Decommissioning Insight 2017

DECOMMISSIONING INSIGHT 2017

5.6 Operator Project Management and Facility Running Costs Operators forecast that a significant proportion of overall decommissioning expenditure will be spent on project management and facility running costs (£2.7 billion, 16 per cent) from 2017 to 2025. This includes preparatory work for decommissioning such as regulatory compliance and feasibility studies, as well as running installations after CoP until they are fully decommissioned. The proportion of expenditure in this area has declined from 19 per cent in last year's report as the industry strives to reduce decommissioning costs. For projects that involve platforms for removal, the costs in the central and northern North Sea and west of Shetland account for 26 per cent (£2 billion) of expenditure compared to just 7 per cent (£216 million) in the southern North Sea and Irish Sea. Indeed, 92 per cent of project management and facility running costs in the UKCS are concentrated in the central and northern North Sea and west of Shetland, a reflection of the size and complexity of these typically manned installations. As more fields approach the end of their productive lives and operators learn from the experience of recent decommissioning projects, there is an increasing drive towards streamlining the regulatory process and schedule of activities to enable a smoother andmore cost-effective transition into decommissioning. Industry is also focused on delivering efficiency gains and cost reductions in the decommissioning process itself. For assets that were included in the survey last year, operators expect to spend close to £440 million less than was forecast. Measures being taken to safely reduce the cost of running facilities in late-life and once they cease production include: • Concurrent late-life production and decommissioning activities – carrying out decommissioning activities while production continues, for example P&A on redundant wells, means the manpower on an asset can be lowered earlier and the decommissioning project’s overall duration can be reduced. Some operators on the UKCS are aiming to carry out up to 75 per cent of their well P&A activity before production ceases. • Tailored maintenance strategy for late-life assets – as CoP approaches, maintenance requirements change. An optimised strategy will help avoid maintenance on equipment that is no longer required or will shortly become redundant. This has the potential to deliver significant savings in decommissioning, from 20 to 25 per cent in the southern North Sea and Irish Sea to up to 50 per cent in the central and northern North Sea. • Fixing the date of CoP – this gives a much clearer picture of maintenance requirements in late-life and allows activities to be scheduled with decommissioning inmind. However, there are several challenges, notably whether the planned date aligns with the regulatory approvals process and the industry’s focus on maximising recovery. It is acknowledged that this approach requires a change in mindset which several operators are looking to adopt. • New operating models for fields in late-life and decommissioning – the decision to hand over operatorship and the right time to do so is asset specific, but also depends on market capabilities and pressures. Operators must find the right balance between maintaining asset-specific knowledge and ensuring decommissioning expertise.

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