Decommissioning Insight 2017

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DECOMMISSIONING INSIGHT 2017

Contents

1. 2. 3.

Foreword

5 7

Key Findings

The North Sea Decommissioning Market

10 11 12 13 14 15 16 23 26 28 29 30 30 30 32

3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 4.6 5.1 5.2 5.3 5.4 5.5

The Regulatory Environment

A Growing Market

Planning for Decommissioning

Forecast Activity Across the North Sea

Survey Development and Methodology Well Plugging and Abandonment Topside and Substructure Removal

Subsea Infrastructure

Onshore Recycling and Final Disposal

Site Remediation and Long-Term Monitoring 28

UK Continental Shelf Expenditure Forecasts

Maturity of Estimates Cost Reduction Targets

Historical Comparison of Forecasts

Regional Breakdown

Expenditure by Decommissioning Component

5.6

Operator Project Management and Facility Running Costs Well Plugging and Abandonment Costs

34 35 38 41

5.7 5.8

Platform Removal Costs

Glossary

HEALTH & SAFETY REPORT 2017 D COMMI SIONING INSIGHT 2017

The UK Oil and Gas Industry Association Limited (trading as Oil & Gas UK) 2017 Oil & Gas UK uses reasonable efforts to ensure that the materials and information contained in the report are current and accurate. Oil & Gas UK offers the materials and information in good faith and believes that the information is correct at the date of publication. The materials and information are supplied to you on the condition that you or any other person receiving them will make their own determination as to their suitability and appropriateness for any proposed purpose prior to their use. Neither Oil & Gas UK nor any of its members assume liability for any use made thereof.

1. Foreword Oil & Gas UK’s 2017 Decommissioning Insight captures an even broader picture of the decommissioning opportunities across the North Sea in Norway, Denmark and The Netherlands, as well as a focus on what the UK will offer between 2017 and 2025. We hope this further expands the information available to operators planning to decommission assets across the basin and assists supply chain companies in understanding the future demand for their services and expertise within a wider North Sea context. Our report shows the UK Continental Shelf (UKCS) is the largest decommissioning market in the North Sea, with annual decommissioning expenditure in 2016 amounting to £1.2 billion. Over the next five years, the annual expenditure profile is forecast to remain consistent at £1.7-£2 billion per year, indicating that there is not a rush to decommission despite the downturn. Decommissioning will represent around 11 per cent of total expenditure in the basin this year, compared to 2 per cent in 2010. Looking ahead, £17 billion is forecast to be spent on UKCS decommissioning between now and 2025, which is in line with the trends we observed in the 2016 report. The forecast shows that decommissioning activity on the UKCS is greater than for the other three countries in the report, reflecting the total amount of infrastructure in the basin and the fact that an increasing number of mature assets are naturally coming to the end of their productive lives. This does not mean the UKCS is entering its declining years. Indeed, since 2014, production has increased by 16 per cent following a decade of continuous decline and, by the end of the year, one-third of production will come from new fields that have started up since 2016. More generally, there are also signs that development activity on the UKCS could pick up in 2018, with decommissioning expected to take place alongside more productive activities in oil and gas production. The UK’s oil and gas industry has strived to improve its competitiveness in the face of the oil price downturn over the last few years. The increase in operational efficiency has helped to halve operating costs and boost production, as well as extend field life on many mature fields causing decommissioning to be postponed. Our industry’s desire to collaborate to deliver a more sustainable future underpins this step change in performance, and a key vehicle for promoting positive change is the pan-industry Efficiency Task Force. This initiative has promoted sector-wide sharing of guidance, tools and best practice to support efficiency improvement. It is exciting to see how many companies have helped drive progress in this area across their whole business and are now applying the same lessons to control decommissioning costs. This report provides fresh evidence of how this focused approach has benefitted well plugging and abandonment (P&A) activities, where forecast expenditure has reduced on average by 5 per cent across the UKCS with many companies achieving much greater cost reductions. With well P&A predicted to be the largest category of expenditure through to 2025, the industry is concentrating on delivering big improvements in these high cost activities, while maintaining safety and environmental standards at the highest levels. In support of this, industry Guidelines for the Abandonment of Wells are currently being updated to reflect the latest lessons and best practices from around the world. Our collective experience shows we are doing the right things now to deliver an efficient and evolving decommissioning sector, where operators and their contractors work together to drive continuous self-improvement. Industry is committed to working closely with its regulators and the government to reach the shared target of a 35 per cent reduction in the total cost of decommissioning on the UKCS, and good progress is already being achieved.

DECOMMISSIONING INSIGHT 2017

It should be remembered that decommissioning on the UKCS is just getting under way. Our experience as a sector in decommissioning will in time become a valuable part of the UK oil and gas industry’s international reputation. We will be judged by how effectively we manage late-life assets and how successfully we deliver our decommissioning programmes. If we continue to build on current achievements, the UK will in time earn its place as a global leader in late-life asset management and decommissioning. Our competencies in this field have already been recognised in the UK Government’s Industrial Strategy as a key opportunity for our economy and we have clear aspirations to make decommissioning a part of a Sector Deal over the next few months. Looking at the wider North Sea picture, 23 fields are preparing for decommissioning on the Norwegian Continental Shelf. The Norwegian Petroleum Directorate’s outlook for the next five years shows that expenditure will rise to £800 million by 2021. In The Netherlands, decommissioning between now and 2025 is forecast to take place on 106 fields totalling between £650-800 million. We face an exciting future; what we do now to build a decommissioning capability in the UK will reap rewards for years to come. The provision of an increasingly open and broad perspective on decommissioning activity will arm the industry with the information it requires to become more efficient and competitive. There is a very real opportunity for the UK’s decommissioning sector to become a champion of decommissioning excellence within the global arena. Together we can achieve this, and this Decommissioning Insight with its wealth of market intelligence is one key way to prepare for achieving that outcome.

Michael Tholen, Upstream Policy Director, Oil & Gas UK

2. Key Findings Decommissioning Across the North Sea

• Decommissioning is a growing market across the North Sea. Activity on the UK Continental Shelf (UKCS) is expected to be significantly higher than on the Norwegian, Danish and Dutch Continental Shelves to 2025. This reflects the scale of total infrastructure and the relative maturity of the different regions of the North Sea, with more fields reaching the end of their productive lives in the UK.

• From 2017 to 2025, decommissioning is forecast to take place on 349 fields across the four regions of the North Sea:

• Six fields on the Danish Continental Shelf • 23 fields on the Norwegian Continental Shelf • 106 fields on the Dutch Continental Shelf • 214 fields on the UKCS

• Across the four regions:

• Over 200 platforms are forecast for complete or partial removal • Close to 2,500 wells are expected to be plugged and abandoned • Nearly 7,800 kilometres of pipeline are forecast to be decommissioned

UK Continental Shelf in Focus

• Decommissioning, as a proportion of total UKCS expenditure, has increased from 2 per cent in 2010 to 7 per cent (£1.2 billion) in 2016. Operators forecast this figure will rise to 11 per cent (£1.8 billion) this year.

• From 2017 to 2025, £17 billion is forecast to be spent on decommissioning on the UKCS.

• The annual expenditure profile is forecast to remain consistent over the near term at £1.7-£2 billion per year.

• Forty-six per cent (£7.9 billion) of the total UK decommissioning spend from 2017 to 2025 will be concentrated in the central North Sea.

• The largest category of expenditure is well plugging and abandonment (P&A) at 49 per cent (£8.3 billion).

• The UK offshore oil and gas industry is committed to ensuring that decommissioning is carried out as cost-effectively as possible, while maintaining high safety and environmental standards.

• The average forecast cost for well P&A has fallen by 5 per cent in the central and northern North Sea and west of Shetland, and by 4 per cent in the southern North Sea and Irish Sea. These figures are expected to fall further as lessons learnt from industry experience are shared sector-wide to further improve efficiency.

DECOMMISSIONING INSIGHT 2017

Forecast Decommissioning Activity Across the North Sea, 2017 to 2025

Northern North Sea and West of Shetland

Southern North Sea and Irish Sea

Norwegian Continental Shelf

Danish Continental Shelf

Dutch Continental Shelf

Central North Sea

Total UKCS

Total

Number of fields with decommissioning activity Number of wells for P&A

214

106

349

568

604

452

1,624

300

113

410

2,447

Proportion of wells that are platformwells Number of platforms for removal

70% (399)

49% (297)

76% (345)

64% (1,041)

85% (254)

98% (111)

84% (345)

72% (1,751)

206

Topside weight to be removed

238,110 tonnes 52,655 tonnes

224,458 tonnes 128,024 tonnes

78,760 tonnes 68,979 tonnes

541,328 tonnes 249,658 tonnes

123,205 tonnes 115,176 tonnes

75,602 tonnes 58,602 tonnes

119,665 tonnes 84,502 tonnes

859,800 tonnes 507,938 tonnes

Substructure weight to be removed

Subsea infrastructure to be removed Length of pipelines to be decommissioned

13,586 tonnes

31,015 tonnes

4,772 tonnes

49,373 tonnes

2,555 tonnes

590 tonnes

1,385 tonnes

53,903 tonnes

778 kilometres

2,624 kilometres

2,112 kilometres

5,514 kilometres

222 kilometres

217 kilometres

1,827 kilometres

7,780 kilometres

Total tonnage coming onshore

304,351 tonnes

383,497 tonnes

152,511 tonnes

840,359 tonnes

240,936 tonnes

134,794 tonnes

205,552 tonnes

1,421,641 tonnes

Forecast Decommissioning Expenditure on the UK Continental Shelf, 2017 to 2025 1

Central and Northern North Sea and West of Shetland

Southern North Sea and Irish Sea

Total UKCS

Operator project management and facility running costs Facilities ‘making safe’ and topside preparation Pipelines ‘making safe’ Substructure removal Mattress decommissioning and other subsea infrastructure removal Pipeline decommissioning Well P&A Topside removal

£2.4 billion

£216 million

£2.7 billion

£6.8 billion

£1.5 billion

£8.3 billion

£808 million

£150 million

£958 million

£121 million £1.3 billion £689 million

£162 million £133 million £449 million

£283 million £1.4 billion £1.1 billion

£546 million

£248 million

£794 million

£834 million

£173 million

£1 billion

Onshore recycling and disposal Site remediation

£215 million

£65 million

£279 million

£136 million £20 million £13.9 billion

£43 million £10 million £3.2 billion

£179 million £29 million £17 billion

Monitoring

Total

Forecast Average Unit Costs for Well P&A and Cost per Tonne on the UK Continental Shelf, 2017 to 2025

Central and Northern North Sea and West of Shetland

Southern North Sea and Irish Sea

Average UKCS

Platform well P&A

£4.9 million

£2.8 million

£3.8 million

Suspended exploration and appraisal well P&A Subsea development well P&A Facilities ‘making safe’

£6.9 million

£3.4 million

£4.9 million

£10.1 million

£7.8 million

£9.7 million

£509

£928

£578

Topside removal

£2,800 £4,700

£3,600

£3,436

Substructure removal

1 All forecasts by region and component are rounded and so the sum of them may not come to the total forecast expenditure

DECOMMISSIONING INSIGHT 2 017

Decommissioning Infograp – Facts and Figures, November 201

3. The North Sea Decommissioning Market

£1.7 – £2 billion on the UK Continental Shelf per year £400 – £800 million on the Norwegian Continental Shelf per year £650 – £800 million Forecast decommissioning expenditure over the next five years:

In Summary W ith significant remaining resource yet to recover, the focus of the offshore oil and gas industry and its regulators across the North Sea (the UK, Norwegian, Danish and Dutch Continental Shelves) is to maximise economic recovery. In parallel with this, and a necessary part of the petroleum economics life cycle, is decommissioning of an oil and gas field. Decommissioning is a growing market as an increasing number of fields naturally reach the end of their productive lives. The timing around cessation of production (CoP) and subsequent decommissioning is notoriously challenging to plan for as it is affected by variables such as oil price, asset integrity, production efficiency, field interdependencies and brownfield investment potential. The recent fall in oil price, by and large, has not accelerated decommissioning, with only a small number of isolated examples where this has happened. Instead, the focus across the North Sea is to maintain or extend field life by reducing costs and increasing operating efficiencies. The majority of decommissioning activity taking place now has long been in companies’ plans. The UK Continental Shelf (UKCS) currently has the largest decommissioning market in the North Sea, at around £1.2 billion in 2016 and is expected to grow to £1.8 billion in 2017. This is equal to around 11 per cent of total UKCS expenditure, and could increase further to around 17 per cent by 2025 as more fields enter their decommissioning phase and spend in other areas reduces. The UK supply chain is therefore in a good position to develop the requisite skillset and experience to form an international centre of excellence in decommissioning, with the opportunity to export its expertise. Companies must, however, develop the capability and capacity to compete in a global marketplace on quality, efficiency and cost, while maintaining focus on high environmental and safety standards. £1.7 – £2 billion on the UK Continental Shelf per year £400 – £800 million on the Norwegian Continental Shelf per year £650 – £800 million Forecast decommissioning expenditure over the next five years:

total on the Dutch Continental Shelf

Decommissioning Infographics – Facts and Figures, November 2017

Decommissioning activity is forecast on 349 fields across the UK, Norwegian, Danish and Dutch Continental Shelves to 2025

Supply chain companies must be able to compete in a global marketplace for decommissioning contracts on quality, efficiency and cost

Almos

2,5

wells

are forecas plugged and a across the Nor to 2025, with two-thirds i

Operators forecast that total decommissioning spend in the UK Continental Shelf will be £17 billion between 2017 and 2025

The Oil an Authority is ta 35

total on the Dutch Continental Shelf

3.1 The Regulatory Environment The OSPAR Commission is an international convention that aims to protect the marine environment of the North-East Atlantic. As contracting parties to the OSPAR Convention, the UK, Norway, Denmark and The Netherlands are committed to OSPAR Decision 98/3, which requires all offshore structures to be removed during decommissioning. Pipelines are not covered by OSPAR and are regulated under national legislation. National regulators can grant an exemption (derogation) fromOSPAR Decision 98/3 for concrete structures and the footings of steel structures that weigh more than 10,000 tonnes and were installed before 1999; the infrastructure owner must demonstrate appropriate safety, environmental and technical considerations. Contracting parties are committed to carrying out a review every five years to determine if there is a case for reducing the scope of this derogation. The three reviews carried out since 1999 have concluded that a change in the criteria is not required. The next review is due in March 2018. In the UK, the Department for Business, Energy & Industrial Strategy (BEIS) is the competent authority for decommissioning and is responsible for approving decommissioning programmes under the Petroleum Act 1998. The Oil and Gas Authority (OGA) ensures platforms do not prematurely cease production in line with the principles of MER UK (maximising economic recovery from the UKCS), and that decommissioning is carried out in a cost-effective manner. The OGA therefore grants approvals to cease production. In Norway, the Norwegian Petroleum Act regulates the shutdown and disposal of offshore facilities, while the Norwegian Ministry of Petroleum and Energy makes the final decision on decommissioning in consultation with the Norwegian Petroleum Directorate. In Denmark, platform decommissioning is regulated by the Subsoil Act and Offshore Safety Act, and approval and permits for decommissioning are awarded by the Danish Working Environment Authority. In the Netherlands, this activity is regulated under the Dutch Mining Act. In November 2016, The Netherlands Masterplan for Decommissioning and Re-use 2 set out plans to: establish a national platform to drive the decommissioning and re-use agenda; develop a national decommissioning database; promote effective and efficient regulation; and share learnings. The National Platform for Re-use and Decommissioning – Nexstep – was launched in October 2017 following a joint industry project between Energie Beheer Nederland (EBN) and The Netherlands Oil and Gas Exploration and Production Association (NOGEPA) 3 .

2 See the Netherlands Masterplan for Decommissioning and Re-use at http://bit.ly/EBNmasterplan 3 See Nexstep National Platform for Re-use and Decommissioning at www.nexstep.nl

DECOMMISSIONING INSIGHT 2017

3.2 A Growing Market Across the North Sea, the current inventory of offshore infrastructure that will eventually require decommissioning includes over 11,000 wells, a pipeline network of 45,000 kilometres (including cables and umbilicals), 560 steel platforms and 24 gravity-based structures. In addition, there are some 40,000 mattresses plus hundreds of thousands of tonnes of other offshore infrastructure such as subsea templates and manifolds. To date, around 10 per cent of oil and gas platforms installed across the North Sea have been decommissioned and less than 5 per cent of pipelines. While decommissioning activity has not yet started in Denmark, it is already a growing market in the UK, Norway and The Netherlands. Decommissioning on the UKCS expanded from 2 per cent of total industry expenditure in 2010 to 7 per cent (£1.2 billion) in 2016. This is expected to reach £1.8 billion in 2017, representing 11 per cent of total industry expenditure (£17.1 billion). In Norway, decommissioning represented 2 per cent (£400 million) of expenditure offshore in 2010. The Norwegian Petroleum Directorate forecasts that this will double as decommissioning expenditure is expected to rise to £800 million by 2021 4 . While in The Netherlands, EBN forecasts that decommissioning expenditure will total between £650-£800 million over the next five years, which is similar to the forecast spend on capital expenditure (£570-£800 million) 5 . Decommissioning does not represent a new industry, but is part of the natural life cycle of an installation, relying on many of the same people and skills that have already been developed through oil and gas exploration and production. It encompasses a broad range of activities from well plugging and abandonment (P&A), to cleaning and flushing of facilities and pipelines, offshore removals and onshore disposal. With almost half of the estimated expenditure on the UKCS up to 2025 in well P&A, and a further 16 per cent to be spent on the preparatory work for decommissioning and running facilities after they cease production, much of the employment will be in these areas. The operator and service sector is already applying its extensive project delivery, engineering and offshore construction skills to deliver decommissioning projects across the North Sea and will continue to mature as the industry learns through experience. Well P&A is a key focus area and is benefitting from increasing technology development. Activities such as onshore recycling and final disposal are meanwhile increasingly visible and therefore attract significant attention, despite representing just 2 per cent of total expenditure in decommissioning on the UKCS from 2017 to 2025. The decommissioning of subsea infrastructure, meanwhile, is a less established discipline offering scope for companies to showcase and apply their expertise by driving innovation in subsea engineering. In the UK, current experience suggests that the supply chain already has the necessary skills and equipment to compete for over 80 per cent of the total decommissioning scope forecast over the next decade. However, companies must be able to compete successfully for this work in a global marketplace on quality, efficiency and cost. The supply chain has a significant role to play in offering cost-efficient solutions, while maintaining focus on high environmental and safety standards.

4 See Norwegian Petroleum Directorate at www.npd.no/en 5 See EBN’s Focus on Energy report, June 2017, at http://bit.ly/EBNenergyfocus

3.3 Planning for Decommissioning The decommissioning process across the North Sea involves rigorous planning and consultation with regulators several years before production ceases. Decommissioning regulations, physical interdependencies of other fields, asset and equipment integrity, safety and environmental considerations, available technologies and market conditions are some of the factors that will determine the approach. Over time, the scope of each project is refined as engineering studies and comparative assessments are carried out to determine the optimum approach. Forecasting the precise schedule of each activity and the associated expenditure at the outset of a project is therefore challenging. In addition to the complexities involved in planning each decommissioning project, there is also a great deal of uncertainty around the date that production will cease. CoP is not solely driven by oil price and the economics of the field. On older assets, CoP may be driven by asset integrity challenges, or it may be dependent on the economics of other interlinked fields or third-party tie-backs. In some cases, operators may continue production on sub-economic infrastructure because it acts as a host to other fields. On the UKCS, operators must gain regulatory approval from the OGA to cease production and often need to demonstrate that they have looked at different scenarios for maximising economic recovery of reserves and possible reuse of infrastructure. Infill drilling, subsea systems restructuring, near-field exploration and transfers in asset ownership are ways that operators can extend field life. Oil & Gas UK has analysed 23 UK asset transfers since 2011, which reveal that deals have extended field life by 4.8 years on average, with some fields producing for up to an additional 14 years.

Supply chain c must be able t in a global ma for decommi contracts on efficiency a on the Norwegian Continental Shelf per y £650 – £800 millio total on the Dutch Continental Shelf

DECOMMISSIONING INSIGHT 2017

4. Forecast Activity Across the North Sea

In Summary T he Decommissioning Insight 2017 Continental Shelves. Forecasts are provided for the period 2017 to 2025 to give a comprehensive picture of forthcoming activity, enabling operators and the supply chain to plan for decommissioning in the most cost-effective way. Close to 2,500 wells are expected to be plugged and abandoned across the North Sea by 2025, with more than two-thirds in the UK. Around 200 platforms are forecast for complete or partial removal, with just under half in the UK sector. On the seabed, there is an extensive network of pipelines and other subsea infrastructure that will eventually need to be decommissioned. After depressurisation and the removal of hydrocarbons, current forecasts suggest around 7,800 kilometres of pipeline could be decommissioned by 2025. The timing of this activity is inherently uncertain and could be pushed out as the industry strives to maximise economic recovery. £1.7 – £2 billion on the UK Continental Shelf per year £400 – £800 milli n on the Norwegian Continental Shelf per year £650 – £800 million total on the Dutch Continental Shelf Decommissioning Infographics – Facts and Figures, November 2017 Forecast decommissioning expenditure over the next five years: Decommissioning activity is forecast on 349 fields across the UK, Norwegian, Danish and Dutch Continental Shelves to 2025 provides the first joint activity forecast for four regions of the North Sea: the UK, Norwegian, Danish and Dutch

Decommissioning activity is forecast on 349 fields across the UK, Norwegian, Danish nd Dutch Continental Shelves to 2025

Supply chain companies must be able to compete in a global marketplace for decommissioning contracts on quality, efficiency and cost

total on the Dutch Continental Shelf

Over 200 platforms are expected to be removed in the North Sea from 2017 to 2025 The Oil and Gas Autho ity is targeting a 35% reduction in UKCS decommissioning costs by 2035 are forecast to be plugged and abandoned across the North Sea up to 2025, with more than two-thirds in the UK Operators forecast that total decommissioning spend in the UK Continental Shelf will be £17 billion between 2017 and 2025 Almost 2,500 wells

are forecast to be plugged and abandoned across the North Sea up to 2025, with more than two-thirds in the UK Operators forecast that total decommissioning spend in the UK Continental Shelf will be £17 billion between 2017 and 2025 Almost 2,500 wells

Decommissioning activity is forecast on 349 fields across the UK, Norwegian, Danish and Dutch Continental Shelves to 2025

Operators forecast that total decommissioning

The average forecast

The Oil and Gas Authority is targeting a

4.1 Survey Development and Methodology Data have been compiled from25 operators on theUKCS, nine in TheNetherlands, six on theNorwegian Continental Shelf and three on the Danish Continental Shelf. There are more operators with forecast decommissioning activity in the UK, reflecting the larger number of companies in the basin and its relative maturity. This year, forecasts for the UKCS were collated from raw data that operators submitted as part of the OGA’s mandatory Asset Stewardship Survey, providing even better coverage of the market than previously. Detailed interviews were also carried out with operators on the UKCS to discover how they intend to deliver the OGA’s 35 per cent cost reduction target (see section 5). Data from The Netherlands came fromNexstep National Platform for Re-use and Decommissioning, while Oil & Gas UK collected data directly from operators in Norway and Denmark. All data are structured around the components of the Decommissioning Work Breakdown Structure described in Oil & Gas UK’s Decommissioning Cost Estimation Guidelines 6 . The information is presented in a non-attributable and aggregated format. Analysis has been split by country. The UKCS data have been split further into the following groups: the central (CNS) and northern North Sea (NNS) and west of Shetland (WoS); and the southern North Sea (SNS) and Irish Sea. It should be recognised that the activity forecasts provided in this report reflect operators’ current best estimates, and the timing is subject to change. The cost estimates provided for the UKCS could also adjust as efficiency gains drive costs down, while market pressures could influence them in either direction.

With the aim of providing visibility of the whole North Sea decommissioning market, joint activity forecasts have been compiled for the UK, Norwegian, Danish and Dutch Continental Shelves, where available.

In total, decommissioning activity is forecast on 349 fields across the North Sea: 214 on the UKCS, 106 on the Dutch Continental Shelf, 23 on the Norwegian Continental Shelf and six on the Danish Continental Shelf. Forecast activity on the UKCS to 2025 is significantly higher than in other regions of the North Sea.

6 The Guideline on Decommissioning Cost Estimation is available to download at www.oilandgasuk.co.uk/product/op061

DECOMMISSIONING INSIGHT 2017

4.2 Well Plugging and Abandonment The purpose of well P&A is to isolate reservoir fluids within the wellbore and from the surface or seabed. This activity is carried out in accordance with industry guidelines 7 , as well as the OffshoreWells Design and Construction Regulations 1996 8 on the UKCS and the NORSOK D-10 regulations on the Norwegian Continental Shelf 9 . Well P&A can be challenging and may involve intervention in the form of removing downhole equipment, such as production tubing and packers, and well-scale decontamination treatment. The process also requires the wellhead and conductor to be removed. Well P&A is the largest category of decommissioning activity, with 2,447 wells forecast to be plugged and abandoned across the North Sea to 2025 (1,624 in the UK, 300 in Norway, 113 on the Danish Continental Shelf and 410 in The Netherlands). The combined forecast for the North Sea has been relatively consistent year-on-year, clearly demonstrating the strong market opportunity that well P&A represents for the supply chain. Year-on-year activity will average at around 230 wells per year to 2022, before a new wave of projects starts in 2023. Seventy- two per cent of this activity is for platform wells (1,751), and the remainder are subsea wells. This ratio does however vary when looking at each region specifically (see regional breakdown on subsequent pages). The region with the highest number of wells forecast for P&A is the central North Sea where a quarter of the wells (604 wells) are located, while the Danish Continental Shelf is expected to see the least amount of activity with 113 wells due to be plugged and abandoned by 2025.

Figure 1: Well P&A Forecast Across the North Sea

CNS - Platform Wells

CNS - Subsea Wells

SNS and Irish Sea - Platform Wells

SNS and Irish Sea - Subsea Wells

NNS and WoS - Platform Wells

NNS and WoS - Subsea Wells

Norway - Platform Wells Denmark - Subsea Wells

Norway - Subsea Wells

Denmark - Platform Wells

The Netherlands - Platform Wells

The Netherlands - Subsea Wells

100 150 200 250 300 350 400 450 500

Number of Wells

0 50

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Oil & Gas UK, The Netherland's Nexstep National Platform, Asset Stewardship Survey

7 Guidelines on the Abandonment of Wells and Qualification of Materials for Abandonment are available to download at www.oilandgasuk.co.uk/product/op105 and www.oilandgasuk.co.uk/product/op109 8 See www.legislation.gov.uk/uksi/1996/913/made 9 See NORSOK Standard D-010 Well Integrity in Drilling and Well Operations , (Rev.4 June 2013) at http://bit.ly/20BWqdD

UK Central North Sea • Operators forecast that 604 wells will be plugged and abandoned in this region to 2025. • This is similar to estimates in 2016, although shifts in the timing of some projects have increased the proportion of platform wells from 37 to 49 per cent (297). • Sixty-two wells are planned for P&A in 2017, with around 57 wells forecast per annum to 2020. • From 2021, around 75 wells will be plugged and abandoned each year as a new wave of projects begin activity.

Figure 2: Well P&A Forecast in the Central North Sea

120

Suspended Exploration and Appraisal Wells Subsea Development Wells Platform Wells

100

40 Number of Wells

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Oil & Gas UK, Asset Stewardship Survey

Number of Wells

Proportion that are Platform Wells

Forecast Expenditure

604

49%

£4.2 billion

DECOMMISSIONING INSIGHT 2017

UK Northern North Sea and West of Shetland • Forecast activity in these regions has increased from 428 to 568 wells. The 140 additional wells all lie towards the end of the survey timeframe. This increase is primarily due to greater survey coverage rather than the acceleration of well P&A. • Large and complex decommissioning projects, which have long been in operators’ plans, are driving nearer-term activity (up to 2021). • Seventy per cent of wells (399) forecast for P&A are platform wells. • Year-on-year activity is at around 50 wells per year, until 2023 when a new wave of projects start, peaking at 153 wells in 2023.

Figure 3: Well P&A Forecast in the Northern North Sea and West of Shetland

180

Suspended Exploration and Appraisal Wells Subsea Development Wells Platform Wells

160

140

120

100

60 Number of Wells

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Oil & Gas UK, Asset Stewardship Survey

Number of Wells

Proportion that are Platform Wells

Forecast Expenditure

568

70%

£2.6 billion

UK Southern North Sea and Irish Sea • Of the 452 wells forecast to be plugged and abandoned in these regions to 2025, 76 per cent (345) are platform wells. • Forecast activity has increased by 77 wells since 2016, primarily due to greater survey coverage. Most of this new activity falls at the end of the timeframe. • Near-term activity remains closely aligned to the forecast in 2016 and is associated with ongoing well P&A campaigns.

Figure 4: Well P&A Forecast in the Southern North Sea and Irish Sea

100

Suspended Exploration and Appraisal Wells Subsea Development Wells Platform Wells

Number of Wells

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Oil & Gas UK, Asset Stewardship Survey

Number of Wells

Proportion that are Platform Wells

Forecast Expenditure

452

76%

£1.5 billion

Danish Continental Shelf • Operators in Denmark forecast that 113 wells will be plugged and abandoned by 2025. • The majority of activity – 100 wells – will take place in 2023 across four decommissioning projects, with the remaining 13 wells in 2025. • Ninety-eight per cent (111) are platform wells.

Figure 5: Well P&A Forecast on the Danish Continental Shelf

Number of Wells

Proportion that are Platform Wells

113

98%

DECOMMISSIONING INSIGHT 2017

Norwegian Continental Shelf • Around 800 of the 3,800 wells that will eventually require decommissioning have already been plugged and abandoned on the Norwegian Continental Shelf 10 . • Of the remaining 3,000 wells, 10 per cent (300 wells) are forecast to be decommissioned by 2025. • Eighty-five per cent (254) of these are platform wells. • Activity is forecast at around 27 wells per year to 2024, peaking at 87 wells in 2025 indicating the start of several large projects that fall partially outside the survey timeframe. • All the activity is concentrated in the most mature region of the basin – the Norwegian North Sea.

Figure 6: Well P&A Forecast on the Norwegian Continental Shelf

100

Subsea Development and Suspended Exploration and Appraisal Wells Platform Wells

Number of Wells

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: Oil & Gas UK

Number of Wells

Proportion that are Platform Wells

300

85%

10 See Abandonment of Obsolete Wells and Installations on the Norwegian Continental Shelf; a Study into the Magnitude and Technical and Economic Challenges, June 2014 , University of Stavanger, at http://bit.ly/1m8jpNW

Dutch Continental Shelf • Of the some 1,400 wells drilled in the waters in offshore Netherlands, 410 are forecast for P&A to 2025. • Eighty-four per cent (345) of these are platform wells and the remainder subsea wells. • Activity in the near-term to 2020 is forecast at 20 wells on average per year, increasing to an average of over 70 from 2022 onwards.

Figure 7: Well P&A Forecast on the Dutch Continental Shelf

100

Suspended Exploration and Appraisal Wells Subsea Development Wells Platform Wells

Number of Wells

2017 2018 2019 2020 2021 2022 2023 2024 2025

Source: The Netherland's Nexstep National Platform for Re-use & Decommissioning

Number of Wells

Proportion that are Platform Wells

410

84%

Rig Types Well P&A is typically carried out using a drilling rig, although in some cases, technologies exist that preclude the need for a rig altogether. The requirements depend on various factors, including well type, water depth and availability of rig-less techniques. Platform wells are typically plugged and abandoned in phases. The first phase can be rig-less and uses lower cost methods such as wireline, coil tubing or a hydraulic workover unit. This is followed by the second and third phases that are more likely to require a rig. Many platforms in the UK central and northern North Sea and the Norwegian Continental Shelf have an integral rig that could be used for platform well P&A. The decision to upgrade the integral rig for P&A will depend on when it was last used, the cost to upgrade and the availability of alternative approaches. Rig upgrades can be challenging and costly, and operators are considering alternatives to this approach.

DECOMMISSIONING INSIGHT 2017

In the Dutch sector, the few wellhead oil platforms that were originally equipped with a fixed drilling derrick have had these removed, which means all platform well P&A will be carried out with a jack-up rig or rig-less methods where available.

For subsea wells requiring a rig, this will typically depend on water depth. For wells located in shallower water, a jack-up rig is typically used as they operate at a lower cost.

Figure 8: Forecast Rig Type for Well P&A Across the North Sea, 2017 to 2025

Platform Wells

NNS and WoS

CNS

SNS and Irish Sea

Integral rig

98%

Integral rig Modular rig

78%

Modular rig Other rig-less 19% Stand-alone jack-up 55% To be decided 21% 5%

Stand-alone semi-submersible

11% Stand-alone jack-up 11%

Danish Continental Shelf

Norwegian Continental Shelf Stand-alone jack-up 40% Integral rig 47% More than one rig type 13%

Stand-alone jack-up

90% 10%

Other rig-less

Subsea Wells

CNS Other rig-less

SNS and Irish Sea Stand-alone jack-up 69% To be decided 31%

NNS and WoS

11%

Other rig-less 11% Stand-alone jack-up 11% Stand-alone semi-submersible 78%

Stand-alone jack-up Stand-alone semi-submersible

84%

To be decided

Danish Continental Shelf Stand-alone jack-up 100%

Norwegian Continental Shelf Stand-alone jack-up 91% Semi-submersible 7% To be decided 2%

Combined Wells

Dutch Continental Shelf (platform and subsea combined) Stand-alone jack-up 50% Other rig-less 30% To be decided 20%

4.3 Topside and Substructure Removal The removal of 206 platforms is forecast across the UK, Norwegian, Danish and Dutch Continental Shelves to 2025. These range from small, unmanned, steel installations weighing 350 tonnes to larger, manned, steel and concrete gravity-based structures that weigh more than 1,000 times that. The total weight of infrastructure to be removed is close to 860,000 tonnes of topsides and 510,000 tonnes of substructure.

Activity is greatest in the UKCS where 98 of the platforms are to be decommissioned, closely followed by The Netherlands with 77, 14 in Norway and 17 in Denmark.

Making Safe and Topside Preparation Before a platform can be decommissioned, it must be hydrocarbon free. This is referred to as ‘making safe’ and involves cleaning, freeing equipment of hydrocarbons, disconnection and physical isolation, and waste management. The topsides are then prepared for removal, which involves separating them from the process and utilities modules and appropriate engineering, such as installing lift points. Topsides are prepared in line with the removal method being used (see below for the varying removal methods). The overall activity levels for making safe and topside preparation mirror that for topside removal. Making safe can be carried out several years prior to removing the platform, while topside preparation typically occurs directly prior to removal and can either be contracted out separately or built into the removal contract.

Removal Methods The most common methods for topside removal are piece-small, reverse installation (piece-large) or single-lift.

• The piece-small method involves dismantling the topsides and using demolition techniques typically used onshore to produce small, manageable pieces that can be transported to shore.

• For reverse installation or piece-large, the topside modules are lifted separately onto a transportation barge or the deck of a crane vessel before being taken onshore.

• The single-lift method involves removing topsides in one piece and may involve extra engineering work to reinforce them in preparation for removal.

For the substructure, the removal method depends on the type, weight and configuration. In the southern North Sea, Irish Sea and The Netherlands, the substructures that are to be decommissioned are primarily shallow-water jackets that typically weigh less than 2,000 tonnes and are usually deployed in water depths of 55 metres or less; the single-lift method is suitable for these structures. For larger substructures (barge-launched, lift-installed and some self-floaters), the jackets may be cut into smaller sections in situ and removed in segments. These more complex projects are typically located in the central and northern North Sea and on the Norwegian Continental Shelf. The supply chain continues to innovate in cutting technology to undertake this task.

DECOMMISSIONING INSIGHT 2017

Figure 9: Forecast Topside and Substructure Removal Across the North Sea, 2017 to 2025 11

Norwegian Continental Shelf

Danish Continental Shelf

Dutch Continental Shelf

NNS and WoS

SNS and Irish Sea

CNS

Total

Number of platforms

206

26manned and 51 unmanned 11

Small steel

Large steel Gravity based structure Total topside weight to be removed (tonnes) Total substructure weight to be removed (tonnes)

224,458 238,110

78,760

123,205

75,602

119,665 859,800

128,024

52,655

68,979

115,176

58,602

84,502

507,938

Water depth

45 to 143 metres

118 to 190 metres

18 to 73 metres

66 to 174 metres

37 to 60 metres

22 to 50 metres

18 to 190 metres

UK Central North Sea • Nineteen platforms and eight floating, production, storage and offloading (FPSO) vessels are forecast for complete or partial removal to 2025. • Two are small steel structures weighing less than 4,000 tonnes, while the remainder are large steel structures weighing between 4,500 and 56,600 tonnes. • Operators are actively looking to group activity into multi-platform removal campaigns, particularly for substructures that can be more easily left in situ until decommissioning activity aligns with that of other infrastructure in the area. • £843 million is forecast to be spent on topside and substructure removal to 2025.

11 Platforms in The Netherlands have been categorised differently into manned and unmanned installations.

UK Northern North Sea and West of Shetland • Twelve platforms are forecast for complete or partial removal, four of which are gravity-based and the remainder large steel installations weighing between 15,400 and 70,000 tonnes. Two FPSOs are also expected to be decommissioned. • Eleven of these platforms were built prior to 1999 and weigh in excess of 10,000 tonnes, making them candidates for derogation under OSPAR rules (see section 3 on the regulatory environment). • Due to the size and complexity of platforms in these regions, removal of the topside and substructure are often carried out individually rather than as part of a multi-platform campaign. Some operators are, however, actively looking at opportunities to decommission substructures in a campaign approach. • £1.1 billion is forecast to be spent on topside and substructure removal in these regions to 2025.

UK Southern North Sea and Irish Sea • Of the 67 platforms forecast for removal, only six of these weigh more than 4,000 tonnes with the majority being

small, steel, unmanned installations that are likely to be removed by single-lift. • Platform weights range from 350 tonnes to 9,200 tonnes (1,900 tonnes on average).

• Several operators are already removing platforms in these regions as part of multi-platform campaigns spanning many years. Operators with fewer platforms are exploring opportunities to combine their activities with those of other operators. • £582 million is forecast to be spent on topside and substructure removal in these regions to 2025. Norwegian Continental Shelf • Operators forecast that 14 fixed platforms and two floating production units will be removed by 2025. • Total platform weights range from 4,000 to 30,000 tonnes (12,000 tonnes on average). • Nine of the platforms are to be removed in a multi-platform campaign approach. Danish Continental Shelf • Seventeen platforms, four of which are normally unmanned installations, are to be removed from the Danish Continental Shelf. • Platform sizes range from 970 tonnes to 22,100 tonnes (5,700 tonnes on average). • Operators plan to carry out all activity in a multi-platform campaign approach. The sizes of individual campaigns range from two to 11 platforms. Dutch Continental Shelf • Of the 150 platforms remaining in the Dutch North Sea 12 , 77 are forecast for removal by 2025. • Looking at the total inventory offshore in The Netherlands, the platforms range from small wellhead structures weighing just 500 tonnes to larger gravity-based structures of around 50,000 tonnes 13 . • Through the combined effort of EBN and NOGEPA, the Dutch industry has developed a database and Nexstep National Platform for Re-use and Decommissioning so that activity can be co-ordinated and carried out in the most efficient manner.

12 See the Netherlands Masterplan for Decommissioning and Re-use at http://bit.ly/EBNmasterplan 13 See the OSPAR Inventory of Offshore Installations 2015 at https://odims.ospar.org/odims_data_files/

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