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Decommissioning of offshore facilities increasing significantly - IHS Markit Says

Decommissioning of offshore facilities increasing significantly - IHS Markit Says

Nov 30, 2016
4 min read
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The decommissioning of aging offshore oil and gas platforms, subsea wells and related assets is increasing dramatically, with more than 600 projects expected to be disposed of during the next five years alone. This rapid trend toward decommissioning is causing spending to rise significantly, according to a new study by IHS Markit.

IHS Markit expects spending on decommissioning projects to increase from approximately US$2.4 billion in 2015, to $13 billion-per-year by 2040, or an increase of 540 percent, says the new IHS Markit Offshore Decommissioning Study Report. The report provides a detailed market analysis and assessment of the legal, regulatory and financial requirements for decommissioning in the UK, Norway, the US Gulf of Mexico, Indonesia and Australia.

An additional 2,000 offshore projects will be decommissioned between 2021 and 2040, the report noted, and total expenditures from 2010 to 2040 will amount to $210 billion. During the next five years, Europe will absorb approximately 50 percent of global decommissioning spending as the industry removes major offshore structures from the North Sea. Each year, the industry currently decommissions an average of 120 projects on a global basis, IHS Markit said.

“In terms of decommissioning, the global offshore industry is headed for a perfect storm. We see increasingly stringent decommissioning regulations coming into force at the same time that the inventory of structures nearing end-of-life status is getting larger and more complex,” said Bjorn Hem, senior manager of IHS Markit upstream costs and technology service and one of the study’s authors.

According to the IHS Markit report, as E&P activity has shifted to deeper waters, harsher environments and increasingly complex projects, some of which comprise hundreds of wells and miles of risers tied back to a few ultra-large platforms, operators now face enormous challenges when planning the removal of these assets. Some of these decommissions can cost billions of dollars and take years to successfully dispose of, and decommissioning delivers no return on investment or revenue, but instead carries significant environmental and regulatory liabilities.

“The effective decommissioning of offshore platforms, subsea wells, and related assets is one of the most important business challenges facing the oil and gas industry today and in the future,” said Bill Redman, senior director of upstream costs and technology commercial strategy at IHS Markit. “Decommissioning represents a considerable shift in terms of sustainable business planning for most operators.”

Key environmental issues in decommissioning include dealing with any potential direct effects on the marine ecosystem, ensuring the appropriate use and containment of hazardous substances, and addressing waste management issues, including seabed debris accumulated during the life of the platform. Items typically involved in decommissioning include surface facilities, called topsides, as well as subsea installations, pipelines and wells. These topsides structures can vary greatly in size and function, from one small well/wellhead to massive deepwater installations, including large processing and storage facilities, and staff accommodation facilities.

Key environmental issues in decommissioning include dealing with any potential direct effects on the marine ecosystem, ensuring the appropriate use and containment of hazardous substances, and addressing waste management issues, including seabed debris accumulated during the life of the platform. Items typically involved in decommissioning include surface facilities, called topsides, as well as subsea installations, pipelines and wells. These topsides structures can vary greatly in size and function, from one small well/wellhead to massive deepwater installations, including large processing and storage facilities, and staff accommodation facilities.

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