Decommissioning in the North Sea: review of decommissioning capacity

This report aims to provide an overview of the scale and nature of the North Sea oil and gas (O&G) decommissioning market in the next decade, highlighting areas where there are potential bottlenecks in the supply chain which might impact decommissioning activity levels. The analysis focused on critical supply chain elements which are resources that are fundamental to delivering decommissioning projects, and which would have the most significant effect on the deliverability of projects if there were capacity constraints. These elements were identified as: rigs/rigless abandonment infrastructure, removal vessels for topsides and substructure, ports/harbours/yards for recycling and skilled engineering and operational resources serving all aspects of the sector. The analysis considered the following parameters for each of the supply chain elements: available capacity and investment lead time, investment commitment, pressures/synergies from other industries and capability.

The study used a number of existing sources of information to assess the likely scale of demand for decommissioning services. It also drew on Arup’s knowledge of the sector, along with the expert views of a range of industry leaders in the field, to identify and assess critical areas of capability and capacity. A capacity health check was undertaken for each of the critical supply chain elements.

The report indicates that the O&G decommissioning sector offers a significant socio-economic opportunity in terms of job creation in the Scottish, UK and European supply chains, and an opportunity for North Sea based firms to export expertise to other parts of the world. By 2040, investment of around £30 billion is expected in the UK Continental Shelf (UKCS) on decommissioning North Sea assets. It is suggested that the industry should build on its existing capacity and capability to service the complex and demanding nature of decommissioning work in the North Sea if it is to take advantage of this opportunity. Available market forecasts have indicated that overall decommissioning expenditure in the North Sea could be between £1.1bn and £2.6bn per annum, and is estimated to reach over £17bn for the period between 2014 and 2022. The capacity health check for the critical supply chain elements found that, overall: there is a high potential for well abandonment resources to cause a supply chain bottleneck; there is a moderate potential for topside and substructure removal resources to cause a supply chain bottleneck; there is a low potential for topside and substructure recycling resources to cause a supply chain bottleneck; and there is a moderate potential for people resources to cause a supply chain bottleneck. Contributors to the consultation exercise commonly noted the need for the market to develop an approach to decommissioning distinct from that of exploration and production activity. There was broad consensus that the industry needed to evolve to efficiently deliver the activity needed over the next 40 years. It is suggested that innovation can play a role in delivering decommissioning in a more cost effective manner. The analysis indicated that there is a need to adapt existing procurement strategies to reduce requirements for previous experience which will allow new entrants to the market who may introduce innovative methods.

No recommendations were made.