Meeting the Decommissioning Challenge – Addressing the Cost and Safety Issues of Abandoning Wells

At the same time as the oil and gas industry is expanding into new basins and new unconventional plays, mature basins around the world are offering fresh decommissioning challenges at the end of field life. Decommissioning creates no further revenue to operators and the associated costs and risks are high. Addressing these challenges is urgent and the potential to avoid high costs is significant.

Decommissioning and the UKCS

A large number of oil and gas assets in the North Sea are coming to the end of their field life. The decommissioning and removal of the associated infrastructure presents a huge challenge and must be carried out safely, securely and cost effectively.

According to Oil and Gas UK, the projected decommissioning spend between 2017 and 2025 on the UK Continental Shelf is $20-30 billion, distributed between almost 2,500 wells. Well plugging and abandonment (P&A) is the largest component of this decommissioning expenditure, accounting for almost 50% of the total cost.

Current legislation means the UK taxpayer will supply half of the multi-billion pound burden for dismantling these rigs, platforms and old infrastructure. The government’s priority, therefore, is to reduce costs effectively, while maintaining high safety and environmental standards. Of course, conducting operations in the most safe and cost-effective manner is equally important to operators.

Global Decommissioning

Southeast Asia, Latin America, West Africa, the Arabian Gulf, Egypt, India, China, and Australia are all beginning to face the emerging challenges of decommissioning. Most governments have begun an initial look at decommissioning, although their timelines may be decades behind Europe and the US.

Brazil, for example, has removed less than 5% of its offshore platforms, 42% of which are more than 25yrs old. A further 38% of their offshore platforms are between 15 and 25 years old. Clearly, decommissioning will become a pressing issue in Brazil over the next 10 years. By contrast, there are over 2500 offshore oil installations across the Southeast Asia region of which almost 800 are approaching the end of their design life, or have already exceeded it. Cost estimates for the eventual decommissioning of these regional assets range from $30-60 billion.

Similarly, Nigeria and Angola hold the fastest growing decommissioning markets in West Africa. It’s estimated that by 2020 Nigeria will have performed 107 platform removals, compared to just 1 in the Ivory Coast.