In many established oil and gas production areas, such as the Gulf of Mexico, the North Sea and elsewhere, an increasing number of fields are coming to the end of their planned operational lives. Therefore, global decommissioning costs are expected to rise…
In many established oil and gas production areas, such as the Gulf of Mexico, the North Sea and elsewhere, an increasing number of fields are coming to the end of their planned operational lives. Therefore, global decommissioning costs are expected to rise from approximately $2.4 billion in 2015 to $13 billion a year by 2040 according to a recent IHS Markit Offshore Decommissioning report. Today, with low oil prices, operators have a choice with aging installations to decommission them or invest in automation to extend their life span.
The acceleration in decommissioning spend reflects the trend towards deeper offshore developments, located in harsher environments, with larger and more complex installations. This increases the time it takes to dismantle installations and creates a rising risk of environmental and regulatory liabilities. While the Gulf of Mexico faces the largest number of decommissioning projects, spending on the North Sea’s plugging of wells and dismantling platforms and pipelines will account for around half of total global decommissioning expenditure.
According to industry group Oil and Gas UK, oil companies are expected to spend 53 billion pounds sterling after 2017 on dismantling installations in UK waters. However, if oil prices were to fall back to $50 a barrel this would make 35 percent of the UK’s North Sea production uneconomic with current prevailing technology and could accelerate the rise in decommissioning rates.
The cost of offshore decommissioning
Decommissioning costs depend on the size and complexity of the installation and its water depth. For example, a typical four-pile rig structure in 15 meters of water in the Gulf of Mexico costs around $2 million to decommission. By comparison, a typical gravity-based system with 22,500 ton topsides and 180,000 substructures in the North Sea will cost around $2 billion to decommission.
Shell paid around £1 billion to dismantle four rigs in its Brent North Sea field. Decommissioning of offshore oil and gas installations is not only expensive but often occurs despite leaving significant resources in the ground. For example, the UK’s mature North Sea oil fields still hold an estimated 10 billion to 20 billion barrels of oil, according to Oil and Gas UK. Could automation release these barrels at a profit and delay decommissioning?
The case for automation
Advances in artificial intelligence, robotics and automation alongside their falling costs, could significantly extend the economic life of old and maturing oil and gas fields. As oil industry veteran Paul Jardine of Quatre Ltd states, “Automation will contribute to maximum economic recovery (MER), and this will obviously extend economic field life.”
Furthermore, extending the operational lifespan of installations helps to contribute to funding the eventual decommissioning costs, especially if operational running costs are further reduced by future AI, robotics and automation. William R. Williams, CEO of Altresco Group, notes that “Automation could result in significant reductions in operational costs and productivity benefits.” As an example, he cites using renewables and energy storage to reduce energy consumption of offshore installations. For instance, Shell operates a solar and wind powered autonomous well platform in the North Sea.
However, in Morecambe Bay, Spirit Energy (previously Centrica) working with Servelec Controls, simplified and automated its 33-year-old DP6 gas platform on the South Morecambe field in the East Irish Sea, so it can be operated from the nearby manned main South Morecambe platform. As a result, the rig’s operating cost has reliability improved and the lifespan of the rig extended.
Examples of oil-rig automation
Drones equipped with sensors and cameras are carrying out real-time inspections and monitoring of pipelines for leaks, security and compliance issues. In inaccessible or difficult to access locations, divers are being replaced by automated drones to inspect and report on repair requirements. A case in point is the work of ADUS Deep Ocean sub-sea drones, which undertake precision sonar and underwater laser surveys of aging sub-sea assets, and the resulting 3D-point cloud data allows for the regeneration of ‘as is’ plans and drawings of older seabed infrastructure. In addition, the ability to monitor offshore assets, above and below water, through connected sensors by internet of things technology, reduces the risk of equipment failure by indicating necessary maintenance requirements in good time. For instance, drone firm Air Control Entech provides a real-time, high-definition video stream and data transfer from offshore inspections to onshore teams. This can reduce the size of offshore inspection teams and significantly improve the speed and efficiency of reporting.
The potential savings could be substantial. For example, General Electric has found oil and gas organizations have incurred an average $38 million annual cost from unplanned downtime in its oil and gas installations. Cloud-based technology can monitor assets and improve productivity by integrating a wide range of logistics, operational and production systems, thereby maximizing efficiency and alerting managers to potential problems.
Some oil rigs are already nearly fully automated, although the majority have currently automated just for specific tasks. For example, automated supervisory control for supervision of tripping integrates pipe-handling systems and human ‘roughnecks’ with consequent reductions in staff numbers. In addition, rigs now have a robotic tool to handle fire suppression equipment or pressure vessels. The robotic tool can turn valves to manage pressure drilling and can turn on switches for high-voltage power. In sum, as R. Williams states, “An increasing number of tasks are already partially automated.”
Oil and gas companies could be major beneficiaries of forthcoming innovations in artificial intelligence, automation and robotics. These, in combination, will cut the industry’s costs, improve productivity and allow old and maturing fields to continue producing profitable barrels until depletion and decommissioning becomes inevitable.
Source: Nicholas Newman