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Gunther Newcombe
Operations DirectorNovember 2019
Transforming our approach
to decommissioning
© OGA 2019This presentation is for illustrative purposes only. The OGA makes no representations or warranties, express or implied, regarding the quality, completeness or accuracy of the information contained herein. All and any such
responsibility and liability is expressly disclaimed. The OGA does not provide endorsements or investment recommendations. Oi l and Gas Authority is a limited company registered in England and Wales with registered number
09666504 and VAT registered number 249433979. Our registered office is at 21 Bloomsbury Street, London, United Kingdom, WC1B 3HF
Outline
Context
OGA
Industry
Key Messages
Context
Safety
Need to ensure decommissioning is undertaken in a safe manner 4
Buchan
Alpha
Curlew
Brent
Bravo
Working at heights
Lifting operations
Hot work
Confined space entry
Business at scale
$32bn predicted global decom spend
over next 4 years*
Europe is largest & fastest
growing market by value
for offshore decom
Offshore
market to reach
$8.9bn by 2027
4.8% CAGR annual
growth rate (2019-2027)**
UK & Norway to see
highest offshore
decom spending
UK has around 85%
of projects yet to
be completed
Will be responsible for ca. 1/3rd
of upcoming global decom
activity in next decade
Decommissioning is big business in UKCS and globally 5
Data source Woodmac & Research & Markets
Projected Annual Decom Spend
UKCS annual decommissioning spend £1.5 – 2.5bn p.a.
£51bn
2019 Est.(£49bn like-
for-like)
6
UKCS decommissioning
UKCS cost challenge
Reduce costs from £59.7bn end 2016 baseline to <£39bn by end 2022 7
Subsea
CoE
OP
ER
AT
OR
SS
UP
PL
Y C
HA
IN
£59.7bn
£56bn
£49bn
Cost estimate Vs Time
UKCS cost progress
Significant cost reductions, and range uncertainty has been reduced 8
Reduction to Cost and Range Cost Progress towards Target 2018 Actual v Plan
2017 2019 2022
£49bn(P50) like-for-like:
2017 inventory
£59.7bn(P50)
INDUSTRY TARGET
35% reduction
£39bn(P50) like-for-like:
2017 inventory
£0.4bn
(24%)
OGA Approach
Online portal Real life case studies
Sharing lessons learnedDecommissioning dashboard
Integrated approach
20+Success
stories
Activity benchmarking
Mock data
OGA stewardship
OGA works closely with operators through review processes 10
Supply Chain Action Plans
Requirement for all Decommissioning
Programme approvals from 1st April 2018
Validates Operator’s Supply Chain activities
and promotes non-adversarial relationships
Over 30 SCAP’s submitted with early
indications of a change in behaviours with
operators embracing innovative contracting
strategies
29
+
Ongoing project monitoring to verify
project delivering as per SCAP commitment
SCAP helping drive a new culture in contracting strategies
SCAPs are a tool to:
• Monitor market conditions
• Promote lessons learned
• Improve project performance
• Understanding of cost schedule overruns
• Collaboration and innovative contracting
Aligned scope delivery with collective
commercial risk and reward models
between operator and suppliers
11
Reuse and repurposing important part of energy integration
Platform
FPSOTerminal
PipelinesO&G install.
OFTOsOil
GasCond. I/Connectors
WindfarmsPower
Energy integration
UKCS infrastructure
12
The project aims to:
• Unlock UKCS energy integration opportunities
• Leverage oil and gas infrastructure for CCS, wind
and hydrogen
• Enable partnering of oil and gas operators and
supply chain with renewables.
The project comprises two phases:
1. Technical options (completed)
2. Economic and regulatory
assessment (ongoing)
This report describes the findings from Phase 1.
Funded by £1m grant from the Better Regulation
Executive’s Regulators’ Pioneer Fund
Led by the OGA, in collaboration with:
OGA working collaboratively with government to identify
infrastructure with potential for re-use and to develop re-use policy
OGA considers re-use opportunities as part of the Cessation of
Production process
OGA actively involved in CCS licensing in OMF, SNS & EIS
Huge re-use and storage potential for CO2
Positive steps in BEIS policy development
78GtCO2
Storage
Infrastructure
Re-use for CCS
13
Project in concept stage seeking support and funding from BEIS
Flotta Oil Terminal Orkney
14
Repurposing
Industry Approach
£59.7bn 2016 baseline
35%
~£1-2bn
(20-40%)
£15bn £6bn £4bn
~£2-5bn
(15-30%)~£9-18bn
(35-65%)
~£2-3bn
(30-50%)
£27bn
18% 14%14% 21%
P&A
1. Barrier technology
2. Maximise well P&A rig-less/thru tubing
3. Campaigns
Subsea
1. Scope aggregation
2. Technology development for bundle removal
Removals
1. Alternative technologies from heavy lift
2. Contracting models
3. Innovative transportation technologies
Post CoP Running Costs
1. Early execution of well P&A before CoP
2. Simulation technology to enhance planning and
facilitate scope aggregation
3. Improved clean and flush technology
Forward priorities/commitments
Decommissioning cost reduction target
46% 26% 10% 7%
£39bn end-2022 target
Achieved to
Date
Key Costs
Reduction
Potential
Target
Reduction
Technology, scope aggregation & campaigning are key focus areas 16
Well P&A
Removals
Subsea
Post COP
PathFinder
managed by OGA,
being improved &
needs to be utilised
Sharing data
Requirement for industry to share information more openly with supply chain 17
Decom
Stewardship
Expectation
refreshed, published
in June 2019
Decom
Learning Website
publishing industry
learnings
Contracting
for Decom
adopting a different
approach
Campaigns
Need for industry to increase amount of campaigning 18
• Campaigns under review
• Suspended E&A well portfolio(>200 wells)
• East of Shetland Area Plan(>10 large platforms, ~500 wells)
• All WBS categories and geographic areas to
be followed-up
• Critical for Supply Chain & Operators to align
to deliver campaign benefits
UKCS Suspended E&A Well
campaign opportunities
Commercial models
Industry needs to seek new approaches to developing commercial models 19
Ease of Implementation
Va
lue
Area
Operator JV
Operator
Collaborations
Operator Internal
Optimisation
Supply Chain
AggregationArea Operator
& Supply
Chain JV
Commercial Models, and enablers
Ris
k &
Re
wa
rd
Equity
Level of
integrationTransactional
SupplierIntegrated Project
Partner
Contract
Margin
Key enablers
✓ Establish requirements for decommissioning at scale• Overcome the barriers to scope aggregation
• Redesign contracts/ commercial terms and business models
• Focus on the opportunities – not the liabilities
✓ Integrate transformational technologies into a risk
based approach• Be dynamic and innovative– challenge the status quo
• Contracting strategy to facilitate continuous improvement & technology
development.
✓ Develop a people strategy• Build truly diverse team
• Capture knowledge of the Ops team
• Focus on culture & transition management
Key feedback from Offshore Europe 2019 around decommissioning 20
Miller Heavy Lift Saipem vessel
STATS Group subsea flowline
de-oil & abandonment
CNR Ninian North decom team
Key messages
Significant cost
improvements have
been made in reducing
decommissioning costs
across UKCS
We need to be more transformational in our thinking 21
UKCS decommissioning
supply chain is ideally
positioned to become a
world leader
Requirement to be more
open and strategic in our
approach to
decommissioning & allow
supply chain to lead
Energy integration is a
key factor when
considering
decommissioning
OGA Decommissioning Team
Head of Decommissioning
Nils Cohrs Pauline Innes
Ian FozdarDecommissioning
Manager
Peter CacelaNNS/WOS
Lisa ZardoniSNS/EIS
Rebecca AllanCNS
Louise WoodCost
John IbbotsonSeconded SEPA
Come talk to the OGA Decommissioning Team 22