Low Oil Price to Hasten UKCS Decom Opportunity

Russia: Global Shale Output Decline Will Stabilize Oil Market
The UK oilfield services sector is set to benefit from a significant increase in decommissioning activity in the North Sea, according to industry observers Rigzone has spoken to at Offshore Europe.

The UK oilfield services sector, currently struggling amid a significant decline in capital spending on exploration and development, is expected to benefit from a significant increase in decommissioning activity on the UK Continental Shelf, according to industry observers at the Offshore Europe show being held in Aberdeen, Scotland this week.

In an interview on the sidelines of Offshore Europe, Wood Mackenzie upstream research analyst Fiona Legate pointed out to Rigzone that with just 38 new fields due to come on stream over the next five years "supply chain companies will move into the decommissioning market" and that decom spend is set to overtake development CAPEX in 2019, although Wood Mac sees capital investment spending falling by 65 percent by that time.

The low oil price is set to hasten decommissioning activity, according to Wood Mac.

"Under our base case 140 fields are forecast to cease [production] over the next five years… And then, looking at the low oil prices environment and the potential for fields to cease early, there are around 50 fields that could cease earlier," Legate said.

Legate also pointed out that the UK North Sea is in an almost unique position in that it is one of the most mature offshore petroleum provinces in the world and so there is a great opportunity for the UK to lead the way in the decom sector.

"If we do decommissioning right we can lead the way in terms of best practice. So, we could turn this into a positive thing," she said.

Speaking separately to Rigzone, GE Oil & Gas Subsea Systems CEO Rod Christie said that his firm is looking to play a role in decom activity in the North Sea. But he said that the industry needs to see alliances develop that can make decommissioning a viable proposition that can free up cash earmarked for the activity on operators' balance sheets.

"Ultimately it's about cost. [The field] is not producing anything. It's being decommissioned. It’s a cost. How do you de-risk that? For many years it's been about 'how do we put off the evil day?' Because the potential liability there is pretty sizable and if there is no robust technical and commercial solution to deal with it you are sitting with some very high risk. So I do think a company the size of GE, working with some potential partners, potentially has something to bring to that space," Christie said, pointing out that GE Oil & Gas already has plenty of experience of working on well plugging and abandonment programs in the North Sea.

Meanwhile, Kenny Dooley, an Aberdeen-based regional director for recruitment consultancy Petroplan, believes that decommissioning represents a "huge" employment opportunity for the industry at a time when there are large numbers of contractors looking for work.

"This is the perfect time to kick off decommissioning projects. We're speaking to a few companies about decom. We're lucky because we've a good contractor base to go after."

Read other Offshore Europe 2015-related news at bit.ly/1UyQBy7.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com


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