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IHS Markit forecasts global offshore decommissioning spending to
reach almost USD100 billion for the 2021-30 period, up by over 200%
compared to the previous ten-year period.
As multiple oil and gas fields are approaching end of
production, and the global economy is pushing toward a low carbon
economy and energy transition, a horde of oil and gas platforms and
associated infrastructure are going to be obsolete and left without
purpose during the next decade.
The United Nations Convention on the Law of the Sea (UNCLOS)
obliges member countries to remove any abandoned or disused
installations or structure to ensure safety of navigation,
considering any generally accepted international standard of the
IMO and with due regard to fishing and protection of marine
environment (Articles 60(3) and 80).
The North Sea countries have committed itself to the responsible
removal and recycling of platforms that are not in use through the
Oslo-Paris Convention for the Protection of the Marine Environment
of the North-East Atlantic (OSPAR).
Government and offshore regulators across the world are greatly
aware of the forthcoming oil and gas field abandonment and are
enhancing their scrutiny and enforcement to make sure the industry
does not leave the clean-up bill for the taxpayers.
According to IHS Markit's proprietary database Petrodata™
FieldsBase, nearly 2,800 fixed platforms and 160 floating platforms
could be decommissioned during the 2021-30 period. That represents
33% of fixed platforms and 43% of floating platforms currently in
operation. Additionally, more than 18,500 wellheads, 2,850 subsea
trees, and 83,000 km offshore pipelines and umbilicals currently in
operation are subject to decommissioning during the same
period.
This is a daunting task for the oil and gas industry. A task that
will require strong collaboration with both the service industry
and regulators to make it as safe and cost effective as possible.
Oil and gas operators are better served in the long run to start
decommissioning as early as possible rather than delaying as long
as possible, because the task ahead is formidable and will require
cost-effective solutions and innovation to succeed.
The service industry needs sustained activity and incentives to
keep developing new technology and expand its experience to keep
pushing down the costs on decommissioning.
Technology development, improving project execution, and
creating innovative commercial models are all contributing to push
down costs within decommissioning activities. Challenging resources
and regions with stricter regulations are also driving the needs
for technology-enabled cost reduction, as seen in the
decommissioning of Gulf of Mexico (GOM) deepwater assets.
Most new decommissioning technologies and highest cost-saving
potential are within plug and abandonment (P&A) of wells, which
represent about 50% of total offshore decommissioning spending. But
innovation and strong capabilities in other areas including
offshore heavy lift, subsea removal, and cutting and dismantling
are also vital to achieve further cost-savings, not to mention a
competent and qualified workforce.
Other notable findings in the report
Europe is the largest market with 33% of spending, followed by Asia
Pacific and North America with 23% and 17% respectively.
United Kingdom is expected to be the largest decommissioning
spender, followed by USA, Brazil, Norway, Australia.
The 13 largest operators represent 51% of expected global
decommissioning spending.
Decommissioning costs is more expensive in deepwater and harsh
environments.
Decommissioning spending is sensitive for lower oil prices. A
USD45/bbl scenario will have a significant, negative effect on the
economic production period for multiple fields in the tail-end
production phase.
Watch a reply of our recent
offshore decommissioning webinar and listen to our expert Erik
Simonsen discussing factors affecting future demand trends
globally, regionally, and in key markets. For more information
about our Offshore Decommissioning service please contact james.blanchard@ihsmarkit.com.
Posted 05 October 2021 by Christian de los Reyes Ullevik, Sr. Research Analyst, Upstream Costs & Technology, S&P Global Commodity Insights
