The North Sea Dilemma: Continue to Invest or Start Decommissioning?

While the extent of the decommissioning opportunity for oilfield services companies is becoming increasingly apparent and assured, the foundations that need to be laid today are becoming increasingly complex and contradictory to management and shareholder instincts to cut costs. OFS companies will need to ensure they adhere to three key steps:

  • Develop the right business model. In the future the North Sea market is going to be much more diversified than today, with the likes of wind power and decommissioning representing much larger shares of the overall market. Instead of specializing only on one part of the value chain, OFS companies should diversify their business and spread exposure and better mitigate external shocks. This will require new service models, infrastructure, end-to-end outsourced services and more information sharing to deepen internal know-how.
  • Retain/develop right skill set. Oilfield services companies should avoid removing the necessary skills, expertise and scale required to capitalize on future opportunities as North Sea revenues diversify.
  • Successful overall program management. Decommissioning is an extremely complex process requiring robust internal program management capability to cope with the extensive cost and technical challenges, environmental concerns and regulation. OFS companies will need to find the right approach to handle multiple stakeholders: local authorities, lawyers, environmental regulators, sub-contractors, media relations; the list goes on.

All three of the above aspects are not necessarily easy to accomplish in unison, especially in the current environment. Knowing where to diversify, what skills/assets are required and who may be suitable targets to partner with are all difficult decisions to be taken over the coming years in order to fully benefit from the opportunities while effectively mitigating against future shocks.

Conclusion:

  • If properly prepared for, decommissioning in the North Sea could represent major opportunities for OFS companies, greatly offsetting the ageing E&P sector
  • But OFS companies must ensure that they have the necessary skills, business operating model and program management ability to capitalize on the opportunity in the future
  • The foundations for this will need to be laid today

For more information please contact: Walter Pfeiffer (walter.pfeiffer@rolandberger.com), Tim Longstaff (tim.longstaff@rolandberger.com), Richard Pearce (richard.pearce@rolandberger.com).


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WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

jay cresswell  |  October 16, 2015
Well said Jim! As you will know, I highlighted the diversification issue in the Offshore Europe edition of Energy and, in the current edition, focused on Amec Foster Wheelers very specific efforts in the late-life into decom sphere JC
Jim Rae  |  October 12, 2015
Strict Regulation is being touted here as an increased cost factor. Sorry chaps, Operators were well aware of these conditions when they took out their licences and then got development sanction subsequently for field development and many years thereafter of fruitful bounty. If they are unable/unwilling to manage the entire life-cycle of their assets properly, nor make proper decommissioning estimate provision on an annual basis, like most mature sectors, then they are going to be in trouble!! Time everyone stopped trying to blame the Regulators and looked at their own short-termism as the main reason decommissioning costs are so much higher than they estimated!! Reality hurts. We need to start planning for field late-life much more honestly or there will be tears. Get it right - the simplest and cheapest way to decommission is to comply as quickly and effectively with the regulatory framework - dont blame the regulators because Operators stick their hrads in the sand and live in La La Land until it is virtually too late. Wake up and smell the coffee. This was all possible to plan for years ago!!

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