Oil and gas decommissioning work could bring billions to the North East

Oil giant Shell is investing millions of pounds in a former North East shipyard after awarding it the contract to dismantle one of the North Sea’s first oilfields. Peter McCusker reports on the growing decommissioning industry

Decommissioning is a huge undertaking – here an artist's impression shows the size of the enormous concrete supports compared with the Eiffel Tower
Decommissioning is a huge undertaking – here an artist's impression shows the size of the enormous concrete supports compared with the Eiffel Tower

Shell's first attempts to dispose of one of its redundant offshore assets, the Brent Spar, more than 20 years ago, provoked worldwide protests and prompted tougher regulations.

Brought into force in 1998, the OSPAR Convention stipulates the onshore recovery of almost all man-made structures from the North East Atlantic, including hundreds of platforms, thousands of miles of pipes and the plugging of thousands of wells.

One of those at the forefront of this decommissioning industry is North East company Able UK. It recently announced it had secured a multi-million-pound contract with Shell to dismantle its Brent platform – the biggest contract of its kind to date.

Able has completed almost 20 decommissioning contracts for smaller gas platforms in the southern North Sea but this is the largest one to date and will lead to the building of a new quay at the former Graythorp shipyard in Hartlepool, with oil major Shell paying for some of this.

Billingham-based Able won the Shell Brent contract in competition against five other yards from Norway and the UK and many in the offshore industry are now turning their attention to decommissioning.

David Hardy, of Newcastle oil and gas consultancy Hardy AVAAR, has helped pull together a North East consortium looking to bid for decommissioning work.

It includes some major blue-chip, tier-one engineering contractors and ports, with the aim of offering a one-stop-shop for operators such as Shell.

He said: “A number of platforms have had their lives extended, meaning the decommissioning contracts have been pushed to the right. But that cannot continue and there are signs that the industry is now becoming a real industry. We are confident that we can help secure much of this work for the region.”

There are some 600 offshore oil and gas platforms in the North Sea, and analysis by industry body Oil and Gas UK put the value of this work at £30bn over the next 25 years, with the potential to create and sustain over 35,000 so-called “brown jobs”.

The Hardy AVAAR consortium aims to capture 20% of this work, which could create more than 7,000 jobs in the region.

Oil & Gas UK’s Decommissioning Insight 2013 indicates that a handful of large decommissioning projects are well under way and will be delivered in the next five to seven years including Brae, Brent, Murchison and Miller.

The same survey forecasts that a total of £10.4bn is to be spent on decommissioning assets on the UK Continental Shelf (UKCS) from 2013-22.

Austin Hand, general manager, decommissioning and restoration at Shell E&P UK, is in charge of the dismantling contract for the Brent oilfield – a contract valued at least £1bn.

At a recent NOF Energy-organised meeting in Sedgefield on decommissioning of the Brent oilfield, he said: “Many of the decommissioning projects have been moved to the right over the years as everyone chases the extra barrels but the industry is now reaching a tipping point and decommissioning is becoming a reality.” Paul Charlton, chairman of supply chain representatives NOF Energy, CEO of PDL Solutions (Europe) Ltd and non-executive board member of Decom North Sea, said: “Although the physical decommissioning of the majority of assets on the UKCS is some way off in the future, the opportunities for NOF Energy members are very much in the here and now. This is reflected in the £1bn that is being spent on UKCS decommissioning each year and will continue at that level for the next three decades. 

 “While aiming to maximise the economic recovery of UKCS resources as recommended by the Wood Report, operators are concurrently planning decommissioning programmes in line with Oil & Gas UK’s 11-stage decommissioning process, a process which is supported by Decom North Sea.

“Therefore, it’s important for NOF Energy members to engage with operators and prime contractors now to make them aware of the products and services that can support the decommissioning process and enable the NOF Energy members to become part of the operator and prime contractors supply chain”.

Tees Valley is positioning itself as a key location for the sector. In addition to Able Seaton Port it has South Bank Wharf, which is an 80-hectare freehold site on the River Tees, with deep-water access.

Steven Pugh, low-carbon office at Tees Valley Unlimited, said: “Having a site of this calibre open to the market is a genuine rarity, and could place Tees Valley in the perfect long-term position for accessing the £30 to £35bn being spent on decommissioning between 2010 and 2040.”

Brian Nixon, chief executive of Decom North Sea, which was established to co-ordinate decommissioning activities, said: “There is little doubt that decommissioning is gaining in prominence as a growing number of operators acknowledge the end of the economic lives of their respective assets. 

“No one in the industry, and certainly not Decom North Sea, wants to see decommissioning getting under way any earlier than absolutely possible.  

“However, it is equally important that we work now to stimulate collaboration and innovation, to share knowledge and experience, and generally to drive efficiency across the sector before the full effects of the programme are felt across the industry. 

“This is exactly what Decom North Sea was established to do, and we are pleased to be working with a strong cluster of contactors, consultants, supply and service specialists in the North East.

“Investment levels in the North Sea oil and gas industry are currently at record levels and while there is an air of inevitability that decommissioning will one day take centre stage, there is a desire to make the most of what is left.”

A spokesman for industry body Oil & Gas UK outlined the current position as follows: “Factors affecting the timing of decommissioning include the extensions to tax allowances in 2012 and the recent introduction of the Decommissioning Tax Relief Deed, a contract between government and industry guaranteeing certainty of future tax relief on decommissioning costs, helping to sustain the record levels of investment in 2013.

“Rejuvenation of existing assets will help to significantly extend the field life of the UKCS and may delay decommissioning in favour of redevelopment.

“Most recently, the support of both government and industry for Sir Ian Wood’s Maximising Economic Recovery Report means that energies truly remain focused on maintaining the basin’s competitiveness, attracting investment and sustaining activity on the UKCS for the next 20 yearsor more. “

Despite the rising investment levels, North Sea oil and gas is becoming increasingly expensive to recover and if there is a fall in the price of oil then decommissioning will speed up.

After 40 years of oil and gas recovery and a total expenditure of £400bn, the offshore industry is now turning its attention to this massive clean-up operation.

And, much as after a cracking party,it’s one viewed with reluctance by the industry – but for those happy to accept the challenge, the clean-up contract is worth up to £35bn.

The logistics of decommissioning

The Brent oilfield was discovered in 1971, started producing in 1976 and in that time has produced 4 billion barrels of oil from four major platforms.

The decommissioning project will see the four topsides, with a combined weight of 100,000 tonnes, taken away on a newly-built £2bn, 1,250ft-long, 407ft-wide vessel, the Pieter Schelte Heerema, which has a total lifting capability of 48,000 tonnes.

The largest topside will be from the Charlie platform which is 32,000 tonnes. Three concrete pillars with a total weight of 350,000 tonnes will be left in the North Sea. They have been sunk 15m into the seabed and may collapse if removed.

On arrival at Able Seaton Port, 100 miles south west of the oilfield, the topsides will be slid off on to a new quay.

As well as the metal structures the project involves the plugging of 116 wells. There is also an additional cost of £20m to remove scaffolding poles which had been left on the ocean floor from the construction job 40 years ago.

The timing of the arrival of the first topside is subject to further offshore preparation work and regulatory approvals.

Able UK boss Andrew Jacques said: “We are delighted to have been selected to undertake this significant platform decommissioning project. This six-year contract will see the deployment of the very latest techniques and technologies in the recycling of these materials.

“We are looking forward to working with our partners on this project, and we are justifiably proud to have been selected for this exciting project. Able Seaton Port is already a superb facility and it will see further investment from Able UK with the construction of what will be one of Europe’s heaviest-load-bearing quays, along with associated infrastructure at the northern end of the dry dock to receive the structures. This will enable the topsides and jackets to be shipped to the new quay for dismantling.”

About 100 jobs will be created during the 18-month construction period of the new quay, with the six-year recycling contract generating a further 100 new jobs itself.

It is anticipated that over 97% of the structures will be reused or recycled.

Austin Hand of Shell has worked in the oil industry for decades and has always been involved in construction, not dismantling projects.

He said: “I build them, not destroy them. I’ve been working on the Brent decommissioning project for five years.

“It is an amazingly complex and challenging project.”

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