimated that

onshore disposal would provide only 8% of the total decommissioning jobs

associated with platform decommissioning. This is the equivalent of 150 jobs per


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32

annum in the UK averaged over a 25-year period. Given that there will be a ramp up

and tail off of jobs then a peak job requirement of perhaps 200 can be envisaged.

Even if these estimates are doubled the prediction is still a very low number of jobs

compared to the numbers involved in fabrication. These estimates have recently

been supported by Aker in Norway who are predicting a requirement for 100 jobs on

average and a requirement for two decommissioning yards to serve the Norwegian

sector. (The Norwegian market is approximately two thirds the size of the UK

market).

We estimate that the UK could support 3 onshore decommissioning yards. The

established Able UK yard on Teesside is well placed for the Southern half of the

North Sea and the proposed facility in Shetland is particularly well placed for the

larger Northern facilities. The access to sheltered deep water gives Shetland a

particular advantage over other UK sites. There is perhaps potential for another yard

to be located in Scotland. The existing fabrication yards such as Nigg, Ardersier or

Methil are obvious candidates but there are a number of factors acting against them

in their current fabrication mode. Namely, overheads, high labour costs compared to

the demolition industry and management with a fabrication mind set. In short the

existing facilities are too sophisticated to be competitive. In the event that one of the

existing fabrication yards ceases trading as a fabricator then it would be feasible to

reinstate the yard for onshore decommissioning. With the UK likely to have an

overcapacity in onshore decommissioning capability for some time, possibly 10

years, we would not recommend investment at this time unless it is part of a

diversified development with alternative income streams.

7.4.3 Other areas

As explained previously the decommissioning market is potentially very large and

there will be opportunities for small and medium sized enterprises to play a

significant role. Examples are given below:

Weight engineering. Before an old structure can be lifted it will be necessary

to accurately check the actual weight to be lifted. This estimate will have to

take into account the many modifications that are likely to have taken place

over the life of the installation. It is quite conceivable that structures will have

to be reduced in weight before they can be lifted. There will therefore be a


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requirement for engineers to accurately check weights and to calculate

centres of gravity.

Structural Engineering. There will be a considerable amount of structural

engineering calculation required to enable these installations to be safely

removed.

NDT Inspection. As well as checking the weight of structures it will be

essential to check that the load bearing members of the structure are still

sound and that corrosion or other defects are not compromising the safety of

the lift.

Environmental assessment. The media attention given to Shells Brent Spar

proposal has created an impression that there are significant environmental

hazards associated with the decommissioning of offshore structures. Brent

Spar was a unique type of installation and cannot be used as a guide for the

decommissioning of typical offshore platforms. Whilst environmental

management will be important and there will be an ongoing requirement for

specialist support in this area it should not be regarded as a major element of

typical decommissioning projects.

Equipment reuse. The difference between a successful onshore disposal

contractor and an unsuccessful one may prove to hinge around success in

maximising the sale of reusable equipment rather than simply scrapping it.

There is a huge difference in value between resale and recycle but it requires

specialists to identify the markets for surplus equipment.


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8.0 Concrete Gravity Based Structures. (GBS)

8.1 General

There are relatively few concrete GBS platforms in the North Sea with 12 in the UK

and 13 in Norway.

Whilst regulations require that the topsides of concrete platform must be removed

and brought to shore or re -used the regulations recognise that it may be extremely

difficult to remove the concrete substructures of these platforms. The regulations

therefore permit exceptions or derogations to be permitted from the general rule of

complete removal.

Although the offshore removal of the topsides from the concrete platforms may bemore challenging compared to the steel platforms we do not see significantly different

technologies or equipment being required. There may be a greater requirement for

temporary lifting aids relative to the steel platforms but given the relative ly small

number of concrete GBS platforms this will not be significant in the overall market

place.

The more significant issue is the feasibility of removing the concrete substructures

from their offshore location and bringing them inshore for breaking up. Although a

Norwegian study carried out in 1998 concluded that it would be feasible to remove

concrete structures their work considered a second generation structure with

systems built-in to assist the refloatation. Even for the second generation platforms

the risks are not inconsiderable and there is a general belief within the industry that

whilst it may be feasible to refloat the concrete structures the risks to both personnel

and environment will generally be unacceptably high. This view has been reinforced

by Phillips Norway concluding that they wish to leave the concrete tank installation in

place in the Ekofisk field.

There are no reliable published estimates of the costs of decommissioning the

concrete GBS structures but if the platforms are removed from the field there is no

doubt that the costs will be extremely high. Even the leave in place option will have

significant costs associated with it. Not only for the removal of the topsides but also

for the cleaning of the oil storage tanks.


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8.2 Concrete Platform Technology Issues

Studies are underway to assess the viability of removing these platforms but to date

little has been published.

The generally recognised problems associated with removal are:

1. Restoration of buoyancy. Many penetrations through the concrete walls and

base slab will have to be plugged to restore buoyancy to the structure. The

feasibility of establishing reliable plugs is questionable.

2. Release of the soil suction. The soil beneath the base of the installation will

have to be pressurised to release the natural suction that will exist between

structure and soil.

3. Grout and soil may adhere to the underside of the structure when the

structure is refloated. The consequences of this heavy mass suddenly

detaching itself from the base will have to be assessed.

4. Many of the pipework systems used for installation will have corroded and

become unserviceable.

5. The structures may have suffered in-service damage and deterioration which

will be difficult to measure.

An alternative to total removal would be to take off the deck from the platform and to

leave the concrete legs sticking out of the water with suitable navigation warnings.Removal of the deck section should be relatively straightforward using conventional

heavy lift vessels. However there are question marks regarding how clean the oil

storage cells need to be before the structure is abandoned and what methods can be

used to clean them given that access is extremely limited. It seems likely that the

tank cleaning process could produce large quantities of contaminated sea water

which will have to be cleaned before returning the treated water to the sea.

Rather that leave the legs protruding above the sea surface it has been suggested

that the legs should be cut off underwater. International guidelines requires the cut to

be made at least 55 metres below the sea surface. This option will require the

development of underwater concrete cutting technology and will require a detailed

engineering assessment to determine the viability of the idea.


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Some platforms will however be easier to remove than others and any that are

brought inshore for demolition will require a suitable deepwater site and nearby

drydock. Loch Kishorn is an obvious candidate for consideration in Scotland.

8.3 Concrete Platform Market Development.

This is a particularly difficult market to predict. The picture should become clearer in

the next few months when TotalFinaElfs plans for the decommissioning of the three

concrete platforms in the Frigg field are published. (Two of the three platforms are in

the UK sector with the other being in the Norwegian sector).

If as expected, the majority of the installations remain in place then the market

development will be limited to cleaning and monitoring activities.

Like the steel platform decommissioning market, we see no reason to believe that

decommissioning of concrete installations will not be spread over a number of years

to minimise peaks and troughs.

8.4 Concrete Platform Market Opportunities.

If some or all are brough t inshore for decommissioning then there will be a need to

reopen a dry dock facility such as Kishorn and there will be a high number of jobs incomparison to the steel structure decommissioning activity. We estimate that it could

take two to three years at an inshore location to demolish a concrete GBS whose

weight may be as great as 350,000 tonnes.

Assuming the majority of the concrete platforms remain in place then opportunities

will exist for companies to provide the technology and the services to clean the

storage cells before the structures are left to decay naturally which may take several

hundred years. Given the difficulty in accessing the storage cells it is not clear what

the best methods of cleaning will be but there is little doubt that this activity will be

time consuming and expensive. Disposal of the waste hydrocarbons and cleaning

fluids is also a potentially expensive operation.

There will be a requirement for ongoing monitoring of the platforms if they are left in

place.


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9.0 Subsea installations.

9.1 General

The market for the removal of subsea installation is relatively small in comparison to

the overall market. The work will be undertaken almost exclusively by diving and

ROV specialists.

9.2 Technical Issues.

We do not believe that there are any significant technology issues associated with

the removal of subsea installations.

9.3 Market Development.

This is a relatively small market sector and we believe that the technology and

capability is in place to undertake this work. Like the other markets, there will be

timing flexibility and it therefore seems likely that these smaller projects will be used

to smooth the utilisation of personnel and equipment between larger

decommissioning projects.

9.4 Market Opportunities

We do not envisage any significant new market opportunities other than an eventual

expansion of existing capabilities as the decommissioning of subsea activities

increases.


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10.0 Drill cuttings.

10.1 General

Beneath many of the installations in the Central and Northern North Seas there are

accumulations of rock cuttings deposited on the sea bed as a result of the drilling of

wells. These cuttings are contaminated by oils used to make up the drilling fluids and

are potentially toxic if disturbed. There is estimated to be over 1 million cubic metres

of cuttings on the sea bed in the UK sector.

The industry has initiated a wide ranging study along with other interested parties to

determine the Best Environmental Practice and Best Available Techniques with

respect to these cuttings piles. All reports completed to date are published on the

UKOOA website (9).

At this point in time it is not clear if the best solution will be to leave the cuttings in

place or to remove them.

With so much uncertainty, it is not feasible to give a reliable estimate of the value of

this market but if the majority of the piles have to be removed from the UKCS then

the cost is likely to be over a 1 billion and could be significantly greater.

10.2 Technical Issues

The basic issues are:

From an environmental standpoint is it better to leave the cuttings undisturbed

on the sea bed to naturally degrade over time or is the best overall solution to

remove them?

If the answer is to remove some or all of the cuttings what is the best

technology to develop to undertake this task with minimum environmental

impact?

Are there alternative solutions to removal such as covering the cuttings or

perhaps using biotechnology methods to accelerate natural degradation?

If the cuttings are removed there will be considerable quantities of

contaminated water brought to the surface. Tests to date have had a

water/cuttings ratio as high as 10/1. How and where can this water be

treated?


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If the cuttings are removed how are they to be disposed of? The ideal would

be to identify an economic reuse for the material since the cuttings do not

make good land fill material.

All of the above issues are being studied in the UKOOA research and development

project.

10.3 Market Development

Until the current research and development programme is complete it is not clear

how this market will develop.

It seems likely that there will be a need to remove some drill cuttings the minimum

will be that required to get access to remove the platform structure and the maximum

could be the removal of all drill cuttings.

Waste regulations will tend to dictate that all UK sector cuttings return to the UK and

all Norwegian cuttings return to Norway for disposal.

The removal of cuttings will require the development of specialist equipment and

processes. It seems likely that an integrated solution will be required combining the

removal method, the water and cuttings handling process and the onshore disposal

processes. If we assume that the removal requirement will be greater than the

minimum then there will be a requirement for at least two companies offering

competitive solutions.

10.4 Market Opportunities

This is a potentially large market in which there are no current players. There will be

significant opportunities for innovative solutions and technology development. We

believe the important areas to consider are:

In-situ measuring and monitoring equipment.

Development of leave-in-place solutions.

Development of underwater suction pumps to remove the material from deep

water.

On-ship water treatment equipment.


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Onshore water receiving and treatment plants.

Onshore cuttings cleaning.

Re-use of cuttings material.

Companies interested in this market should keep abreast of the UKOOA initiative andshould consider having solutions developed for the Ekofisk and Frigg

decommissioning projects.


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11.0 Pipelines

11.1 General

According to DTI figures there are 10,430 km of offshore pipelines in the UK. Like

drill cuttings the decommissioning requirements for pipelines are unclear. There are

no international rules or guidelines available. The guidelines issued by the DTI

indicate that decisions will be taken in the light of individual circumstances and with

little pipeline decommissioning having been undertaken to date there are no

precedents on which to base any predictions of the likely size and shape of the

pipeline decommissioning market.

The Norwegian Ministry of Oil and Energy has taken a lead in researching the

possible options and has recently published the results of their studies (10).

It would seem that the final outcome will include a number of solutions including

leaving in place, trenching and burying or totally removing. It is impossible to predict

at this stage the mix of solutions that will be applied and combined with the fact that

there are no reliable cost estimates for each of these solutions it is not possible to

give a reliable cost estimate for this market. Using the range of costs quoted in the

Norwegian study and adjusting for the greater length of UK pipelines then a low

estimate based on trenching only of 325 million is obtained with a high estimate of

3.8 billion for complete removal. Allowing for a range of different solutions then a

cost range of 1 billion to 3 billion could be considered reasonable given the current

uncertainties.

These costs will be totally dominated by the cost of specialist marine construction

equipment.


Pipelines associated with offshore oil and gas production can either be buried, lie inopen trenches or simply lie on the sea bed.

The key decommissioning issue is the cost and environmental effects of removing

the pipelines versus the environmental effect of leaving them to decay in situ

particularly the effect it may have on fishing activities. The larger diameter export

pipelines have a heavy coating of concrete surrounding the pipe that makes them


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42

more difficult to remove and recycle compared to the smaller infield pipelines which

have less heavy coatings and can often be removed from the sea bed by reeling up

onto a ship.

Leaving buried pipelines in place in areas where the sea bed is stable would

arguably not pose significant problems for fishermen. However, some of the

Southern North Sea areas are prone to the movement of sand waves which can

alternately bury and uncover pipelines. There will be arguments that these pipelines

should be removed.

For pipelines lying on the sea bed, research suggests that trenching the line will be a

significantly lower cost option compared to complete removal.

For unburied lines it would be feasible to dump rocks over the lines to provide cover

but there are strong objections to this solution from fishermen.

The final solution may well be a mix of removal, trenching and covering but at this

point in time no firm predictions can be made.

If lines are to be left in place then clearly they will need to be flushed and cleaned.


There is little doubt that there will be an ongoing market for the removal of small

diameter lines and cables which are not buried. This market can be served by the

existing capability in underwater services.

There is also likely to be a requirement for trenching of pipelines since this appears

to be one of the favoured decommissioning options. There is also likely to be a

requirement for the total removal of pipelines in some areas where trenching or

leaving on the sea bed are not acceptable in the long term. In either event, there will

be a need for specialist marine equipment.

11.4 Business Opportunities

The near term market is likely to be limited to the removal of relatively small lines and

cables which can be accommodated by the existing contracting market.


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Longer term opportunities need to await further research, dialogue between

interested parties and regulator guidance. At the present time there are no

indications of any early activity with respect to research or regulatory developments.

However the market is potentially large.


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12.0 Well Plug and Abandon

12.1 General.

Interest in decommissioning has, to date generally been concerned with onshore

disposal of structures which is in fact one of the smallest sectors in the market and

little attention has been paid to well abandonment which is likely to account for

almost a third of the cost of decommissioning a production platform.

Well abandonment cost estimates are highly variable ranging from the cost of

straightforward platform based wells, the cost of difficulties arising from corrosion of

the well tubulars through to the costs associated with complex high temperature high

pressure wells and to subsea wells. There are reportedly 2,400 wells to be plugged

and abandoned in the UK sector and we estimate that the total cost of this activitycould be in the order of 1 billion to 1.5 billion.


This is a highly specialised activity which will typically be carried out by specialist

contractors for both platform and subsea wells. It is likely that platform wells will be

abandoned in a phased manner during the final years of production. In this way the

associated overhead costs can be shared with other installation activities.

With the cost of well abandonment being a major element of field decommissioning

there is obviously an interest from oil companies in new technology to help reduce

these costs. Techniques using coiled tubing are now being utilised and no doubt

further research and development work will be needed to tackle the challenge of

reducing costs whilst at the same time increasing reliability.

A conference sponsored by Robert Gordon University in Aberdeen on 28th

and 29th

March 2001 is believed to be the first of its kind to focus on North Sea well plug andabandonment issues and is a sign that greater attention is now being paid to this

important subject.


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In the Gulf of Mexico well plug and abandonment is generally undertaken by

specialist contractors using techniques that do not require the use of a drilling rig. It

seem likely that similar developments will occur in the North Sea although it remains

to be seen whether rigless techniques will be suitable in all cases in the North Sea.

In the UK there are already companies developing specialist equipment and

expertise for the North Sea market. The size of the future market suggests that there

will be further openings for specialist operators and equipment developers.


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13.0 Reuse of Offshore Installations

13.1 General

Much of international and national environmental legislation on waste is based on the

waste hierarchy that says, in order of importance:

1. Minimise the creation of waste.

2. Reuse assets rather than create new.

3. Recycle materials rather than use new resources.

4. Dispose of the material in landfill or by incineration.

Whilst close to 100% of the material in offshore platforms can be recycled it is clearly

more desirable if the assets can be reused.

There are two distinct aspects to the reuse of redundant offshore platforms. Namely

reuse in whole or in part for hydrocarbon production or for reuse for non-oil and gas

related purposes.

1.2 Reuse for oil and gas production.

In the Gulf of Mexico reuse of redundant platforms is a well established process. In

the North Sea area, several oil companies have put considerable time and effort into

trying to find a buyer for their installations but to date there has been no success. We

believe the reasons for the lack of success are a combination of the following:

Limited number of North Sea assets decommissioned to date.

North Sea is a mature area that is almost exclusively using subsea and

floating production technology to develop remaining reserves. Therefore there

is not a market within the North Sea for old platforms.

The ageing North Sea structures and their large size are not well suited to

new developing areas in the world

There is an attitude amongst designers that new is best.

Whilst there will no doubt be reuse of the more versatile of the North Sea structures

such as the Hutton TLP and the FPSO installations it is difficult to envisage a reuse

market developing on the scale of the Gulf of Mexico.


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Nevertheless, there is a very significant financial prize on offer if a platform can be

sold rather than scrapped and we therefore anticipate that efforts will continue to be

made to sell installations.

We are not aware of any studies having been undertaken to identify where potential

reuse markets might lie. If they do exist, then we would expect them to be located in

developing areas such as China, Far East, Eastern Europe, Asia and West Africa. A

study of these markets could be considered to determine if there is scope for reuse of

North Sea assets.

An essential ingredient of being able to reuse installations is to be able to match

sellers with potential buyers. A Dutch company, The Web Platform Brokers (11), has

been set up to undertake this function with the aid of the world wide web.

The sale of a complete platform including jacket and topsides to a new owner such

that the facility is a close fit to the new requirements is unlikely. In particular the

jacket structures will be difficult to reuse without the new water depth being very

close to the original North Sea location. A more realistic reuse is to take the topsides

of a North Sea installation and place it on a new support structure. It is even more

realistic to envisage particular sections of a topsides structure such as the living

quarters, drilling rig, power generation modules etc. being used in new locations.

Ultimately there will be an overlap with the onshore disposal industry which will also

be aiming to sell as much reusable equipment as possible.

If markets can be identified and buyers matched with sellers then there could be a

limited but profitable business in removing, modifying and reinstalling North Sea

platforms.

13.3 Reuse for non-oil and gas purposes.

13.3.1 Reuse offshore

It is important to regard a redundant platform as an asset rather than an industrial

relic destined for the scrap heap. The challenge, therefore, is to identify the best use

of these assets in position in the North Sea. It is a mistake to believe that structurally

these installations are nearing the end of their life. Indeed the concrete structures are

likely to survive for several hundred years without maintenance and the challenge of


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finding a new use for old concrete installations is particularly relevant since many of

them are unlikely to be moved.

There have been many reuse ideas put forward in the past such as prisons, hotels,

casinos etc. most of which have no likelihood of being financially viable.

There are however two generic areas which we believe merit further study to

determine if there is any prospect of viability.

Power Generation.

There is an abundance of wind and wave power at the offshore platform locations.

Whilst there may be limited space available to mount wind turbines we feel there may

be opportunities to harness considerable quantities of wave power. One of the

serious proposals considered by Shell for the reuse of Brent Spar was the use of

Spar as a hub for an array of wave power generation buoys using a novel technology

being developed by Ocean Power Technologies Inc in the United States. The

proposal was to generate 15 MW of power using Spar. A large offshore platform

would clearly be capable of generating a much greater output.

If the legs of the concrete platforms are opened to the sea then it may be viable to

generate power from the resultant oscillating air column in the legs using the same

principles as being put into practice by Wavegen (12).

Lastly, an idea brought to our attention by a Norwegian environmental pressure

group, Bellona, is to use offshore platforms to generate large power outputs from gas

turbines but rather than discharge the exhaust gases to the atmosphere the gases

would be injected into underground reservoirs. In this way large amounts of fossil fuel

power could be generated without atmospheric emissions.

Question marks have been raised regarding the economics of laying power cables

from offshore to land but it is interesting to note that BP are planning to lay cables

from land to some of their offshore installations so that power can be supplied from

onshore stations. These same cables could presumably be used in the opposite

direction.


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An alternative suggestion to exporting electricity from an offshore installation is to use

the offshore power for the electrolysis of seawater to produce hydrogen the fuel for

cars of the future.

The viability of the above and similar ideas is clearly highly questionable but we

believe that there is sufficient merit to justify a serious investigation to determine if

the ideas should be discarded or developed.

Aquaculture.

We have been advised by fish farming specialists that there is a desire in the fish

farming industry to move away from inshore areas to more exposed offshore

locations. This would open up new disease free areas and opportunities to raise

different species.

Suggestions put forward are to have fish cages that can be lowered below the wave

zone for much or the year but raised during the summer period for harvesting.

Other ideas have suggested using platforms as nursery areas for development of

young fish which would eventually be released to the wild.

We are not competent to judge the merits of these ideas but given the current

pressure on fish stocks there is an argument for looking more closely at these ideas.

It is conceivable that both power generation and aquaculture could occur at the same

location.


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Internet References.

1. http://www.phillips66.com/maureen/default.htm

2. http://phillips.netpower.no/3. http://www.totalfinaelf.no

4. http://www.shell.com/uk-en/directory/0,4010,25268,00.html5. http://www.ospar.org6. http://www.excalibur-engineering.com

7. http://www.msoinc.com8. http://www.pilottaskforce.co.uk

9. http://www.ukooa.co.uk10. http://odin.dep.no/oed/norsk/html/rapporter/14/#_Toc47586188711. http://www.web-platform-brokers.com

12. http://www.wa

Documents

Energy - Decommissioning 2002-4