decommissioning - oil and gas authority · pdf file1. accountabilities - pauline innes 2....

Decommissioning

September 6th 2017

Offshore Europe Seminar

1. Accountabilities - Pauline Innes

2. Regulatory Guidance - Pauline Innes

3. Decommissioning Context - Gunther Newcombe

4. Cost Estimate and Certainty - Neil Edward

5. Operator Engagement - John Ibbotson and Ian Fozdar

6. Delivery Capability - Bill Cattanach

7. Well P&A - Michael Comfort and John Youles

Outline

Accountabilities

Click to edit Master title style

Click to edit Master subtitle style© OGA 2017This presentation is for illustrative purposes only. The OGA makes no representations or warranties, express or implied, regarding the quality, completeness or accuracy of the information contained herein. All and any such

responsibility and liability is expressly disclaimed. The OGA does not provide endorsements or investment recommendations. Oil and Gas Authority is a limited company registered in England and Wales with registered number

09666504 and VAT registered number 249433979. Our registered office is at 21 Bloomsbury Street, London, United Kingdom, WC1B 3HF Decommissioning – Status Update

Regulator Roles

2OGA and OPRED working together

Department for Business, Energy & Industrial Strategy (BEIS)

Energy Development

(Headquartered in London - Emily Bourne)

Oil and Gas Authority (OGA)

Chief Executive - Andy Samuel

(London and Aberdeen)

Offshore Petroleum Regulator (OPRED)

for Environment & Decommissioning

Chief Executive - Wendy Kennedy

(Aberdeen)

Policy and Corporate

Governance

Director - Sarah

Pritchard

Environmental

Operations

Director - Jonathan Ward

Decommissioning (ODU)

Director - Pauline Innes

OPRED’s role in Government

Clear accountability for offshore oil and gas decommissioning

policy, regulation and approval within BEIS

3





ODU and OGA Remits

4OGA and ODU working together

ODU

Approval and regulate

decommissioning

programmes for UKCS oil

and gas installations and

pipelines

Decommissioning policy

and guidance

Protect against risk of

companies defaulting

OGA

Working to assess and

minimise decommissioning

costs

Working with supply chain

Delivering MER UK

Regulatory Guidance




09666504 and VAT registered number 249433979. Our registered office is at 21 Bloomsbury Street, London, United Kingdom, WC1B 3HF

What we consider

Legislation, International Obligations

& Policy Guidance

Part

IV

Guidance Notes

Decommissioning of

Offshore Oil and Gas Installations and

Pipelines

under the Petroleum Act 1998

5





Decommissioning UKCS Offshore

Installations & Pipelines

Safe, efficient

and cost

effective

Minimise risk

to the

environment

and other

users of the

sea

Aim to achieve a clear

seabed

Regulatory decisions balance a number of legislative and policy

consideration to ultimately agree an acceptable

decommissioning solution

6





Other users of the

sea

Views of the

Fishermen’s

organisations

Technical

feasibility

Views of the

Technical

Specialist

OPRED

Stakeholders

and public

view from

consultation

Impact on Safety

Views of the

HSE

Economics and

Cost

Views of the

Decom team

in OGA

Impact on the

Environment

Views of OPRED

Environmental

Managers

Approval of a

Decommissioning

programme

Secretary of State

We have a Comparative Assessment system which assesses 5 key areas to

ensure a balanced decision in determining the decommissioning solution.

Factors taken into consideration

7

Decommissioning Context





Government• Long standing

• Robust

• Globally recognised

Strategy & Programme

Cost certainty and reduction

Delivery capability

Scope, guidance and stakeholder engagement

Driving targeted cost efficiency programmes including innovative and regional approaches with

extensive and effective knowledge sharing and best practice adoption

Developing an efficient and exportable low cost and profitable delivery capability supported by a

competent and efficient supply chain, a selection of business execution models all designed to

allocate risk, align industry participants and drive down costs

Working with BEIS and other relevant parties to identify and evaluate opportunities to further

optimise and define parameters for decommissioning scope and improve industry engagement

Builds on the Strategy

Focus over the next year

Reviewed on an annual basis

Clear action plan and timetable for delivery

Sets out a number of key deliverables

8Jointly developed by OGA & Industry & issued in 2016





OGA Decommissioning Team

Currently in process of recruiting a new Head of Decommissioning 9





Decommissioning Programme

Review Process

• Standard review template

• Agreed with OGA and

OPRED & in use

• Addresses:

– Cost estimate and

minimisation

• Timing

• OGA engagement

• Reuse

• Collaboration

• Benchmarking

• Future steps

10OGA & OPRED working together

COP & DP Forecast

Source: 2016 Stewardship Survey

Volume of COP’s & decommissioning plans increasing into 2018 with majority in SNS 11

Major

Others

Operator Decommissioning Costs

Source: OGA Stewardship Survey 2016

Decommissioning – Status Update 12

0

1

2

3

4

5

6

7

Gro

ss F

ore

ca

st

De

co

mm

issio

nin

g E

xp

en

dit

ure

(£

bn

)

Others

Majors

Five companies’

assets amount to

50% of total

decommissioning

costs





Decommissioning Spend

Source: 2016 Stewardship Survey

OGA need to work with industry to optimise collaboration and phasing 13





Key Deliverables

Decommissioning – Status Update 14Key deliverables for OGA decommissioning team

1Q

2017

SCAP DNS / Accenture

Report

Cost

Activities

Delivery Capability

Well P&A

Operator EngagementInternal

Strategy & Plan

Regulations in Practice

External UpdateRoad Test

WorkshopCNS Workshop

Engagements &

WorkshopsSelect

2Q

2017

3Q

20174Q

2017

1Q

2018

2Q

2018

3Q

20184Q

2018

Cost Estimate

ReportHMT Cost

ProfilesCost Estimate

ReportHMT Cost

Profiles

External Report

External

Engagement

Plan

Delivery

Plan

DTF WorkshopReissue Delivery

Programme

Cost Estimate & Certainty





Cost Estimate

• Based on UKCS 2016/2017

Stewardship Survey utilizing operator

supplied data with current and

proposed offshore facilities, pipelines,

all wells and onshore terminals

• Probabilistic approach used by

combining ranges from survey

classifications

• Approach and outputs reviewed with

OPRED, HMT, HMRC and assured

independently with Rider Hunt

• P50 probabilistic estimate is £59.7bn

OGA UKCS decommissioning probabilistic cost estimate £59.7bn 15





Need for Change

• Industry and government have

shared desire to minimise cost

• Awareness that business as usual

will not be sufficient to transform

cost

• Typical improvements of 35%

seen in other industries e.g.

automotive and aviation

• Minimum target of £39bn based

on 35% improvement on £59.7bn

P90

P50

P10

Transformational

approach

P90

P50

P10

Business as

usual

Cost

Cost

Pro

ba

bilit

yP

rob

ab

ilit

y

Decommissioning – Status UpdateIndustry decommissioning cost target £39bn 16





Industry Performance

Brent

Estimated cost decreased over £1bn

over past 2 years

Work with supply chain: cost

reduction in topsides and substructure

removal

Reduced well P&A costs: execution &

contracting strategy, efficiency

improvements

Learning transferable: Shell willing to

share

Murchison

Lessons learned to help half cost of

future projects

2 years ahead of schedule, estimated

final cost 88% of sanction cost

Early engagement with contractors,

flexibility of schedule

Sharing/engagement with regulators,

peers and industry

SNS

Internal well P&A campaigns delivering

50% cost reductions

Multi-operator well P&A to further

reduce costs and share experiences

Optimisation of schedule and market

flexibility

Engaging with SNS peers/industry

Decommissioning – Status UpdateDecommissioning – Status UpdateTangible evidence of significant cost saving by industry 17

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj0kse8yZzTAhVL6RQKHbMYA20QjRwIBw&url=https://twitter.com/shellstationsuk&psig=AFQjCNGGJ3yLz3frnIGHB-eRvdINSmyzqw&ust=1492005960750580

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjvwfKbypzTAhXGVRQKHZnhDv8QjRwIBw&url=https://en.wikipedia.org/wiki/File:ConocoPhillips_Logo.svg&psig=AFQjCNHVZ51aMLElfKGM1AotgM4g-KUbsw&ust=1492006160755065





Decommissioning – Status Update

Measuring Progress

• Future cost estimates will be

normalised against 2016 baseline

taking into account Inflation, scope

additions & completions

• Values plotted to give a

percentage realisation towards

target

• Improvements in estimates will be

identified through operator

engagements

• Reduction of 35% is at industry

level and not expected from every

operator for every asset

Pro

gre

ss

to

wa

rds

P5

0 T

arg

et

Time

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdateSignificant cost improvements expected in next 10 years towards £39bn target 18





OGA and Industry Next Steps

• Decommissioning cost report issued 29th

June, communicating current estimated cost

(£59.7bn) and target (<£39bn)

• Engaging with operators to:

– review cost dashboards

– review cost reduction focus areas

– share meaningful metrics/tools (e.g.

Basis of Estimate)

• Joint OGA and Industry taskforces to deliver

key initiatives during 2017/2018

• Update decommissioning stewardship survey

in 2017 to provide improved information on

decommissioning cost

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdateOGA and Industry working on ways to reduce decommissioning costs 19

Production Installations 0 Northern North Sea Pipeline(s) Wells Execution Plan

Name DescriptionInstallation

CategoryPOB Mass (Te) Premise Ref.: Description OD (") Dist.(km) Product Premise Well Base OGUK Type Well-Count Late-Life Management

Alfalfa A NUI - Normally Unmanned Installation Small - Oil 0 450 Remove PL631 Inde D Platform (Perenco) to Inde CP Platform (Perenco) 2 5 Chemical Injector Part Remove Type 0 0

Alfalfa B Integrated platform Combination >150 16,200 Remove PL870 Ninian Southern Platform to Tie In At Base of NSP 12 25 Injector Water Leave Type 1 0

0 0 Type 2 7

0 0 Type 3 0

0 0 Type 4 17

0 0 Type 0 0

0 0 Type 1 0

0 0 Type 2 0

0 0 Type 3 0 P&A

0 0 Type 4 0

Scope & Cost Phasing (£MM) Prior Years Future Cost L/Cycle Cost Est.Quality % Lifecycle 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 +

Operator Proj.Mgmt 1 MM£ 16 MM£ 17 MM£ AACE Class 3 5% £1 £2 £3 £3 £3 £2 £2 -£ -£ -£ -£ -£ -£ -£ -£ Running/Owners Costs 3 MM£ 66 MM£ 69 MM£ AACE Class 3 21% £1 £20 £20 £20 £5 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ Well P&A 4 MM£ 85 MM£ 89 MM£ AACE Class 3 27% £5 £20 £40 £20 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ -£

Fac./Pipelines Make Safe 5 MM£ 3 MM£ 8 MM£ AACE Class 3 2% -£ -£ £3 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ Topsides Preparation 1 MM£ 2 MM£ 3 MM£ AACE Class 3 -£ -£ £2 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ -£

Topsides Removal 2 MM£ 125 MM£ 127 MM£ AACE Class 3 -£ -£ -£ £50 £75 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£ Fac./Pipeline Make SafeSub-structure removal 3 MM£ 4 MM£ 7 MM£ AACE Class 3 -£ -£ -£ £1 £3 -£ -£ -£ -£ -£ -£ -£ -£ -£ -£

Super-/Sub-structure recycling 2 MM£ 1 MM£ 3 MM£ AACE Class 3 -£ -£ -£ -£ -£ £1 -£ -£ -£ -£ -£ -£ -£ -£ -£ Subsea infrastructure 0 MM£ 0 MM£ 0 MM£ AACE Class 3 -£ -£ -£ -£ -£ £0 -£ -£ -£ -£ -£ -£ -£ -£ -£ Site remediation 2 MM£ 1 MM£ 3 MM£ AACE Class 3 -£ -£ -£ -£ -£ -£ £1 -£ -£ -£ -£ -£ -£ -£ -£

Monitoring 1 MM£ 1 MM£ 2 MM£ AACE Class 3 1% -£ -£ -£ -£ -£ -£ £1 -£ -£ -£ £1 -£ -£ -£ £0

Cessation of Production (Year) 2018 304 MM£ 328 MM£

Warm StackCold Stack Removals & Recycling

Scope & Cost Phasing (£MM)Prior Years Future Cost

Operator Proj.Mgmt 1£ 16£

Running/Owners Costs 3£ 66£

Well P&A 4£ 85£

Fac./Pipelines Make Safe 5£ 3£

Topsides Preparation 1£ 2£ ContractingTopsides Removal 2£ 125£

Sub-structure removal 3£ 4£

Super-/Sub-structure recycling 2£ 1£

Subsea infrastructure -£ 0£

Site remediation 2£ 1£

Monitoring 1£ 1£

Business Environment

Operating Model

Industry Collaboration

Facilities re-use / Carbon Capture & Storage

Saving Opportunities vs Min vs Mode

Project Management £1 £0 MM

Post-CoP Running Costs £63 £0 MM

Well P&A £47 £31 MM

Facilities/Pipelines Make Safe £5 £0 MM

Topsides & Substructure Prep. + Removal £97 £3 MM

Topsides & Substructure recycling & disposal £2 £1 MM

Subsea infrastructure £0 £0 MM

Site remediation £2 £0 MM

Monitoring £1 £0 MM

£218 £36 MM

Summary / Conclusion

44%

Conclusion Added on Cost Category review tab

Total

23 March 2017 I.Fozdar





Platform

Subsea






£-

£10

£20

£30

£40

£50

£60

£70

£80

£90

£100

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 +

MM

Decommissioning Cost Phasing

Operator Proj.Mgmt Running/Owners Costs Well P&A Fac./Pipelines Make Safe Topsides Preparation Topsides Removal Sub-structure removal Super-/Sub-structure recycling Subsea infrastructure Site remediation Monitoring

5%

21%

27%

2%1%

39%

2% 1%0% 1% 1%

Decommissioning Cost Breakdown (WBS)

Operator Proj.Mgmt Running/Owners Costs Well P&A Fac./Pipelines Make Safe Topsides Preparation Topsides Removal

Sub-structure removal Super-/Sub-structure recycling Subsea infrastructure Site remediation Monitoring£0

£50

£100

£150

£200

£0

£50

£100

£150

£200

Project Management Post-CoP Running Costs Well P&A Facilities/Pipelines MakeSafe

Topsides & SubstructurePrep. + Removal

Topsides & Substructurerecycling & disposal

Subsea infrastructure Site remediation Monitoring

Decommissioning Project Cost Uncertainty and UKCS Benchmarks

Project P10 - P90 Range

Project Lifecycle Total Spend

UKCS Benchmark P10 - P50 Range





Industry Cost Modelling

• Develop a high level transparent decommissioning economic model that can be

used by industry stakeholders to quantify opportunities for cost reduction

– Create an AACE Class 5 probabilistic model with a transparent

reference case, using OGUK WBS construct using BEIS data set

– Uncertainties such as asset base, end state, condition, methodology,

resources and timing to be appropriately considered

– Economic model parameters will be explored to identify and articulate

cost reduction opportunities

– Model construct and outputs will be on a basin level basis by WBS to

maintain asset specific anonymity

• OPRED/OGA/OGUK/Industry team established, with steerage by

Decommissioning Task Force (DTF), to construct, review and evaluate the

model and outputs.

• Output will be shared at OGUK St Andrews Decommissioning conference end

November with a publication issued by OGA

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdateCost modelling led by BP with virtual team set up under DTF 20





Data Improvement

• 2017 UKCS Stewardship Survey will

include improved decommissioning data

collection processes, additional guidance

and a request for new information on:-

– Contingency

– Rig reactivation costs

– topside/substructure weights

• Basis of Estimate Guidance

– BOE template published to

coincide with Decommissioning

Cost Estimate Report

– Template provides industry a

standard basis of estimate that

captures and communicates

critical aspects of a project cost

estimate

– Helps operators standardise

input of data in the 2017 UKCS

Stewardship Survey

Decommissioning – Status UpdateDecommissioning data quality improvements from 2017 UKCS Stewardship Survey 21

Operator Engagement





Cost Reduction

Imp

rove d

eco

mm

issio

nin

g e

ffic

ien

cy

Cost certainty and reduction

• Benchmarking

• Metrics identifying high cost elements

• Standardisation of methods

• Sharing good practice

Delivery Capability

• Learning from other industries

• Innovative approach to contracting & commercial strategies

• Changing behaviours

Regulatory Guidance

• Improve awareness

• Communicate requirements

• Develop tools e.g. cleaning

Well Abandonment

• Campaign approach to well P&A

• E&A suspended well stewardship

• Pilot and upscale

10%-15%

Potential savings (not additive)

25%-35%15%-20%35%-45%NNS

WoS

CNS

SNS

IS

Owners Cost

Well P&A

Topside removal

Subsea Infrastructure

Substructure removal

Onshore recycling

59.7bn

59.7bn

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdateKey focus areas identified and OGA working with industry 22

Decommissioning – Status UpdateStructured engagement framework

Operator Engagement

• OGA web-based decom ‘regulatory

roadmap’ being updated Q3 2017

• BEIS updating decommissioning

guidance Q4 2017

• OGA Stewardship Implementation

Guide (Decom) issued Q2 2017

• Plan for decom in place 6 years prior to CoP

• Execution & Contract Strategy in place 3 years

prior to CoP

24





Cost Benchmarking Cost Breakdown (WBS)

Operator Input

Cost PhasingAreas of Potential Savings

Decommissioning – Status UpdateDecommissioning – Status Update 25Benchmarking dashboard used to evaluate Operator decommissioning plans

Operator Dashboard

Commentary

Pipelines Description & Tonnage

Well ClassificationFacilities Description & Tonnage

Benchmarking

26

Project

Management

Post CoP

Running Costs

MonitoringTopsides &

Substructure

Prep & Removal

Topsides &

Substructure

Recycling Disposal

Subsea

Infrastructure

Site

Remediation

Facilities/Pipeline

Make SafeWell P&A

Project P10-P90 Range

Project Lifecycle Total

Spend

UKCS Benchmark P10-P50

Range

50

0

250

100

200

300

150

Co

st

£ M

M

UKCS Benchmark P50

UKCS Benchmark P10

OGA engage operators to challenge, share and transfer best practice

Delivery Capability





Government• Long standing

• Robust

• Globally recognised


Decommissioning Overview


Supply Chain Opportunities

490,000tonnes

Around 800

platform and

450 subsea

wells

Topside

tonnage130,000

tonnes

FPSO

tonnage290,000

tonnes

Steel

Jacket

tonnage

15,000tonnes

Substructure

tonnage

Source: BEIS Data 2015

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdatePotential size of market based on anticipated COP dates up to end 2015 27

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiq3svcvPnTAhXlJ8AKHYqrBpAQjRwIBw&url=http://www.offshoreenergytoday.com/tag/sabah/&psig=AFQjCNFMEd1PQ7cvzbLQqsCZSdnGjy8LYg&ust=1495197991566542

4. Influencing and Promoting

• Active participants in developing a Sector Deal

• Supporting new pilot scheme to change tendering between service sector and operators

• Industry demand intelligence portal ‘Project Pathfinder’ covering new and decommissioning projects

Market Stimulating Initiatives

1. Supply Chain Action Plans (SCAP)

3. 2035 Vision

• OGA co-chairs the Supply Chain and Exports Taskforce

• Exports workgroup ensures connections with DIT, SDI and UKEF

• Focus on Norway by working closely with MPE and British Embassy

• OGA assessing domestic and international opportunities for the UK Supply Chain

2. Decommissioning Supply Chain Capabilities

• SNS PILOT Well P&A Forum – 8 Operators participated - held two SME opportunity Hackathon events

• Report on UK supply chain decommissioning capability and capacity is being prepared

• Working with governments and industry to promote UK port and yards capability

• Concept already used in other energy sectors

• Part of the enhanced asset stewardship process, FDPs and decommissioning plans

• Workgroup with five operators and two supply chain companies means good industry buy-in

For Vision 2035 to be

achieved, domestic

share of work to grow

from 50-65% and share

of international export

market to grow from

3.7% to 7.4%

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status UpdateOGA working with the service sector 28

Onshore Disposal

• Dales Voe Shetland official

opening was on 28th August

to dismantle Buchan Alpha

production facility

• Current site has a water

depth limit (13m) with

requirement to develop a

deeper water facility which

will need a investment

• UK and Scottish governments

supportive of

decommissioning

• Call on industry to provide

funding support

Decommissioning – Status UpdateDecommissioning – Status UpdateDecommissioning – Status Update 29Significant investment required to develop Dales Voe as first UK “deep-water” site

Well P&A





Suspended Open Water E&A Wells

• Stewardship process working with largest holders

who hold nearly 40% of suspended open water E&A

wells

• Meetings held with operators in Q2 to understand

their individual plans

• Review planned in Q3 with all operators to explore

synergies and potential joint programmes

Decommissioning – Status Update 30Current estimate to P&A all current suspended open water E&A wells is £0.5bn





Multi Operator Scope

• Cost reduction initiative investigating the optimal means of coordination of

scope for multiple operators for decommissioning

• Desire is that Cost-Optimal solution is available to all operators

• Similar methodology could be applied to any element of scope where timing is

flexible and there are suitable common requirements

Decommissioning – Status UpdateDecommissioning – Status Update 32To date collaborative approach by operators is not common practice





Subsea Development Wells• Subsea well P&A expenditure in range £10-15 billion over

next 40 years

• Cost-Optimal execution could be achieved through a

sufficiently large programme of continuous work but not all

operators have scope within own portfolio to construct

such a programme

• Savings in the range 10-30% have also been estimated

by supply chain companies amd collaboration could yield

further improvements through sharing of knowledge and

experience

• Access to the foundations for cost-optimal execution cash

flow management

• Timing is flexible as there is no significant on going cost

and common requirement for mobile asset and specialist

services

• Provide common testing ground e.g. trial and

implementation of new techniques and technologies

Decommissioning – Status UpdateDecommissioning – Status Update 31Value of opportunity £0.5 to £2.25bn





Next Steps

• Working with operators and supply chain companies

• Appraise coordination options and work through common challenges

• Quantify the opportunity

• Examine whether the current regulatory environment is providing the optimal

solution for HMG

• Supply chain invite to participate imminent

• Update to be issued at end Q4

Decommissioning – Status UpdateDecommissioning – Status Update 33Objective: Cost-optimal Subsea Well P&A

decommissioning - oil and gas authority · pdf file1. accountabilities - pauline innes 2....

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