Robert Gordon University, Aberdeen

The Scott Sutherland School of Architecture and Built Environment

BSc (HONS) in Quantity Surveying

“An investigation into the current and future challenges of decommissioning in the North

Sea.”

Sam George – 1103549

January 2016

“An investigation into the current and future challenges of decommissioning in the North

Sea.”

Sam George – 1103549

January 2016

Word Count: 10,893

This report is submitted in partial fulfilment of the requirements for the degree of BSc (HONS) in

Quantity Surveying at Robert Gordon University, Aberdeen.

The content of this dissertation is the result of my own investigation, except where stated

otherwise. It has not been accepted for any degree, nor been concurrently submitted for any other

degree within or outside Robert Gordon University. I take full responsibility of the authenticity,

sources and originality of the content used in this dissertation.

Name: ………………………………….. Matric Number: …………….

Signed: ................................................ Date: .......................

v

ABSTRACT

Decommissioning is a sector of the oil and gas industry that has not been prominent in the past but

is estimated to pick up greatly over the coming decade as a large number of North Sea installations

reach the end of their economic production lives. It has been estimated that the total cost of

decommissioning in the North Sea could reach a huge £70 billion (Decom North Sea, 2015b).

There have undoubtedly been challenges in the process to date and this work aims to investigate

what these challenges have been and if new ones look set to occur as the decommissioning sector

starts to grow.

Interviews with three industry professionals were undertaken to get a grip on the various

viewpoints from those actively involved in decommissioning. This information was then analysed

and cross referenced with a range of literature.

The findings show that the most prominent challenges currently are cost and a lack of information

sharing within the industry. The cost issue relates to difficulties obtaining accurate cost estimates

with companies therefore struggling to fund decommissioning projects. The lack of information is

a frustration that is preventing the industry from obtaining benchmark figures and the transfer of

knowledge, stemming from the industry’s natural tendency to be confidential.

It is clear that the decommissioning sector needs to find solutions to overcome these challenges, or

at least minimise their affects. Findings suggest that a great increase in knowledge sharing within

the industry should help to eliminate these challenges. Decommissioning is going to play a large

part in the future of the oil and gas industry and it must be prepared to cope with this burden.

vi

ACKNOWLEDGMENTS

I would like to thank my supervisor, Dominic Ahiaga-Dagbui for all of his constructive feedback

and advice.

I would also like to thank all the industry professionals who so willingly took time out of their busy

schedules to assist me with my research.

vii

Table of Contents

CHAPTER 1 - INTRODUCTION AND BACKGROUND .......................................................... 2

1.1 INTRODUCTION............................................................................................................................ 2

1.2 AIMS AND OBJECTIVES ............................................................................................................... 2

1.3 MOTIVATION ............................................................................................................................... 3

1.4 BACKGROUND ............................................................................................................................. 3

1.5 METHODOLOGY .......................................................................................................................... 3

1.5.1 LITERATURE REVIEW 4

1.5.2 INTERVIEWS 4

1.6 PROJECT STRUCTURE ................................................................................................................. 4

CHAPTER 2 - LITERATURE REVIEW ...................................................................................... 5

2.1 INTRODUCTION............................................................................................................................ 5

2.2 WHAT IS DECOMMISSIONING? ................................................................................................... 5

2.3 DECOMMISSIONING PROCESS .................................................................................................... 6

2.3.1 PIECE SMALL 6

2.3.2 PIECE LARGE/REVERSE INSTALLATION 6

2.3.3 SINGLE LIFT 7

2.4 DECOMMISSIONING IN THE NORTH SEA .................................................................................... 8

2.4.1 THE SIZE OF THE TASK 9

2.4.2 REGULATORY FRAMEWORK 10

2.5 POTENTIAL CHALLENGES OF DECOMMISSIONING IN THE NORTH SEA ................................ 10

viii

2.5.1 SUPPLY CHAIN/SKILLS 11

2.5.2 COST 11

2.5.3 TECHNICAL 11

CHAPTER 3 – RESEARCH METHODOLOGY ....................................................................... 15

3.1 INTRODUCTION.......................................................................................................................... 15

3.2 WHY USE INTERVIEWS? ............................................................................................................ 15

3.3 THE INTERVIEWS IN THIS REPORT .......................................................................................... 15

CHAPTER 4 – FINDINGS AND DISCUSSIONS....................................................................... 17

4.1 INTRODUCTION.......................................................................................................................... 17

4.2 QUESTION 1: WHAT WERE THE MAIN CHALLENGES YOU HAVE FACED ON PREVIOUS

DECOMMISSIONING PROJECTS? ..................................................................................................... 17

4.3 QUESTION 2: HOW DID YOU OVERCOME THESE CHALLENGES? ............................................ 18

4.4 QUESTION 3. WHAT ARE SOME OF THE CHALLENGES IN TERMS OF: .................................... 19

4.4.1 A) AVAILABLE TECHNOLOGY? 19

4.4.2 B) AVAILABLE PERSONNEL/STAFF TO EXECUTE THE JOB? 21

4.4.3 C) ACCURATELY COST ESTIMATING A DECOMMISSIONING PROJECT? 23

4.5 QUESTION 4: WHAT DO YOU THINK COULD BE SOME OF THE MAIN CHALLENGES IN THE

FUTURE AS THE VOLUME OF WORKS RELATING TO DECOMMISSIONING INCREASES IN THE

NORTH SEA? .................................................................................................................................... 25

4.6 QUESTION 5: AS DECOMMISSIONING IS RELATIVELY IN ITS INFANCY IN THE NORTH SEA,

HOW DO YOU MAKE SURE YOU’RE TRANSFERRING LESSONS AND EXPERIENCES FROM ONE

PROJECT TO ANOTHER? (HOW DO YOU MAKE SURE YOU’RE BECOMING MORE COST EFFICIENT,

COST-EFFECTIVE AND SAFE?) ........................................................................................................ 26

CHAPTER 5 – CONCLUSION .................................................................................................... 29

5.1 DATA COLLECTION ................................................................................................................... 29

5.2 FUTURE RESEARCH ................................................................................................................... 29

ix

5.3 RECOMMENDATIONS ................................................................................................................ 30

5.4 FINAL THOUGHTS ..................................................................................................................... 30

REFERENCE LIST ....................................................................................................................... 32

APPENDICES ................................................................................................................................ 35

APPENDIX 1...................................................................................................................................... 35

APPENDIX 2...................................................................................................................................... 35

APPENDIX 3...................................................................................................................................... 36

APPENDIX 4...................................................................................................................................... 36

APPENDIX 5...................................................................................................................................... 37

APPENDIX 6...................................................................................................................................... 38

APPENDIX 7...................................................................................................................................... 38

APPENDIX 8...................................................................................................................................... 39

APPENDIX 9...................................................................................................................................... 39

APPENDIX 10.................................................................................................................................... 41

APPENDIX 11.................................................................................................................................... 44

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LIST OF FIGURES

Figure 1: A graph showing the average age of North Sea installations (Source: Decom North Sea,

2014) .................................................................................................................................................. 5

Figure 2: A module being lifted away from an installation (Source: CrossTalks, 2014) ................... 7

Figure 3: Topside removal in a single lift (Source: Arabian Oil and Gas, 2014) ............................... 8

Figure 4: Locations of North Sea Installations (Source: Decom North Sea, 2014) ........................... 9

Figure 5: A well plugged at various points (Source: Statoil, 2012) ................................................. 12

Figure 6: Drill cuttings being transported away by the drilling mud (Source: Rigzone, 2016) ....... 13

Figure 7: Drill cutting piles on the seabed (Source: Decom North Sea Conference, 2014) ............. 13

Figure 8: Design image showing the Pioneering Spirit transporting an entire structure (Source:

Allseas, 2015) ................................................................................................................................... 37

xi

LIST OF ABBREVIATIONS AND NOMENCLATURE

UKCS – United Kingdom Continental Shelf

DECC – Department of Energy and Climate Change

OGA – Oil and Gas Authority

OSPAR – Oslo/Paris Convention for the Protection of the Marine Environment

E&P – Exploration and Production

2

Chapter 1 - INTRODUCTION AND BACKGROUND

1.1 Introduction

A mention of the Oil and Gas Industry eighteen months ago would have conjured images of wealth

and success, particularly here in Aberdeen. However, the falling oil price over the last year or so has

wiped that image away on the most part and replaced it with constant talk of redundancies and

downscaling. Despite this, it can be said that when one door closes another opens.

Decommissioning within the Oil and Gas Industry has been described by Oil and Gas UK (2015) as

“redundant oil and gas installations being taken out of service.” Large scale decommissioning in the

North Sea has always been on the horizon but now, with many fields starting to dry up after years of

exploitation, and profit margins on oil production slashed, this process may come about on a large

scale slightly earlier than planned.

1.2 Aims and Objectives

The aim of this report is to determine what the challenges have been to date in North Sea

decommissioning, and whether these look set to change as the rate of decommissioning increases over

the coming decades.

This will be achieved by:

Using literature to contextualise and establish the scope North Sea decommissioning

Using literature to establish the common methods of decommissioning

Using literature to identify supply chain, cost and technical challenges

Using interviews to obtain primary data on past decommissioning challenges and the resulting

solutions

Using interviews to obtain primary data on the scope of the challenges in relation to available

technology, the supply chain and cost estimation in decommissioning

Using interviews to obtain primary data on predicted future challenges in decommissioning

Using interviews to obtain primary data on how information and knowledge is shared in the

industry

3

1.3 Motivation

The motivation behind this report stems from both my interest in the Oil and Gas Industry, and my

desire to pursue a career within it. On top of this, the transitional period that the industry is currently

going through has brought with it a greater focus on decommissioning.

When the oil was plentiful and the price of a barrel was high the focus was understandably on

extracting the oil but with times changing there is a view that decommissioning is the future of the Oil

and Gas Industry and it is this that grabbed my attention and made me want to base my research

around such a topical subject.

1.4 Background

Since 1966 the North Sea has seen upwards of 45,000km of pipelines, umbilical and cable installed,

and since 1967, 556 steel piled structures (Oil and Gas UK, 2013). 88 of these structures have since

been successfully decommissioned (Decom North Sea et al.2014).

The rate of decommissioning in the North Sea is set to increase greatly in the near future with

estimated expenditure set to average £1.5 billion per year for the next ten years (Strategic

Decommissioning Consultants Limited, et al. 2015). This will without doubt be a challenging period

for the industry but it provides motivation for those disheartened with the current state of affairs, and

should inspire a young generation as well as attracting talent from other industries, from all over the

world.

1.5 Methodology

The methodology used in this reports consists of:

Literature Review

Interviews with industry professionals

4

1.5.1 Literature Review

A literature review will be undertaken to look in greater depth at what has been written around the

challenges that have and are being faced in decommissioning. This will help to establish the problems

before refining my understanding of the issues and providing a base for further research through the

means of interviewing various industry professionals.

1.5.2 Interviews

The industry professionals interviewed are actively involved with decommissioning work which

allowed an understanding to be gained of how decommissioning projects are tackled and if this

process is set to change in the future to cope with the increase in decommissioning work that is

expected. Similarities with any literature will be noted.

1.6 Project Structure

This project will be in the form of a report following a traditional structure:

Chapter 1 – Introduction

Chapter 2 – Literature Review

Chapter 3 – Research Methodology

Chapter 4 – Findings and

Discussions

Chapter 5 – Conclusion

5

Chapter 2 - LITERATURE REVIEW

2.1 Introduction

Decommissioning is essentially an end of life, non-profit procedure for operators and

therefore completing a project as quickly and cheaply as possible, yet still adhering to

environmental requirements can prove to be a challenge in itself. Decommissioning in the oil

and gas industry of course has its challenges, as does every industry. In this chapter, the

context and process of decommissioning in the North Sea will be detailed. This will help to

determine some of the potential challenges and opportunities associated with

decommissioning in the North Sea.

2.2 What is Decommissioning?

Offshore decommissioning can be described as the sealing of insertions in the seabed and the

removal and displacement of infrastructure used in the oil extraction process, with the aim

being that there is as little impact on the environment as possible (Society of Petroleum

Engineers, 2015).

The next few decades will see an increase in decommissioning activity as a number of

facilities reach the end of their production lives having been operating for up to 40 years in

some cases, and need to be removed from the North Sea in an efficient and safe manner

(Decom North Sea, 2015a).

Figure 1 below is a graph showing the average age of North Sea installations. It is clear to see

that United Kingdom assets have the oldest average age which goes a long way to explain

expected increase in decommissioning (Decom North Sea et al., 2014).

Figure 1: A graph showing the average age of North Sea installations (Source: Decom North Sea,

2014)

6

2.3 Decommissioning Process

The options for the removal of a North Sea asset should be analysed prior to extraction to

ensure the most appropriate method is selected (Andrew, 2014).

Three methods used for the decommissioning of offshore infrastructure that will be focused

on in this report are as follows:

Piece Small

Piece Large/Reverse Installation

Single Lift

2.3.1 Piece Small

A decommissioning project using the piece small method involves an asset being

deconstructed offshore. To begin with all non-metals, harmful waste, cables and electrical

items are removed (AF Gruppen, 2015). Then through careful cutting and disassembling, into

pieces small enough to fit in containers which are then lifted onto supply vessels and taken to

shore (Arup, 2014). Once onshore the materials are separated, broken down further and any

waste is disposed of appropriately (Shetland Decommissioning, 2016).

The piece small method of decommissioning an offshore asset appears to be a relatively

simple procedure, albeit labour intensive and time consuming. Considering the evidence from

above, it would seem that the piece small method would be best suited to some of the smaller

structures in the Southern North Sea as on a larger platform in the North it is likely to become

inefficient both in terms of time and cost.

Refer to Appendix 1 for the advantages and disadvantages of piece small decommissioning.

2.3.2 Piece Large/Reverse Installation

Piece large decommissioning, more commonly known as reverse installation is when an oil

rig is dismantled module by module through the use of a heavy lift vessel, in the reverse order

of installation (Climate and Pollution Agency, 2011). Figure 2 below shows the removal of a

module from a North Sea installation (Mathonniere, 2014). As further modules are removed

the structural strength and stability of the remaining structure must be monitored in order for

it to be maintained and therefore safe (Veolia et al., 2015).

7

Figure 2: A module being lifted away from an installation (Source: CrossTalks, 2014)

The modules are then transported to land based yards by vessel or barge where they are

inspected and if suitable sent for re-use, or they are broken down further and the materials

sent for recycling or waste disposal (Decom North Sea et al., 2015). The yards must have

deep water and large quays to allow the heavy lift vessels in without seabed clearance issues

(AF Gruppen, 2015).

While the theory behind the reverse installation method makes great sense, it would appear to

be limited to a certain type of structure and not a universal process that can be used on a

structure regardless of its construction. The modular way of building an offshore structure

was primarily enlisted during the 1970s and 1980s (Nixon, 2013). Undoubtedly there will be

ways of adapting this method to cope with structures that were not installed in a simple

modular fashion, but over time there must be the possibility of this method dying out once all

the older modular installations have been removed.

Refer to Appendix 2 for the advantages and disadvantages of reverse installation

decommissioning.

2.3.3 Single Lift

Decom North Sea et al. (2015) explain that the single lift method of decommissioning is

relatively self-explanatory in that the topside of an installation is removed as a whole, in one

lift, and that the jacket can also be removed through this method. Figure 3 shows the topside

of a North Sea installation being removed by the single lift method (Enzer, 2014).

8

Figure 3: Topside removal in a single lift (Source: Arabian Oil and Gas, 2014)

The structure is then transported by barge or heavy lift vessel to a suitable yard (Decom North

Sea et al., 2014) where it can be cleaned of saltwater build up, broken down further or sent for

re-use, and disposed of or recycled (Nixon, 2013).

It appears that the theory behind the single lift method of decommissioning is extremely

logical from what has been stated above. The process is very simple and has a number of

advantages. However, the success of this method long term seems reliant on the type and

number of suitable vessels available. The current heavy lift vessels would appear better suited

to the smaller, lighter, gas-producing installations in the Southern North Sea where the weight

of the structure is less, but to be able to remove the topsides and jackets of the larger

installations in the North a larger boat with a heavier lift capacity is required.

Refer to Appendix 3 for the advantages and disadvantages of single lift decommissioning and

Appendix 4 for the new Allseas heavy lift vessel, Pioneering Spirit.

2.4 Decommissioning in the North Sea

With a number of North Sea installations coming to the end of their efficient production lives,

it is important to understand the scope of what lies ahead over the coming decades. As a

result, the following will be looked at:

The size of the task

The regulatory framework

9

2.4.1 The Size of the Task

Decom North Sea (2015) state that the North Sea is home to upwards of 600 installations used

in the production of oil and gas, with around three quarters of these being situated in UK

waters. They go on to explain that on top of this there is an estimated 10,000km of pipeline

and around 5000 wells or drill cutting piles on the seabed. To process the produced oil and

gas there are 15 onshore terminals currently in use (Decom North Sea, 2015a). To date, only

about 12% (88) of installations in the North Sea have been decommissioned (Decom North

Sea et al., 2014).

Figure 4 shows the location and age of all the

North Sea installations. The green represents

decommissioned assets (Decom North Sea et al.,

2014).

Figure 4: Locations of North Sea Installations (Source:

Decom North Sea, 2014)

The Oil and Gas UK Decommissioning Insight Report (2015) explains that 2014 saw the

majority of planned decommissioning projects completed with a total spend of £800 million

on the United Kingdom Continental Shelf (UKCS).

For the ten years up until 2024 the expenditure on decommissioning has been forecast at

£16.9 billion, £2.3 billion higher than the 2014 figures showed (Oil and Gas UK, 2015).

This increase could be as a result of the falling oil price leading to a greater number of

installations not making money on the resources they are producing, meaning it is more

financially viable to take them out of use and prepare for them to be decommissioned. These

thoughts are echoed in the predicted decommissioning cost over the next decade. The £16.9

billion total equates to just under £1.7 billion a year on average, over double the

decommissioning cost of 2014. However, it could be argued that this figure will come down

if the oil price starts to increase, and those installations on the borderline between being in the

red and the black start to produce more significant profits.

Refer to Appendix 5 for supporting evidence on the scale of future North Sea

decommissioning.

10

2.4.2 Regulatory Framework

A report by Bureau Veritas (2011) delivers a concise compilation of the regulations in place

for decommissioning on the UKCS with the aim of assisting operators in ensuring they abide

by these regulations throughout a project. It is noted that there are separate regulations for

platform decommissioning, pipeline decommissioning as well as a set of general regulations

that apply to both (Bureau Veritas, 2011).

Legislation states that all offshore installations must be decommissioned once they reach the

end of their production lives, and that all equipment must be removed from the seabed unless

there is an environmentally viable reason for leaving it there (Bureau Veritas, 2011).

So despite companies being forced into decommissioning, a process they are undoubtedly

reluctant to pursue due to the time and cost involved plus the fact it does not generate any

profit, they have no choice but to comply with the framework of regulations. It would be easy

to relax these regulations and let the companies have more control over how they

decommission an asset, but that could risk a repeat of the Brent Spar fiasco as companies will

aim to do minimal decommissioning work with dumping on the seabed a likely outcome.

Refer to Appendix 6 for further information on OSPAR and the regulatory framework in

place for North Sea decommissioning.

2.5 Potential Challenges of Decommissioning in the North Sea

A complicated process like decommissioning understandably comes with its challenges. The

industry is under no false illusion of anything otherwise and is aiming to both overcome and

minimise these challenges as the decommissioning sector progresses and becomes more

prominent over the coming years.

The three areas where there are notable challenges in the industry that will be looked at

further are:

Supply Chain/Skills

Cost

Technical

11

2.5.1 Supply Chain/Skills

A report by The Royal Academy of Engineering (2013) suggests that without a vast increase

in the number of trainees and graduates starting careers in the decommissioning industry and

those already in the industry learning new skills, there will be a great deficiency of skilled

workers in the United Kingdom. The paper suggests that the main reasons behind the shortage

of skilled personnel are due to the lack of resources, lack of retention and the image of

decommissioning (Royal Academy of Engineering, 2013).

Refer to Appendix 7 for an insight into the supply chain/skills challenges and solutions to

overcome them.

2.5.2 Cost

The cost estimation of decommissioning projects is known to be an extremely difficult task

for a variety of reasons, as suggested in a report by the Royal Academy of Engineering

(2013). Firstly, there are a variety of unknown factors and constantly changing aspects when

it comes to decommissioning (Royal Academy of Engineering, 2013). When a structure is

installed it cannot be expected for the materials to be in the same condition when it comes to

be decommissioned, some 40 odd years later. This is especially relevant to subsea equipment,

the extent and condition of which can be vastly unknown without a significant sum of money

being spent on inspection prior to cost estimation. The report suggests that the ability to keep

cost estimation realistic is largely down to the experience of those involved in the estimation

process, and this can be a difficult task when those with this knowledge change jobs, retire or

were not even available in the first place (Royal Academy of Engineering, 2013).

Refer to Appendix 8 for supporting information on the cost challenges of North Sea

decommissioning.

2.5.3 Technical

There are of course a number of technical challenges within the decommissioning process and

prominent issues are found within the following two areas:

Well Plugging and Abandonment (P&A)

Drill Cuttings

12

2.5.3.1 Well Plugging and Abandonment (P&A)

Well plugging and abandonment can be defined as the permanent closure of a well following

the reservoir being fully drained (Schlumberger, 2015). An article by Rigzone (2016) states

that the process is one of the significant contributors to decommissioning costs and this is

related to both the complex procedure as well as the importance of getting the plugging

process right to prevent leaks in the future.

The process of permanent P&A involves the pouring and setting of cement or machined plugs

at points throughout the depth of the well to seal it off and prevent leakage (Reid, 2010).

Figure 5 shows the various points throughout the length of the well at which plugs are

installed (Statoil, 2012).

Figure 5: A well plugged at various points (Source: Statoil, 2012)

Reid (2010) goes on to explain some of the various challenges involved in the P&A process

including damage to the wellhead preventing access to the well, something which could have

been ignored at the time production was ceased. This could also be the case with the

condition of the walls of the well which could have suffered from serious corrosion which

would need to be rectified prior to plugging (Reid, 2010). Maslin (2014) reiterates this by

stating that the varying condition of the wells is one the biggest challenges facing the

industry. The lack of vertical access and information from when the well was created can

also lead to difficulties creating a directional flow for the cement insertion procedure (Reid,

2010).

13

Wilson (2014) explains that on top of the physical challenges of the process there are

challenges for both operators and service companies finding staff with specific experience in

decommissioning and well P&A. This would seem a priority area to address because even

with all the right resources a job is unlikely to be executed correctly without the right team

backing it.

2.5.3.2 Drill Cutting Issues

Moore (2014) explains that drilling muds are used for a variety of reasons during the process

of drilling wells including the lubrication and cooling of the drill bit, the removal of drill

cuttings from the well, the upholding of well walls and they act as the hydrostatic head, which

is the height of a freshwater column that applies pressure at a certain depth (Schlumberger,

2016). The author goes onto explain that most muds are water based but 10-15% diesel or

other chemicals are usually added to aid performance.

Figure 6 shows the drill cuttings being transported away from the drill-

head amongst the drilling muds (Rigzone, 2016).

Figure 6: Drill cuttings being transported away by the drilling mud (Source:

Rigzone, 2016)

A report by OSPAR (2009) suggests the drill cutting issues that relate to decommissioning

stating that piles of drill cuttings containing traces of chemical lubricants from the drilling

mud accumulate on the sea bed around the well. Figure 7 shows these accumulations on the

seabed (Moore, 2014)

Figure 7: Drill cutting piles on the

seabed (Source: Decom North Sea

Conference, 2014)

14

Over time these chemicals can start to seep out into the surrounding marine environment. The

report goes on to express the concerns over the seepage being accelerated following

disturbance from trawlers and decommissioning activity.

The natural assumption is that to prevent contamination to the surrounding environment

disturbance to the piles needs to be avoided altogether but interestingly studies have been

undertaken to assess the spread of contamination during the dredging process in Norway, and

being trawled over by nets in the United Kingdom and the results showed that although

contamination was spread, it was not enough to create serious concern. However the report

does state that the results are purely indicative and the same results cannot be assumed in the

future (OSPAR Commission, 2009). This is of course a positive result, but with the increased

rate of decommissioning that is expected in the North Sea, it certainly seems to be an area that

requires regular monitoring.

15

Chapter 3 – RESEARCH METHODOLOGY

3.1 Introduction

In order to gain an insight into decommissioning from those actively involved in the industry

a series of interviews were conducted. A set of five questions were established and each

interviewee was asked the same questions. By not altering the questions for each interview,

comparisons can easily be made between the answers provided by each participant.

3.2 Why use interviews?

In this instance interviews were chosen as the choice of primary data collection due to the

nature of the information that was hoping to be obtained. A questionnaire sent out to multiple

people may have received a greater response, but the answers were likely to be shorter with

less time spent on them, and therefore less beneficial to the research.

Kvale (2005) explains that a research interview is not merely conversation back and forth and

that the interviewer is in control of the direction the conversation takes. This suits the

interviewer as it enables them to obtain the information they require and keep the

conversation on the right track.

Valenzuela et al (2008) explain some of the advantages of the interview method of research.

These include the fact that an interview is more personal than a questionnaire and the

interviewer can work with the respondent to get the information they require. To add to this,

the interviewee may feel more comfortable expressing past experiences and feelings while

speaking in an interview than writing them down in a questionnaire so the interviewer is

likely to get a more in depth response.

3.3 The Interviews in this Report

Three interviews were undertaken to provide information for this report. The compiled

information was then compared and general themes became clear. The following questions

were asked:

1. What were the main challenges you have faced on previous decommissioning

projects?

2. How did you overcome these challenges?

16

3. What are some of the challenges in terms of:

a) Available technology?

b) Available personnel/staff to execute the job?

c) Accurately cost estimating a decommissioning project?

4. What do you think could be some of the main challenges in the future as the

volume of works relating to decommissioning increases in the North Sea?

5. As decommissioning is relatively in its infancy in the North Sea, how do you

make sure you’re transferring lessons and experiences from one project to

another? (How do you make sure you’re becoming more cost efficient, cost-

effective and safe?)

These questions were selected as they were not overly complicated and difficult for the

interviewee to answer, yet gave me precise information that was directly related to my field of

research.

Only five questions were asked because it was felt that greater amounts of information from

fewer questions would be more beneficial than less information from more questions as the

results would likely be from a questionnaire. Five questions were enough to cover the scope

of my research.

The three individuals partaking were chosen because they are all at different stages in their

careers, with varying backgrounds, which enabled the scope of decommissioning to be

covered from various points of view.

17

Chapter 4 – FINDINGS AND DISCUSSIONS

4.1 Introduction

To gain an insight into the views on the current and future challenges of decommissioning

from within the oil and gas industry, interviews were undertaken with a number of

professionals actively involved with decommissioning. The expectations of these interviews

were that the information received from within the industry would both back up and

contradict the original views of the challenges associated with decommissioning projects.

Three interviews were undertaken. One was with a senior project engineer from a large

exploration, development and production company who gave me an insight into the

challenges he faced on a previous decommissioning project, and also predicted ones that may

present themselves in future projects. The founding member of Decom North Sea was

interviewed and shared his knowledge, experience and frustrations with the industry. It is

worth noting that this individual did not answer questions 1 and 2 as he felt that having not

worked for an operator his answers would not be sufficient. The final interview was with a

former decommissioning manager at the world’s largest exploration and production company,

now working as a cost estimator contractor in the decommissioning sector.

Please refer to Appendices 9, 10 and 11 for each individual interview transcript.

4.2 Question 1: What were the main challenges you have faced on

previous decommissioning projects?

Interviewee A’s view is that the most predominant challenge experienced on

decommissioning projects he has been involved in, is cost. As has been mentioned previously,

decommissioning is a non-profit, end of life process and therefore operators want to complete

it with as little expenditure as possible. A scope of works is negotiated with the various

stakeholders including the operator itself, environmental organisations, governments and

fishermen to name a few. It is about the various parties coming to a compromise here.

Naturally the operator would rather undertake no work and have no expenditure, while

environmental organisations would rather the whole installation was removed completely

which certainly wouldn’t be cost viable. A solution is then formed which has as little effect

on the environment as possible and often results in some of the infrastructure on the seabed

being left as it would cause more harm to the environment to attempt to remove it.

It comes as no huge surprise that in industry, cost is the main challenge for operators when

decommissioning an installation. It seems that outwith the industry there is the perception that

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large operators are quite ruthless and only really care about making money, yet from this

interview it can be deduced that they are willing to make compromises to prevent any harm

being done to the environment. However, this may be short term pain for long term gain as by

not following environmentally friendly practices operators run the risk of tarnishing their

reputation which could have devastating effects, especially when the industry is going

through what could be its worst downturn in 45 years (Douglass, 2015).

Interviewee C felt that the main challenges he had experienced on previous decommissioning

projects were cost and time uncertainty. He explained that the lack of completed projects in

the North Sea has resulted in there not being enough data to provide accurate benchmark

figures. He also admits that even information and costs from completed projects have not

been recorded well enough and aren’t readily available using people’s natural instinct to

keeps things confidential as reasoning. He expressed his frustration on the matter. The time

uncertainty issue was then addressed and it was suggested that it occurs from a combination

of when the production of an asset is set to end, when production from that asset is no longer

economically viable and the inflation costs associated with the variation in oil price. These

factors combined with people delaying projects to prevent further expenditure create the

challenges in the industry and prevent the supply chain from preparing for the demand. If oil

companies keep putting off a project, contractors are unable to commit and wouldn’t risk

investing heavily in new equipment without a clear idea as to if or when it will be required.

There was an undeniable sense of frustration from Interviewee C in regard to the difficulties

with information sharing and how this hinders the whole industry working together. The view

of there being significant cost challenges in the industry is shared with the first interviewee,

although they appear to have different takes on how the challenges are posed. Interviewee A

focuses on there trying to be a compromise between stakeholders on the scope and therefore

cost, while Interviewee C stresses that the lack of information means the supply chain cannot

be prepared and this combined with a fluctuating market means there is little cost or time

certainty in the industry.

4.3 Question 2: How did you overcome these challenges?

The ways in which this operator tries to overcome these challenges are also explained by

Interviewee A. Any challenges experienced on a project are discussed with the stakeholders.

This interaction aims to bring about a solution so the problem does not occur again, in a way

that suits all the parties involved. The mission statement of this operator is ‘doing it right’ and

by engaging with the stakeholders they aim to increase their trust that the job is being done

correctly; trust which is vital moving forward to new projects.

Trust was brought up previously and is maybe not something that would naturally spring to

mind when discussing decommissioning. It is extremely important that the work carried out is

19

done well to build up the trust of the stakeholders and even the general public, the vast

majority of whom are taxpayers and are indirectly contributing to decommissioning projects

via the government. If a job is seen to be completed ineffectively then trust is lost and the tax

payer may question the expenditure on decommissioning.

Interviewee C states that to overcome the challenges of cost and time uncertainty a lot of

work was undertaken to try and improve the level of information sharing within the industry.

He goes on to explain that Oil and Gas UK publish general data about North Sea projects that

have been submitted to them anonymously. This general data is seen as a start but not

particularly useful to contractors who require more specific information about projects. He

explains both sides of the story though and how oil companies are reluctant to publicise

information containing dates, because they understandably don’t want to be held to those

dates. He finishes by explaining that the introduction of benchmark figures is trying to be

pushed to help with the cost challenges.

The answer to this question again suggests that the information sharing within the industry

needs to be improved dramatically if the challenges in relation to cost and timing certainty are

to be reduced. Interviewee C and the companies he is associated with are clearly trying to

push this but for serious change to come about it seems that pressure must be applied from all

corners of the industry for there to be a significant change. The solutions appear to be there,

they just need to be better implemented.

4.4 Question 3. What are some of the challenges in terms of:

4.4.1 a) Available technology?

In relation to the available technology in the decommissioning sector, it is suggested by

Interviewee A that there is not enough up to date technology to assist in overcoming some of

the industry’s most prominent challenges. Interviewee A feels that one of the main challenges

in the removal of installations is in the plugging and abandoning of wells. He states that the

well walls often require refurbishment to fix leaks and prevent corrosion build up. Essentially

the wells need to be refurbished to make them safe and leak-proof so that they can be

abandoned. Current technology means the re-activating of drilling rigs on platforms is

required for this job and this can cost millions. The drilling rigs themselves may also need to

be refurbished. The consensus from this particular operator is that technology needs to be

developed to allow the refurbishment of wells without the need to spend vast amounts of

money on re-activating drilling rigs.

It seems that operators have a rather frustrating situation on their hands in relation to the lack

of technology available to assist with the decommissioning process. To ensure that their wells

20

are abandoned safely to comply with the environmental side of the agreed scope of works,

great amounts of money have to be spent on refurbishment, money which they will not get

back. It is therefore extremely understandable that operators are crying out for new

technology that will minimise expenditure at this stage in the process. This may also create a

gap in the market for companies with the means to create and develop such technology as it is

something that has the potential to be required industry-wide. It does seem likely that some

suitable technology will be created as the rate of decommissioning in the North Sea increases.

Up until this stage decommissioning hasn’t been overly frequent and the demand appears to

have not been there, but over the coming years the demand will undoubtedly increase

dramatically. The prominence of the well P&A challenges stated by Interviewee A relates

back to those discussed in Chapter 2.

Interviewee B explains that he feels the view within the industry is that on the most part the

required technology is there. He goes on to explain that lifting technology is an area that is

being heavily focused on currently with some new project vessels under development. These

vessels would have the potential to bring about great change in the decommissioning process

but Interviewee B wonders how many of these vessels will actually be built as they are

extremely expensive so require astronomical investment. In regard to these vessels,

Interviewee B explains that they aren’t purely for decommissioning purposes and in fact that

their primary function is as a pipe laying vessel that will be used worldwide. He then goes on

to explain that the plugging and abandonment of wells is an area which requires an influx of

funding to improve technology to drive down the costs of the process which currently amount

to around 40% of the total decommissioning costs. As it stands, a lot of the same equipment is

being used in the P&A of wells as was used to install them initially so this individual feels

technology to aid this process would be welcomed.

Having investigated the new vessels that are currently under construction, and discussing

them previously, they certainly appear to be a fantastic innovation that would simplify the

removal of jackets and topsides so it was interesting to receive the mixed feelings on them

from Interviewee B. The points made by him were extremely valid referring to whether or not

there will be sufficient supply to cope with an increased demand. The fact that these boats are

not primarily for decommissioning will not make securing one for a job easy. Interviewee B

also mentioned the fact that if one of these boats is over working in the Gulf of Mexico it is

unlikely to come over to the North Sea for a lone decommissioning project where the prices

are high. He felt that to get one of these vessels over to the North Sea may require planning so

that it can complete multiple projects in a single trip.

The technical challenges with the well P&A process mentioned in the interview relate back to

what was discussed in Chapter 2, as well as what was suggested by Interviewee A. It is one of

the most challenging and costly areas of a decommissioning project and it is natural to

presume that there must be new technology available to streamline the process to both

simplify it and reduce the costs.

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Interviewee C stated that he felt the main challenge in relation to available technology was

contractors being unable to take the risk and invest in new technology. He goes on to explain

that the majority of companies simply cannot afford to take these risks, but there are certain

ones wealthy enough to go out on a limb like Allseas, owner of the Pieter Schielte vessel

mentioned in Chapter 2. Interviewee C explained some of the steps the owner took to try and

make sure his 2 million euro investment was safe. Essentially he would announce whenever

he had or was planning to make a significant step forward in the project. This would put off

the competition as they were certain he had gone ahead with each step and that it wasn’t

worth them risking such vast amounts of money to try and compete. Interviewee C goes on to

express that this has not created a traditional market, just a small number of companies trying

to undercut each other.

Interviewee C’s answer focusses largely on how bigger; wealthier companies can afford to

take the risk and invest in new technology. The answer is based around Allseas and the tactics

used by the owner to fend off competition leaving the company as an innovative market

leader, of sorts. The statement made regarding whether this market is exactly that or not is

rather interesting. When one considers a market there is the assumption of many companies

and large demand from clients creating that market, so what the interviewee feels is largely

true in the case of Allseas. It is likely they will have the demand but without the competition,

which may be a recipe for success.

4.4.2 b) Available personnel/staff to execute the job?

Interviewee A’s response when asked about the challenges in acquiring the right personnel to

execute decommissioning projects was rather interesting yet completely logical. As originally

predicted, when the industry was booming the majority of workers wanted to be involved in

new exploration and extraction projects and the problem was retaining workers as much as it

was finding the right workers in the first place. However, since the fall in the oil price

workers have been enlightened about the increasingly prosperous future of decommissioning

within the industry and have therefore started to make the jump across. So looking to the

future, with decommissioning set to increase rapidly, the predicted skill shortage may not be

so prominent, at least while the oil price is low.

With the skill shortage within decommissioning being such a large issue in the past it seems

natural that as the workload increases the skill shortage will only become worse. However, as

seen in this interview that is simply not the case and the falling oil price has made many of

those involved in the industry rethink their career paths. Despite this, the likelihood is that the

oil price will start to rise again in the not too distant future, due to the nature of the industry,

and new developments will start or continue and without trainees and graduates moving into

decommissioning the skill shortage of the past will be prominent again. It is also important to

keep up the current interest in decommissioning so that those employed in this sector now can

be retained and won’t be tempted to move or return to other industry sectors if the market

22

picks up. A lot of interviewee A’s answer relates back to what was suggested in the literature

from Chapter 2.

The response of Interviewee B when asked about the staffing challenges in the industry was

that it is a relatively serious issue but it isn’t to do with the lack of numbers but more to do

with a lack of knowledge and experience from those that are employed. Interviewee B felt

that this could be down to poaching of employees. He explained that operators like to delay a

decommissioning project for as long as possible but eventually reach a point where they have

no option but to start on it. So when they are planning the job they start to put the team

together and become aware of the fact that they don’t have the right personnel on board. This

is when employees of large contractors are approached and tempted into working on the

project. He goes on to explain that in the past people in the oil and gas industry had no

interest in working on decommissioning projects but that this has picked up significantly

since the falling oil price has left many people unemployed and people can see the future

within the decommissioning sector.

This relates back to what was said by Interviewee A in that the current market has created an

influx of available employees for roles in decommissioning teams, but while it may be nice to

have plenty of people willing to work in the sector, it seems more important that the right

people for the job are selected and not those with minimal experience on a decommissioning

project trying to pass themselves off as an expert. It also appears that if employees are

poached from the large contractors, as was made out in the interview, then these contractors

would have to undergo the same poaching process to fill the positions, which means the

sector is essentially going round in a vicious circle. It seems more logical to get the current

employees trained up as best possible before resorting to looking for those working

elsewhere.

Interviewee C also admits that acquiring the right personnel is a challenge, explaining that

there is a lack of people with specific decommissioning-related training. However he does

state that the skills required to work in decommissioning are quite transferable, and not

specific to the sector. He goes on to explain that the way a decommissioning project is

executed, and the objectives of it are different but that the parts are all the same. Interviewee

C almost urges the industry to be slightly more careless when it comes to decommissioning. It

doesn’t matter if items get dented and scratched that are just going to be melted down once

they are onshore. He goes on to warn that over-engineering decommissioning could inflate

the cost and increase the timeframe of projects.

It seems logical that people can just be retrained in decommissioning because at the end of the

day it is the same industry that they have worked in and anyone with an idea about the

installation process of an asset should have basic knowledge of how it will be removed. The

analogy of viewing decommissioning like a demolition project is interesting, but it seems it

23

can only really be viewed in that way for components that are to not set to be reused in the

future.

As with many of the challenges discussed, the implication is that due to the relative infancy of

the decommissioning sector it is extremely important to have as much experience backing a

project as possible. This should have a knock on effect as those with less experience learn and

develop their knowledge. This however does seem to contradict what has been said about the

skill shortage in the industry, with new graduates and trainees being encouraged to move into

decommissioning. Ultimately it is a fine line between having a young team with not enough

experience and an ageing workforce moving closer to retirement. It therefore leads one to

believe that the optimum scenario for a workforce is a mixture of those with experience

working alongside those who are young and inexperienced, but eager to learn. This seems the

most likely solution to bring about progression within the decommissioning sector.

4.4.3 c) Accurately cost estimating a decommissioning project?

As mentioned previously, there can be difficulty cost estimating decommissioning projects

due to the lack of experience in the industry, and the relative unknown of what is on the

seabed. Interviewee A’s views on this are that getting an estimate that is as accurate as

possible is largely down to taking on board experiences from previous projects and learning

from any errors made. For a particular project, the team was made up of people with

experience working for various operators on decommissioning projects and the collective

knowledge meant that a reasonably accurate estimate could be produced. Current figures

suggest that the final project cost will be 13% higher than what was estimated in 2011. This

may seem a lot but in the grand scheme of a large scale decommissioning project, it can be

deemed as a relatively accurate original estimate, especially when the oil price crash over the

last year or so is taken into account. Market data in the form of data sets are now readily

available as a result of the contracts placed by this particular operator.

It seems natural that the accuracy of a cost estimate will increase as the experience of those

cost estimating increases. For the project mentioned above, the operator was fortunate enough

to have a team with experience working for a range of operators on previous

decommissioning projects. This can relate back to the issues about skill shortages and staff

retention mentioned in Chapter 2. By employing and retaining the right members of staff,

with the right experience, decommissioning projects should start to become estimated more

accurately. If a more accurate cost is known upfront then an operator will be able to budget

more precisely going forward and there isn’t as great a risk of significant cost overruns

occurring.

Interviewee B’s view on the cost estimating challenges is that there are two main points

companies should focus on: deciding upon the scope of the works and then pricing the agreed

24

scope of works, something which he feels that operators and the industry as a whole are not

competent at. He backs this up by stating that on average, the final cost of completed

decommissioning projects has been 40% more than the initial estimate that was agreed upon

to allow the project to go ahead. Interviewee B then goes on to explain that it is employees of

the operator that create the scope of works, but that these people are maybe not ideal for this

task, and that contractors, cost engineers or even quantity surveyors would be better suited as

the creation of a scope of works and costing that scope is more in line with their profession.

He feels that the skills and knowledge have so far not been utilised as well as they could in

the decommissioning sector.

Interviewee B explains that interview techniques will differ depending on the project. He

compares the differences that exist between cost estimating for the decommissioning of a

single asset and a chain of assets often owned by a larger operator. A single asset would have

the goal of completing the job in the allocated timeframe, as close to the original cost estimate

as possible, but when decommissioning a chain of assets there would be the intention of

reducing the cost and streamlining the process as the programme is ongoing. Interviewee B

ends his answer to this query by stating that people should look at decommissioning as an

industry-wide project and not as an individual project as the process of decommissioning is

not competitive and knowledge sharing should be encouraged, something which Decom

North Sea are trying to implement.

It is an interesting view that maybe operators are not tasking the right people to create the

scope of works and estimate the costs, yet it seems completely logical that those doing this

kind of work in their profession may be better suited to such roles. This however can relate

back to the staffing issues mentioned above in that those with a history of cost estimating may

not be employed by an operator and may therefore be poached from another company,

leaving that company down an employee and forcing them to do the same, creating that

vicious circle, something which cannot be productive within the industry. An option here may

be to look towards the construction industry where quantity surveyors may possess some of

the necessary skills and be willing to change industries.

Interviewee B’s point regarding the different approaches required for different projects is

interesting. Where a smaller company may have a single asset, they need to have their process

and cost estimate as accurate as possible before beginning the project as once the asset is

removed the project is essentially completed. Larger operators who own multiple assets can

look at the project as more of a long term development, aiming to reduce the costs and

simplify the process as the project goes on. It seems, however, that this could be inefficient

with much wasted time and money at the early stages of the project.

Interviewee C briefly explained that currently initial cost estimates are extremely vague and

could be as much as 200% off from the final cost.

25

There was no real surprise to hear that the estimates have not been very accurate, in line with

the information from the other interviewees, but to hear the extent of these inaccuracies was

quite shocking and this certainly seems to be an area that needs vast improvement

immediately.

4.5 Question 4: What do you think could be some of the main

challenges in the future as the volume of works relating to

decommissioning increases in the North Sea?

The next point to be asked to Interviewee A was where it was thought the challenges would

lie as the rate of decommissioning-related work increases in the North Sea. Cost was

mentioned again but the main focus appeared to be on involvement from the government,

however it is apparent that the two are related to one another. It is explained by Interviewee A

that a large portion of decommissioning costs are funded by the United Kingdom

Government. This funding is based on backdated tax receipts. The income produced by each

asset can be retrieved to finance approximately three quarters of the project cost. It is

expected that the government will aim to monitor its spending on decommissioning projects

more closely so that the tax payer is not left with any unanswered questions in regards to

where the money is going. It is therefore likely that the challenges faced in the future will be

largely dependent on the government’s influence.

It comes as no surprise that cost is likely to be one of the future challenges in

decommissioning. It is however interesting to understand the extent of the government’s

financial assistance within the industry. The individual interviewed felt that cost and

government involvement are set to become the main challenges as decommissioning activity

increases. These two aspects appear to be related to each other because the smaller the

financial assistance from the government then the greater the cost for the operators and

therefore the greater the financial challenge. The reverse of this may be an unlikely scenario

with the government closely auditing the extent of the financial assistance, but if this

assistance was to increase or even be maintained then it would seem that the financial

challenge would not be so great.

Interviewee B expressed that some of the challenges looking forward will be the same as

those already existing, with getting the right people with the right experience and knowledge

working in the industry an on-going challenge. He feels that the future may be based around

the oil and gas industry as a whole and how it copes during this downturn. The redundancies

could force valuable employees away from the industry meaning it will lose that knowledge

and experience that is so desperately required. On top of this he feels multinational companies

could move away from the North Sea if the industry doesn’t pick up. He goes on to reiterate

the difficulties there may be securing heavy lift vessels to operate in the North Sea when they

have long term contracts all over the world which it would seem uneconomical to

26

compromise. He predicts that there will be a shortage of yards big enough to cope with

decommissioning of large structures, leaving the industry in a capacity crisis of sorts.

The predictions of Interviewee B seem to portray the future challenges of the

decommissioning industry as great stumbling blocks but they should not be factors that will

seriously inhibit the development of the decommissioning sector. It seems natural for there to

be various challenges facing a relatively new area of the oil and gas industry that is set to see

a great increase in activity over the coming years. Without the availability of the new

generation of heavy lift vessels, structures will still be able to be removed but the lack of

sufficient decommissioning yards is of more concern and it appears this may be an area that

will require great investment to supply the demands of the developing industry.

Interviewee C feels the most prominent challenge moving forward is the market becoming

overloaded as a result of companies putting off decommissioning for as long as possible then

all commencing projects at the same time resulting in increased competition for equipment

and services. It is suggested that by reducing the extent of the work this may help the problem

but this is only really possible by leaving equipment on the seabed which is not seen as

acceptable by many members of the public and environmental agencies.

A very valid point is certainly made here that relates back to points made by interviewee C

earlier about companies repeatedly pushing back decommissioning projects as far as possible.

Why companies do this is understandable, but they need to look further into the future to

realise that what they are doing at present is not working. It also seems that the idea of

reducing the scope of works by leaving more equipment on the seabed is idealistic but

probably not realistic.

4.6 Question 5: As decommissioning is relatively in its infancy in

the North Sea, how do you make sure you’re transferring lessons

and experiences from one project to another? (How do you make

sure you’re becoming more cost efficient, cost-effective and safe?)

In the case of Interviewee A’s employer, ‘lessons learned’ sessions are held after a project

completion where the project is reviewed in detail. The parts of the project that ran smoothly

are noted and those where there were difficulties are discussed with the aim of finding a

solution to prevent any issues in the future. It is stressed that the timing of these sessions is

extremely important. If they are held too long after a project completion then the team

members may no longer be present in that location or company, and the memories of the

project won’t be fresh in people’s minds. However if the session is held too soon after a

project completion there may not have been time to assess the major successes or failures

within the project.

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As with so many aspects of the decommissioning sector, there is a fine line between having

an extremely beneficial project review session and a relatively useless one. It may not seem a

particularly important activity in the grand scheme of the project that has been completed, but

for an industry that is set to experience huge growth in the not too distant future, it has never

been more important to recognise what has been done well so it can be done well again in the

future, and analyse the areas of the project where there is room for improvement because the

same mistakes cannot afford to be made repeatedly. By reviewing a project in detail after its

completion then improvements can be made for the next project. Not only does this help the

operator, but it helps to bring about progression in the industry. Previously it was mentioned

that there has been a lack of knowledge sharing in the industry, but if all operators were to

have these review sessions and come up with solutions to solve any issues, then share them

with the industry it seems hard to imagine than anything other than progression would occur.

Interviewee B stresses that the sharing of knowledge within the industry is vital so that

mistakes are learnt from, efficiency improved and costs reduced. He goes on to explain that

the developing partnership between Decom North Sea and Oil and Gas UK is really trying to

push this idea. Interviewee B then explains that the introduction of a concise data

management system would go a long way in the recording and sharing of relevant

information and experiences, and that the current database isn’t sufficient to provide this. It is

argued by this individual that the mind set of operators is that as the knowledge, skills and

capabilities of the people develop, and the technology is improved, the market demand will

represent this progression, but this is not something he agrees with. He believes that a greater

understanding of the market itself must be had by the operators before the supply chain can

risk investing heavily in the development of new technologies. He admits that progression has

started to be seen in this area, but that it is no easy task which could be down to operators not

willing to put their reputation on the line. If oil production is stopped and the company then

spends money on decommissioning where there is no financial gain, unrest may be sparked

amongst the shareholders. This in turn results in such operators keeping plans close to their

chest and unwillingness to share them with the decommissioning sector.

It would seem, based on interviewee B’s explanation, that there is a sense of naivety amongst

operators in that they can sit back and wait for the supply chain to go out on a limb and create

new products and technologies to cope with the progression of the industry with minimal

input from themselves. Even without an absolute understanding of the industry and market it

is plain to see that the supply chain wouldn’t risk investing heavily without the operators

providing a clear insight into where the market is moving and the products and services that

will be required. The air of frustration shown from interviewee B in regards to the lack of

information sharing within the industry is completely understandable. Operators appear to be

set in their ways of keeping as much as possible secret, which may be logical in the

competitive development sector of the industry, but decommissioning is not a competitive

process. Operators will not make money from removing an asset and it therefore seems

logical for the industry to share knowledge and experience so that the process can be

streamlined in terms of both cost and the resources required. There also does not appear to be

28

any need to worry about the reputation of the company when it comes to commencing

decommissioning. The shareholders will have always been aware of the fact that eventually it

would not be economically viable to continue operating certain assets so it should not come

as a surprise to them when that time comes. It could be argued that by completely

decommissioning projects in an environmentally safe manner the reputation of operators

amongst the general public will be enhanced.

Interviewee C admits that to date information sharing has not been good enough, preventing

transfer of knowledge from one project to another. He feels this may partly be down to The

Department of Energy and Climate Change (DECC) not being as strict as they should be in

acquiring information from oil companies that can be made readily available to the industry,

and had they been stricter then the industry would be in a much better state. He explains that

knowledge can be transferred within a company very well through the likes of lessons learned

sessions but that this does not help the industry. He goes on to describe the circumstances

where a decommissioning team worked on two projects one after the other and that the

second one was completed much more efficiently as any mistakes from the first one were

learnt from. This leads on to the idealistic view that one team could complete all

decommissioning projects in the North Sea but of course this is not a viable solution.

Interviewee C then predicts that the Oil and Gas Authority (OGA) may move in to try and

bring about change whether companies like it or not.

A more forceful approach from an authoritative organisation may be what is required for the

industry to progress. The lack of information sharing may seem unusual from an outsiders

perspective and there will be reasons from within the industry as to why they behave like they

do, some of which have already been discussed, but something has to give of progression is to

be seen in the industry.

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Chapter 5 – CONCLUSION

An influx of decommissioning in the North Sea is something the oil and gas industry will

need to address imminently. As predicted, a number of challenges are present throughout the

process, and there will continue to be challenges in the future, but at this transitional phase it

seems that the industry needs to pull together to make the process as efficient as possible.

Initial opinions were that the most prominent decommissioning challenges would relate to

cost and timing, and these were issues that were maybe not so vital when the

decommissioning was sporadic. Research in the form of a literature review and interviewing

of industry professionals has suggested that to an extent these predictions were true; cost is,

and looks set to always be, a challenge for the industry. With decommissioning not generating

any profit and initial cost estimates often wildly inaccurate, the costs associated with

decommissioning an asset can turn out to be daunting for operators. This then relates to the

issues of timing, with operators delaying decommissioning for as long as possible which can

cause further problems such as overcrowding of the marketplace. However, the lack of

knowledge and information sharing within the industry was one major challenge that was not

foreseen prior to research, yet one that seems essential to overcome if the industry is to move

forward.

5.1 Data Collection

The interview method of research was important to establish an idea of the views from within

the industry. It was interesting to learn that none of the individuals spoken to mentioned any

challenges with the physical decommissioning process itself. This highlights the importance

of getting the perspective from within the industry because those outwith it may just make

such presumptions.

The data obtained from these interviews was then compared and cross referenced with

information from a range of literature. It was important to take into account the views of both

those in the industry and those focused on research in the same field, so that a more rounded

analysis could be undertaken.

5.2 Future Research

The research that was undertaken was focused primarily on finding what the challenges

associated with decommissioning were. However if future research with a similar purpose

was to be completed it could be suggested that it should be focused upon the issues of cost

estimating and sharing information within the industry, the two main issues that have been

30

identified from this research. Further research into these fields may help to bring about

solutions to minimise their affect upon the industry.

5.3 Recommendations

It can be deduced that the two main challenges of cost estimating and sharing knowledge

within the industry are heavily related. To improve the accuracy of cost estimations

benchmark figures are a good starting point, but without substantial sharing of knowledge,

information and experience within the industry, these benchmark figures cannot be obtained.

This issue with cost estimating could be combatted by employing those with substantial

knowledge of decommissioning, or those with a history of cost estimating to carry out the

procedure. In this tough financial market companies can no longer afford to produce vastly

inaccurate cost estimates then have to find huge amounts of additional money when it comes

to actually carrying out the project. Alternatively, some form of software could be developed

with assistance from those who have great knowledge and experience of decommissioning.

To improve information sharing within the industry, conferences could be held that address

this issue and stress the importance of it. If a member of the general public can see this from

interviewing an industry professional then there is no reason why oil companies cannot see

this too.

5.4 Final Thoughts

Decommissioning is certainly a sector of the oil and gas industry that is currently receiving a

lot of attention and this may be down to people viewing it is as the future of the industry. This

could be perceived as a negative and the beginning of the end but this is not necessarily true.

For at least a generation it looks set to provide a potential career for many people, whilst also

offering hope to those made redundant in the current crisis. Decommissioning is essentially

just looking at the industry from a different angle. The oil and gas industry is based on the

extraction of natural resources and for that reason was always going to slow, and that is where

decommissioning steps in to speed it up again, albeit in a different manner.

For a sector in its infancy there are undoubtedly challenges, but those that have come to light

certainly seem like they can be overcome. New challenges will then appear of course, but that

is just the evolution of this industry. Naturally, with an industry based largely in the North

Sea, nothing is simple.

31

The increase in decommissioning does not signal the end of the exploration and production

(E&P) side of the industry by any means. The huge fall in the oil price may have halted it but

in a cyclic industry like oil and gas it will bounce back and E&P work will increase again.

Age, however, is something that is not on the side of many installations in the North Sea, and

as reluctant as operators may be, decommissioning is an unavoidable process. It should not be

all doom and gloom; the sector will provide great opportunities for individual careers and

company growth. Echoing what was said at the start of this report, when one door closes

another one opens.

32

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ANDREW, S., 2014. Maximising Value - Minimising Cost. Conference Presentation ed. (s.I): ABB Consulting.

ARUP, 2014. Decommissioning in the North Sea - Review of Decommissioning Capacity. Aberdeen: Decom North Sea.

BANNER, A., 2014. DECC Regulatory Update. Conference Presentation ed. Aberdeen: Department of Energy and Climate Change.

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BOMEL LTD, 2001. Decommissioning topic strategy. Merseyside: Health and Safety Executive.

BUREAU VERITAS, 2011. Decommissioning on the UK Continental Shelf - an overview of regulations. Paris: Bureau Veritas.

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DECOM NORTH SEA ET AL., 2014. Decommissioning in the North Sea - Review of Decommissioning Capacity. Aberdeen: Decom North Sea.

DECOM NORTH SEA ET AL., 2015. Offshore Oil and Gas Decommissioning. Aberdeen: Decom North Sea.

DEPARTMENT OF ENERGY AND CLIMATE CHANGE, 2015. Oil and gas: Decommissioning of offshore installations and pipelines. [online] London: GOV.UK. Available from:

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DOUGLASS, E., 2015. Is the oil industry on a cliff edge or just in a down cycle? [online] (s.I): Inside Climate News. Available from: http://insideclimatenews.org/news/04082015/oil-downturn-could-become-cliff-prices-low-exxon-chevron-climate-green-energy [Accessed 01/06 2016]

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ENZER, G., 2014. The challenges of offshore decommissioning. [online] Dubai: ITP Publishing Group. Available from: http://www.arabianoilandgas.com/article-12286-the-challenges-of-offshore-decommissioning/2/ [Accessed 02/05 2016]

KVALE, S., 2005. The dominance of dialogical interview research. Trondheim: Norwegian University of Science and Technology.

MACFARLANE, C., 2013. Simplifying Subsea Installation. Aberdeen: IHS Petrodata Offshore Field Development Monthly.

MASLIN, E., 2014. P&A problems. [online] Houston: Offshore Engineer. Available from: http://www.oedigital.com/component/k2/item/6370-p-a-problems [Accessed 01/24 2016]

MATHONNIERE, J., 2014. Decommissioning: Striking the right balance. [online] London: CrossTalks. Available from: http://www.crosstalks.co.uk/?p=5931 [Accessed 01/05 2016]

MOORE, D., 2014. Drill Cutting Issues in Decommissioning. Conference Presentation ed. Aberdeen: Decom North Sea.

NIXON, B., 2013. Decommissioning North Sea giants. Periodical, 57, p. 16

OIL AND GAS UK, 2013. Decommissioning experience to date. [online] London: Oil and Gas UK. Available from: http://oilandgasuk.co.uk/knowledgecentre/experience.cfm [Accessed 01/06 2016]

OIL AND GAS UK, 2015. Decommissioning - about the industry. [online] London: Oil and Gas UK. Available from: http://oilandgasuk.co.uk/decommissioning.cfm [Accessed 01/06 2016]

OIL AND GAS UK, 2015. Decommissioning Insight 2015. London: Oil and Gas UK.

OSPAR COMMISSION, 2009. Assessment of the possible effects of releases of oil and chemicals from any disturbance of cutting piles. London: OSPAR Commission.

REID, J., 2010. Oil & Gas Well Plug and Abandonment. Conference Presentation ed. London: Charles Taylor Energy.

RIGZONE, 2016. How do drilling fluids work? [online] London: Rigzone. Available from: http://www.rigzone.com/training/insight.asp?insight_id=291&c_id=24 [Accessed 02/05 2016]

RIGZONE, 2016. How does decommissioning work? [online] London: Rigzone. Available from: http://www.rigzone.com/training/insight.asp?i_id=354 [Accessed 01/24 2016]

ROYAL ACADEMY OF ENGINEERING, 2013. Decommissioning in the North Sea. London: Royal Academy of Engineering.

SCHLUMBERGER, 2015. Plug and abandon. [online] Houston: Schlumberger. Available from: http://www.glossary.oilfield.slb.com/en/Terms/p/plug_and_abandon.aspx [Accessed 01/24 2016]

SCHLUMBERGER, 2016. Hydrostatic head. [online] Houston: Schlumberger. Available from: http://www.glossary.oilfield.slb.com/en/Terms/h/hydrostatic_head.aspx [Accessed 01/27 2016]

SHETLAND DECOMMISSIONING, 2016. Piece small decommissioning. [online] Lerwick: Shetland Decommissioning. Available from: http://www.shetlanddecommissioning.com/piece-small-decommissioning [Accessed 01/07 2016]

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SOCIETY OF PETROLEUM ENGINEERS, 2015. Offshore decommissioning. [online] (s.I): Society of Petroleum Engineers. Available from: http://petrowiki.org/Offshore_decommissioning [Accessed 01/06 2016]

STATOIL, 2012. Plug and abandonment. [online] Stavanger: Statoil. Available from: http://innovate.statoil.com/challenges/Pages/PlugAndAbandonment.aspx [Accessed 02/05 2016]

STRATEGIC DECOMMISSIONING CONSULTANTS LIMITED, ET AL., 2015. Decommissioning - From Planning through Execution. Conference Presentation ed. Aberdeen: Decom North Sea.

VALENZUELA, D. and SHRIVASTAVA, P., 2008. Interview as a Method for Qualitative Research. Phoenix: Arizona State University.

VEOLIA ET AL., 2015. North Sea Decommissioning Like You've Never Seen Before. London: Veolia.

WILSON, G., 2014. Effective Multi-Subsea Field Decommissioning Project Experience and

Learnings. Conference Presentation ed. Aberdeen: Hess Ltd.

35

APPENDICES

Appendix 1. Advantages and disadvantages of piece small decommissioning.

AF Gruppen (2015) suggests a number of benefits to using the piece small method. These

include the fact that there is no need for heavy lift vessels or crane barges to be used as the

installation is cut down small enough for the on-site cranes to cope with the weight when

transferring containers onto the supply vessels. This too helps keep the project costs to a

minimum as hire costs for heavy lift vessels can be extremely expensive (MacFarlane2013). It

can also be considered safe both in terms of carrying out the work and in the effect upon the

environment. Weather is not a definitive factor for the piece small method either which makes

it very flexible. What may be the most significant advantage of this method though is the

ability for it to run alongside well plugging and abandonment (P&A) and other subsea

decommissioning work therefore reducing the overall programme duration (AF Gruppen

2015).

Some potential disadvantages with piece small could be that there is a limit to the size of

items that can be dismantled from the structure for re-use or re-sale (Decom North Sea et

al.2015). With the mass of materials on the structures soon to be decommissioned, re-use and

recycling should be promoted as much as possible and it would seem that the piece small

method is a possible inhibitor of this. Another downfall could be to do with cost. Piece small

may utilise cutting skills that have been used onshore for years with success (AF Gruppen

2015), but by doing the cutting process offshore there is the added cost of paying offshore

wages. This may not seem like a huge issue but piece small would appear to be a labour

intensive method so with a large team offshore working for long periods of time it may add

up.

Appendix 2.

Advantages and disadvantages of reverse installation decommissioning.

Some advantages of the reverse installation method are that there is a vast array of heavy lift

vessels available to perform the modular removal, to separate the modules is a straightforward

process and multiple modules can be stacked up and taken to shore in one go, giving a saving

on transport costs. If the structure is made up of large modules, only very few heavy lifts will

need to take place (BOMEL Ltd2001).

36

However there are some limitations with this method. To start with, the re-installation of

lifting points must take place on all the modules, and equipment may have to be moved to

allow sufficient access area for the crane (BOMEL Ltd2001). As mentioned previously, the

structural stability must also be repeatedly reassessed as modules are removed so there is the

potential for the structure’s centre of gravity to be off which could cause it to topple over in

extreme circumstances (Veolia et al.2015).

Appendix 3.

Advantages and disadvantages of single lift decommissioning.

Nixon, B. (2013) then goes on to suggest a number of advantages to the single lift method. He

states that there is potential to save on costs with the use of this method, as well as

minimising the technical input, the environmental impact and the risk involved in the process.

One particular disadvantage, also suggested by Nixon, B. (2013) is that there are a number of

heavy lift vessels, suitable to cope with the weight of large structures, which are still subject

to funding and not complete to operate yet which suggests a potential lack of vessels will be

available to cope with demand for single lift decommissioning projects. He also notes that

there is a short time frame in the summer when the weather is calm enough to perform single

lifts. This adds increased pressure to the project and also relates back to the availability of

vessels as they are likely to be in high demand during the summer months.

Appendix 4.

Further information on the Allseas Pioneering Spirit vessel.

Allseas have supplied the demand for a bigger heavy lift vessel with the creation of the

Pioneering Spirit, a twin-bow vessel which is 382m long and 124m wide and designed for

pipe-lay projects as well as decommissioning (Allseas 2015). The Pioneering Spirit has the

ability to lift, store and transport both the topside and jacket of a structure which could prove

to be revolutionary in the progression of the decommissioning sector. The sheer size and on-

board technology means that bad weather isn’t as great a concern as with smaller vessels, and

project time can be reduced due to the lifting techniques.

37

Figure 8 shows a design image of the Pioneering Spirit vessel transporting a topside across its

double-bow and a jacket on its stern, having removed each section in a single lift (Allseas

2015).

Figure 8: Design image showing the Pioneering Spirit transporting an entire structure (Source: Allseas,

2015)

Appendix 5. Further information on the size of the North Sea decommissioning task.

A report by the Royal Academy of Engineering, (2013) suggests that the total expenditure on

decommissioning in the North Sea over the next 30 years could top £30 billion proving that

the planned projects mentioned above won’t be possible without serious expenditure from oil

companies and the government. Decom North Sea follow this up by publishing an estimate

that the total cost of decommissioning in the North Sea could reach a huge £70 billion

(Decom North Sea 2015b). This figure seems to really sum up the scope of decommissioning

in the North Sea as a staggeringly large task.

The report then goes on to explain that over the next 30-40 years the UKCS is set to see the

decommissioning of 470 installations, with 79 or 17% of these taking place in the next decade

(Oil and Gas UK2015). Although 17% isn’t an overwhelming amount, it seems that the next

decade is where the industry really needs to get a grip on the decommissioning process,

making it as efficient as possible and ironing out any recurring issues so that when the

projects start coming thick and fast in the future, the industry is equipped and really to not

only cope, but excel in their completion.

38

Appendix 6. Further information on OSPAR and the regulatory framework in place for North Sea

decommissioning.

Banner (2015) explains that the regulations for decommissioning in the UK have been

conceived by the Oslo/Paris Convention for the Protection of the Marine Environment

(OSPAR). The OSPAR 98/3 regulations became part of the UK Petroleum Act in 1998 and

ensure that companies take responsibility for the costs of decommissioning (Banner 2014).

Section 29s are legal notices of liability and are issued to all the companies involved in an

offshore asset, including both installations and pipelines, by the Offshore Decommissioning

Unit of the Department of Energy and Climate Change (Banner 2014).

Appendix 7. Further information on the challenges to do with the supply chain/skills in the industry, and

solutions on how to overcome them.

The lack of resources is suggested by The Royal Academy of Engineering (2013) to be as a

result of funding for apprentice schemes being cut with companies streamlining in this

challenging market. It may be short sighted but by preventing spending at this end of the

spectrum it prevents job losses to those already on their career paths at the other end. This can

be the same for graduate schemes where funding has also been reduced. A degree does not

mean real life experience so time and money must also be spent on graduates to mould them

into their roles. The report also puts forward the idea that a lack of retention is due to

competition from both within the industry and from other industries (Royal Academy of

Engineering2013). Individuals may be offered employment in a preferred location or on a

better wage that may entice them away. It is also suggested that the image of

decommissioning does not have the same pull factor for graduates and those already

employed in the industry (Royal Academy of Engineering2013).

Ideas are put forward in the report on how to combat these issues. These include enhancing

the concept to those with experience and graduates alike that there are successful career

opportunities to be had within the decommissioning sector (Royal Academy of

Engineering2013). This involves highlighting the fact that there are environmental and

ecological sub-sectors within decommissioning where individuals may prefer to focus their

career based upon their interests or experience, rather than the cost, safety and engineering

aspects of decommissioning (Royal Academy of Engineering2013) . The report also puts

forward the suggestion that colleges, universities and the appropriate governing bodies could

run courses for anyone thinking of pursuing a career in decommissioning, to give them an

insight into the various aspects of decommissioning and how it works, as well as improving

39

business awareness of the subject both within and outwith the industry (Royal Academy of

Engineering2013).

Appendix 8. Supporting information on the cost challenges of North Sea decommissioning.

A report by The Royal Academy of Engineering (2013) explains that supply chain costs can

experience fluctuations based on the market. When the development side of the industry was

booming then supply chain costs for these services were undoubtedly high with

decommissioning related ones lower, but with the industry in its current state it is probable

that the situation is quite the opposite, with companies in the supply chain for

decommissioning likely to start increasing costs gradually as this sector becomes prominent.

Again however, this fluctuation may be based around the oil price.

Appendix 9. Interview transcript from Interviewee A.

Question 1: What were the main challenges you have faced on previous

decommissioning projects?

Cost is the main challenge for decom. The scope of the decommissioning project is set and

agreed along with the various stakeholders (ex. internally, government, environmental bodies,

fishermen, etc). This is a balancing act between the two extremes of full removal and leaving

everything in….the balancing act being the competing stakeholder requirements.

Environmental bodies would insist upon us removing everything, but that is the most

expensive option……..so we counter that along the lines of what solution causes the least

disturbance/harm to the environment – this can result in us gaining approval to leave more of

the equipment on the seabed – to remove it would now cause more harm to the environment

than leaving it as is.

Question 2: How did you overcome these challenges?

By engaging with the key stakeholders – speaking to them, listening to them. Part of CNR’s

mission statement is to ‘doing it right’ and we abide by that. It’s important that the

40

stakeholders trust us that we are in fact ‘doing it right’…….if that trust goes then we will not

be trusted that our proposals are appropriate.

Question 3: What are some of the challenges in terms of:

A) Available technology?

Key challenges lie with how we plug and abandon the wells. The reservoir can be approx.

2km below the seabed level, so the hole that is drilled all the way from the platform to the

reservoir creates a route for the oil and gas to flow from the reservoir to the platform for

processing and separation. At the end of the well’s life this route must be closed up such that

none of the remnant hydrocarbons in the reservoir can come back to the surface. This isn’t an

easy job to do……can be complicated by the age of the well, and the walls of the well

corroding and leaking. The existing technology means refurbishing the drilling rig on the

platform (can cost millions) – seems crazy to spend all that money renovating a structure that

you are going to remove two years later! We look for technology that stops us needing to

reactivate the platform drilling rig – not many technologies out there just now that do that but

we still look……….if you can think of a way of sorting this it’ll make you a millionaire!!

B) Available personnel/staff to execute the job?

This was more a problem prior to the oil price crashing last year. Then we had problems not

just getting folk, but retaining them. Folk wanted to work on new build development projects.

Since the oil price crashed a lot of people have shown much more interest in getting involved

in decom.

C) Accurately estimating the costs associated with a decommissioning

project?

This all depends on the level of information you have from projects completed. We were

fortunate in that we had people who had knowledge from other operators so we were able to

develop a fairly accurate cost estimate for the Murchison project. Indeed, we reckon that there

will be approx. 13% increase on what the project estimate was in 2011 to what the final cost

will be – that’s pretty good going. On top of that, we now have market data through the

contracts we have placed so we now have a fairly robust data set to call upon.

Question 4: What do you think could be some of the main challenges in the future as the

volume of works relating to decommissioning increases in the North Sea?

41

Cost and government involvement. A large proportion of decommissioning costs are funded

by the UK Gov, based on historical tax receipts (ie the tax revenue generated by the asset can

be recovered to fund say 75% of decom costs). We would expect that the government will get

more and more involved with auditing spend on decom projects, to ensure accountability to

the UK tax payer. That influence form government will steer where projects end up.

Question 5: As decommissioning is relatively in its infancy in the North Sea, how do you

make sure you're transferring lessons and experiences from one project to another?

[How do you make sure you're becoming more efficient, cost-effective and safe?]

We do that by running lesson learned sessions. We review what went well and what didn’t go

well and where we can improve. The timing of these events is important as well. If you leave

it too late then the team involved may have disbanded. If you leave it too long memories can

fade. Also, if you do it too soon then you can be too close behind a lesson and you don’t

capture the full impact of the lesson to be learned. Getting the right balance with these things

dramatically improves the quality of the lesson learned session.

Appendix 10.

Interview transcript from Interviewee B.

Question 3: What are some of the challenges in terms of:

A) Available technology?

The general consensus is that the tools, technology and equipment needed are generally

available. One big area of discussion is lifting technology which is currently being addressed.

There are some new build concepts that could potentially revolutionise the industry but mega

investment is required, millions and millions of dollars so how many will we see? Are they

going to become the tool for the job in the North Sea? They are not just being built as

decommissioning vessels – they are pipe laying vessels primarily and will work all over the

world. Is it a tool that will be used? One area where mega investment is required is in the

plumbing and abandoning of wells, a big ticket when it comes to cost. Over 40% of

decommissioning cost is related to the plumbing and abandonment of wells and issues around

that certainly lend themselves to new ideas, new technology, new tools as the condition of

these wells is often very poor and they are not well documented. There is certainly a need for

new technology and skills. The processes of cleaning, separation etc use the same tools as

were used initially in the construction of the wells.

42

B) Available personnel/staff to execute the job?

Staffing is a significant issue. Within the operator and contractor community there is a

singular lack of experience and knowledge. There is also a lot of poaching going on. It

(decommissioning) is put off for as long as possible but when an operator realises it can’t be

put off any longer they begin to put a plan of action together, researching, doing the analysis

etc and they start to put a team of people together. They then realise they don’t have the

experience or knowledge so tend to go to big contractors (eg Wood Group, Amec) and try to

poach guys and bring them on board. Two, three years ago people didn’t want to know about

decommissioning generally but now there is more interest as jobs are scarcer in the industry

generally. Those who got involved, after a year or two in role found it very exciting and

challenging. This is recognition of where the market is.

C) Accurately estimating the costs associated with a decommissioning

project?

There are two strands here: What is the scope? How much to do that scope?

The industry and operators are not that good at this. Currently operators are usually putting

together the proposed method, scope and costing and then have to sell it to the regulator.

Historically on average, the final cost of decommission projects has been 40% more than the

agreed estimated cost. So obviously the industry is not particularly good at this. Operator

personnel are the people who are devising the scope and applying the norms but they are not

necessarily the best people to do this. Contactors, Quantity Surveyors, cost engineers, etc

would be preferable. They live by their ability to put a scope of work/price together so they

should be more involved with this process. As it stands we have not been applying

experienced cost engineering or QS expertise to decommissioning.

It can also depend on whether it is a one off decommission eg CNR, just looking at one asset

so they apply a team, a logic, a methodology to that one asset whereas Conoco Phillips in the

Southern North Sea have a 15 year programme so are pulling together a team to build the

skills and build the knowledge themselves. They are driving it from the point of view of unit

cost over 20/30 platforms and will be aiming to drive down the unit cost from the first

platform to the last. Not every operator has the portfolio that allows them to do this.

Decom North Sea was trying to encourage people to look at it as an industry rather than an

individual asset and to share the knowledge and experience for the benefit of the industry. It

is not a competitive area of the industry.

43

Question 4: What do you think could be some of the main challenges in the future as the

volume of works relating to decommissioning increases in the North Sea?

Future challenges are likely to include resilience within operators and contractors. There is a

change in the market place, decommissioning is here and now and isn’t going to get kicked

back. It has a much higher profile than previously. Will it attract the people with the expertise

and relevant skills?

What will happen to the industry in this downturn? Will skilled people turn to something else

and leave oil and gas? Companies who focus on international markets and turn their back on

the North Sea may survive. There are serious issues with retaining personnel. People are

being paid off and leaving the industry altogether. Many don’t see decommissioning as an

attractive option.

There are likely to be capacity constraints in a number of areas eg heavy lifting vessels as

there are not too many and they operate worldwide. They often have long term contracts

worldwide so are unlikely to be interested in short term decom projects. Is the industry going

to get together to make it more attractive to bring these vessels back? To bring a vessel back

from West Africa to do a couple of lifts on one asset is not going to be cost effective so there

are serious issues here. There are also only a small number of offshore yards and a small

number of people thinking of building more. Constraints are likely with the number of lifting

vessels, the number of yards and the number of contractors who can do this resulting in

capacity constraints. There is a diminishing attraction of the North Sea and an increased

attraction of other markets.

Will companies struggle to fund the decommissioning? They have to have provision before

they have even built initially so will have agreed a provision with the regulator so that money

should be in the bank. The concern is that the government will not honour their obligations.

There may be decommissioning relief available to bind the government to put in their share of

the costs. The rules will be tightened up as technology and experience develops. Ring fenced

money – with the government’s decommissioning relief in place the decommissioning market

is one of the most certain markets we’ve ever had. Rules say it has to be done. Finance is in

place. It’s going to happen.

Question 5: As decommissioning is relatively in its infancy in the North Sea, how do you

make sure you're transferring lessons and experiences from one project to another?

[How do you make sure you're becoming more efficient, cost-effective and safe?]

44

This is largely down to Decom North Sea and their growing partnership with Oil and Gas UK

where a lot of work going on. The regulator (Oil and Gas Authority) believe in knowledge

sharing and see it as a significant way of reducing costs. They are struggling however, as they

don’t know how to do it. Some kind of knowledge management system is required. There is a

huge database but knowledge capture, experience capture and sharing is required. How do

you make the industry aware that the knowledge and experience resides somewhere? How do

you categorise and catalogue it? They need to promote and make the industry aware of this

knowledge and its availability. The industry is struggling but the regulator wants to encourage

this. This is a huge issue and something the industry is still wrestling with. Another big issue

is the attitude from operators that the market will respond with the technologies, skills,

capacities and people they need but that won’t happen.

They need more understanding about the market which can be obtained through the sharing of

facts and figures. What do you need in terms of new technologies, techniques etc? Unless

the operators share this then the supply chain can’t begin to think about investment to bring

forward capabilities. There is a real head in the sand attitude. More information from the

operators and certainties before will make that level of investment. The process is beginning

to happen but it is really hard work. Reputation also comes into it. Operators are keen to make

sure everything is done by the book – safely and environmentally friendly to safeguard their

reputation etc. They think it is bad news for shareholders to stop production and spend money

on something with no return so that makes them reluctant to share plans with the industry.

There are so many aspects and so many challenges but for every challenge there is an

opportunity. There is recognition that a lot of operators are using their early North Sea

experience for what they will do internationally. Shell, Marathon, BP – have all taken

individuals who were head of decom in North Sea and now have a global role in

decommissioning. They are now working in Gulf of Mexico, Gabon and West Africa using

their early experience to guide them. Knowledge is within individual companies though and

still needs to be shared generally but there will always be an element of unknown. However,

there always needs to be a contingency for the unknown.

Appendix 11. Interview Transcript from Interviewee C.

Question 1: What were the main challenges you have faced on previous

decommissioning projects?

The main challenges are cost and time uncertainty, you’ve probably heard this before.

Fundamentally we still haven’t done enough projects to have a good benchmark for costs

because there just simply haven’t been enough projects in the North Sea. To be frank, the

45

ones we have done haven’t really been documented that well in terms of what the costs are, or

they’re not in the public domain. Again through a natural tendency towards confidentiality,

commercial confidentiality, people haven’t declared everything so a lot of the numbers are

not known widely. It is exceedingly frustrating. It is a big problem because it would be

helpful if some of these numbers were in the public domain in a more overt fashion. I’m still

working on that by the way, I’m still plugging away with the Oil and Gas UK committees to

try and get that done. Ironically, the people with the information don’t need to because

they’ve got it. So what’s the problem? To them it’s not a problem. It’s a problem to those that

you’re working with that don’t have the information.

The timing issue is the cessation of production dates. Uncertain because when is it actually

going to finish, when is it going to become sub-economic is a combination of factors to do

with oil price inflation costs. Sometimes that can change so the actual date is unknown and

then there’s the simple project deferment issue that people want to delay decommissioning so

even though the date is imminent they’re going to say that it’s further away because they just

don’t want to get started, they don’t want to spend the money. So there are a series of factors

that are the challenges around cost and time so therefore the main consequence of that is that

the supply chain cannot respond, they can’t get any concrete data from anybody because it’s

not discretionally spending but the timing is discretionally so oil companies for instance can

delay and effectively the contractors can’t commit. For instance, they won’t invest in some

new kit if they can’t rely on the market. If the market is vapourware, it disappears all the time

they could be left with egg on their face. So those are the keys issues. (me: it’s like they are

trying to play it safe almost) Yes, everything else pales into insignificance compared to those.

Question 2: How did you overcome these challenges?

How did we overcome it? Well we did work very hard on getting the industry to cooperate on

providing information and they provide information now on an anonymous basis. And I work

heavily on this with Interviewee B ironically but there is an industry survey that’s done every

year. Everybody provides the data to Oil and Gas UK. They anonymise it and publish some

generic information about the timing of projects without naming them and that’s split area by

area. It’s got Southern North Sea, Central and Northern. The reason why Central and

Northern are combined is because there aren’t so many big Northern North Sea projects so

they would be easily identifiable, so they have to go with the broad brush differentiation at

the moment. Eventually there will be more granularity and people will get more confident so

it’s a start but it doesn’t help the contractors because they want to know what field is being

looked at so who do they talk to about X project or Y project? They can’t get access to that so

it’s exceedingly frustrating for them. We’ve got to get better at it and when I say we I mean as

operators. From the oil companies’ point of view it’s the reason they don’t want to publicise

the information is because they’re not committed to those dates at this moment in time and

they want to retain the flexibility to change their mind. So they don’t want to get caught in a

situation where they say “well I thought you said it was coming out in this year and now

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you’ve delayed it by 5 years. What happened? Why?” As an oil company I don’t want to

answer all those questions, I don’t want to be barraged with all that and accusations. Despite

the fact I told you it was uncertain you forgot that bit and you nailed me on a date, I’ve given

you a date and now you nail me for not keeping it. I’d prefer not to say anything. I’m being a

bit blunt but you see where I’m coming from? It’s a little bit black and white but it’s more or

less the situation. On the cost side we are trying to encourage benchmarks and the creation of

benchmarks to cope with providing people with some base data that they can work from but

it’s slow progress.

Question 3: What are some of the challenges in terms of:

A) Available technology?

What are some of the challenges in terms of available technology? Well that’s this business

about contractors not being able to invest. There are certain people who have the courage to

go ahead if they’ve got deep pockets. Have you heard about Allseas? The single lifter? 2

billion euros he invested in this based on just his assessment that the market would come to

him if he built it and to a certain extent that’s true but very few people can do that kind of a

project. A normal publicly quoted company could never afford to take that risk so some of the

other companies would never do that. (me: Do you think that risk will pay off?) Yes, I think

so because he’s the first. I think it will pay off. (me: I hear he has had an even bigger boat

commissioned to be completed in 2020?) He hasn’t committed. He does a very good job of

scaring off the competition. What he does is say “I’m building this” and he isn’t actually

building it but what he is saying is “I’m pretty sure I’m going to build this” to warn off the

competition and he keeps doing that. Then he’ll say “I’ve ordered some bits” to pretend like

he’s going to build it when he can always cancel the bits and he wouldn’t be out of pocket too

much, and that’s what he did with the first ship. He said “I’ve ordered the thrusters” to give

the impression he’s going ahead and he ordered some bits and kept announcing that he’s

ordered this and ordered that to give the impression that he was proceeding when he hadn’t let

the main contract for the vessel and that he did eventually, and then he was committed. He’s

scared his competition off and he was very clever that way, and he’s doing the same with the

bigger ship. He doesn’t want someone to leapfrog him and build a bigger ship. (me: One point

Interviewee B made was whether it would be worth these ships coming all the way over from

say, the Gulf of Mexico just to remove a single rig?) I think this is an issue. Once it leaves the

North Sea it will be expensive to get them back because you’ll have to pay for the

mobilisation to get it back so there will be a significantly higher cost to get it back in the

North Sea because he won’t do it unless it’s worth his while so yes, if it leaves the North Sea

then the costs are going to go up, and because there’s only one that’s not really a market so he

can name his price. H can set his price to a dollar less than his brother who runs Heerema, but

what kind of market is that? It’s not a true market in the classic sense. It’s a cartel with a few

players.

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B) Available personnel/staff to execute the job?

That is certainly a challenge. Not many people are trained in decommissioning and so at the

moment you’re limited and people are poorly qualified, so that’s a challenge. However, it

doesn’t require special skill. You can adapt existing skills, it’s quite transferable. There are no

special skills. The way in which you put everything together is different but the actual

components are the same as any other project. The way you put it together is slightly different

and to be simplistic, you can be more rough and ready when you’re taking it out because if it

gets bashed a bit it doesn’t matter. If it’s going to be taken apart and taken onshore then put in

a smelter then if you rough up a few corners or displace a few things it’s not an issue so you

can be less careful when you’re taking stuff away. (me: That will reduce the time frame also)

Yes but we’re not used to that because we’re used to engineering everything. The risk that

we’ve got is that we over-engineer decommissioning and don’t treat it like a demolition job.

It’s a big issue because if you engineer it down it’ll cost you more to take out than it cost you

to put it in.

C) Accurately estimating the costs associated with a decommissioning

project?

I would say that the estimates are, what is internationally known in the American Association

of Cost Estimating (AACE) as a class system, depending on how much engineering you’ve

done. Typically the estimates are class 4 or 5, they’re very conceptual and so the cost could

be plus or minus 100 or 200% so you have to regard those estimates as that.

Question 4: What do you think could be some of the main challenges in the future as the

volume of works relating to decommissioning increases in the North Sea?

I think the challenges are ensuring that we don’t overheat the market. There is a risk that due

to the fact that we all delay we are all of a sudden trying to get them out at the same time and

therefore there is that risk that at times we will overheat the market and cause problems for

ourselves and because we haven’t got a steady flow it’s hard for people to invest so we’re all

competing for a diminished pool of kit and equipment and that’s the biggest problem for the

future. I think the other thing is that if you really want to make a cost difference we have to

really be serious about trying to reduce scope which arguably means leaving stuff on the

seabed which is highly controversial so that would require a change in mind-set, it involves

politics and so there’s moves afoot to try and do that but that’s fraught with challenges and

the court of public opinion may be against them which is fair.

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Question 5: As decommissioning is relatively in its infancy in the North Sea, how do you

make sure you're transferring lessons and experiences from one project to another?

[How do you make sure you're becoming more efficient, cost-effective and safe?]

I think we haven’t done a good enough job in terms of transfer of information. I can be blunt

about his and say that The Department of Energy and Climate Change (DECC) have not been

as rigorous with the oil companies in demanding information on the projects in closeout.

They’ve had a very softly-softly approach and they could be much more demanding about

what information is provided and shared. (me: If they had been more demanding initially do

you think there would be a big difference now?) Yeah. Absolutely. They’ve always taken a

more hands off approach. They’ve been more concerned about the approval of the project and

less about the information. The oil companies have shared information but again it’s on a

selective basis and not a consistent basis so it’s hard to compare one person’s cost estimates

with another’s when you don’t know what’s included. So we don’t have a consistent method

of transferring knowledge or transferring information. For instance, there are certain things

like cleaning the facility where several have been done now but we don’t have good metrics

on the number of man hours it took to do the job and this is just an example of many so we’ve

done a lousy job to date to be honest. (me: Within companies themselves they’re doing

lessons learned sessions after projects but that’s helping themselves, not the industry then I

suppose you have the issue if someone leaves that company who had great knowledge on

what they’d done previously then that’s then lost.) The classic example is BP themselves who

did North-West Hutton and then did the wells and the clean-up of Miller back to back, and the

learning from North-West Hutton to Miller for that phase was excellent because those project

were don’t by essentially the same team, or there was a very efficient handover to the new

team that did Miller. But then things were stopped because Miller became a helicopter base

for a while so it was mothballed as a decommissioning project. So all the project team

dissipated. Now they did write documents but you can’t write enough. In my personal view

you can’t write enough to transfer knowledge. It has to be a contact sport. However, clearly

the people who were involved in North West Hutton have now dispersed in the industry and

have popped up in other places, but it’s not a complete package, it depends what they were

working on. They’ve got some detailed knowledge of one bit and a very cloudy knowledge of

the other bit that they heard by association but don’t really know because they weren’t

working on it so there’s a danger that they think they know and they don’t, because they don’t

know the details. (me: The it’s back to square one again) Yeah, so even BP itself has a new

project team essentially who are going to do Miller decommissioning from now on but not

many of the people are still there. It’s the same with Total. They did Frig. Their team is long

gone so if they have to do the next job they’ll be starting from scratch and it doesn’t matter

how good your records are, you can’t dig up the stuff, read it and really understand, truly

understand what’s in it. The best way to try and transfer knowledge is to transfer people to be

honest, but you have to be more consistent about it than we are. The simplest way is if one

team did them all. That would be the ideal. They’d go from job to job to job and get pretty

good at it. It’s not exactly competitive but you see what I mean, in terms of knowledge,

they’d become experts. The best way for us to get the most efficient transfer of knowledge is

to have longer term contracts so that people do go from job to job and learn and then transfer

that. But we’re a long way off being able to organise that. I hope it comes one day. There’s a

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lot of talk but no action on that. We’re in our infancy, we’ve got a long way to go, we’ve only

just started, we don’t have a great deal of knowledge, we’re learning but we’re not even

organised to learn. That’s my beef at the moment. (me: So it’s a mixture of inexperience and

of things not being done maybe the way they should be?) Yeah, so there are lots of issues.

The bottom line is that we could do a lot better but I think the Oil and Gas Authority (OGA)

may come in and help facilitate this. Now that’s a polite word, but they might knock some

heads together. They certainly might encourage people to do a better job of transferring

knowledge and being more consistent about providing data. If I was them, that’s what I would

do. So it’s a risk that this will get done to the oil companies whether they like it or not

because if we don’t organise ourselves then the OGA will organise us anyway and it might

not be the way we want to do it so that’s an interesting asset of the new organisation but it’s

not fully up and running yet. (me: Maybe in the long run it would be good for someone to put

their foot down, even if it’s not what people prefer, it might be better in the long run) I’m a bit

blunt with so many self-invested interests. Either personal invested interests, natural

reluctance to share information but you’ve got to overcome it somehow. Oil companies

typically compete with each other for getting licenses and development but this is different

and although they’re not competing with each other and they’re saying they aren’t competing,

they still can’t get rid of old habits and tend to keep things close to their chests and they

should be more open with it. They can’t quite get used to it so that’s another issue; it’s a hard

nut to crack.