Decommissioning From the beginning not the end

Transcription

1 Decommissioning From the beginning not the end Angela Seeney OGA Director: Technology, Supply Chain and Decommissioning Presentation title - edit in Header and Footer

2 Leadership, Culture & behaviour New independent regulator Effective stewardship resources About the OGA New powers, better resourced and funded Catalyst for change and facilitator of action Encouraging collaboration Creating the OGA Role of the OGA Licence offshore oil & gas Licence onshore oil & gas Licence carbon capture & storage Priorities Rapidly implement Industry to urgently take action Trusted advisor to Treasury Industry culture Commercial behaviour Greater collaboration Investment in UKCS Value creation Industry development The OGA has a key role to play in driving action

3 Framework Document Energy Bill 2015 DECC EDU LED Building the OGA DECC OGA Executive Agency (Civil Service) DECC OGA Independent regulator (GovCo) Historically From 1 April c. summer 2016 Rapid progress on all fronts

4 MER UK Strategy MER UK Definition Striking the right balance Delivering the maximum overall value from the economic reserves in the UKCS MER UK Principles Maximise net value not just volume Investment should add net value overall UK May oblige companies to redistribute value Companies to see satisfactory expected commercial return on investment Sanctions Rewards Balance extracting all economic reserves and achieving MER across the UK Combining new regulatory powers with a more proactive approach

5 Decom, Supply Chain & Technology Technology, Decommissioning & Supply Chain Angela Seeney Head of Decommissioning Head of Technology Head of Supply Chain Chief Information Officer TBC Carlo Procaccini Bill Cattanach Simon James Developing the organisation Multi-disciplinary, experienced & diverse Recruitment for 13 roles in hand 24 in place Early stage planning, campaigns and roadmaps Alignment across the value chain & industry Collaborating Across the TDS team and OGA With academia, industry & trade associations Across relevant government departments With key stakeholders & other regulators Strengthening governance, data & processes With investors & consultants Experienced Leadership: Ongoing activity attracting significant interest

6 Growth in Decommissioning UKCS decommissioning scope 4,000 wells to plug & abandon 290 fixed platforms 33 floating installations 370 subsea wellhead & structures 20,000 km of pipelines Nos of wells Estimate future wells P&A Ref.: Avg new wells drilled Risks Early decommissioning potentially undermines MER The domino effect on critical infrastructure & value Supply chain is slow to materialise Historical high costs continued Lack of operator planning & collaboration Slow introduction of efficient technology Capacity squeeze (e.g. rigs) and inflation Acceleration drives further inflation Lack of expertise and process Poor industry collaboration Large scope and risks on the horizon

7 Protect Critical Infrastructure The Domino Effect Immediate action Commercial facilitation Sullom Voe Terminal Theddlethorpe Gas Terminal Economic assessments Evaluate investment drivers Anticipate risks & opportunities Early stage involvement Regional plans Develop hub strategies Optimise infrastructure Integrated MER UK approach Urgent action underway to avoid premature decommissioning

8 OGA DECC Decommissioning Considerations Who does what OGA E&P Teams Cessation of production Regional approach MER UK compliant OGA DST Team Technology, costs, efficiencies Learning and cooperation Optimal models & plans DECC ODU Team Security and liability Programme approval Regulatory compliance Environment risk/mitigation Cost Efficiency opportunities Right assets; right hands: Alleviate obstacles to M&A Industry cooperation: benefits from scale; joint campaigns Standardisation: equipment sharing, efficiencies & reduce risks Technology: P&A Wells, topsides removal, pipeline inspections Supply chain: capacity planning, incentives, global export Tri-Partite Late life review Examine case for transferring fiscal relief from tax history to tax credit the wash back impact of investment allowance on tax relief alternative solutions to the issue of liability in perpetuity cost reduction measures. A huge prize: cost efficiency and collaboration is key

9 Decommissioning KPI milestone OGA Corporate Plan MER UK Target Overall decommissioning cost reduction Cumulative 30-35% down from base estimate phased to end of basin life (2050) Ensure effective preparation on key policy positions 1) Avoid increase of regulations 2) Secure potential UKCS derogations 3) Prepare for OSPAR Q 2015 Initial decommissioning cost review, with DECC and HMT (completed) 4/1Q 2015/6 Basin-wide cost analysis, cost drivers, benchmarks input to new strategy and plan 4Q Q Build OGA s decommissioning capabilities, single governance board with industry Operators engagement, upcoming programmes, readiness and efficiency efforts 2016 Regional and basin plans, capturing industry collaboration opportunities (ongoing) Disruptive solutions technologies, processes, business models Accelerate learning curve and efficiencies

10 Total costs are PROTECTIVE be estimated MARKING at over 47bn, ramping up significantly over the next 5-10 years Annual and Cumulative spend estimate ( bn, 2015 money) Annual spend ( bn p.a., Bars) Historical decom spend 2014: 800m 2013: 500m 2012: 300m Field Cessation of Production dates are subject to change 47bn base case Cumulative spend ( bn, Line) Factors influencing timeline Acceleration Delays Drop in oil price Integrity & maintenance issues Opex escalation UKCS lack of competitiveness Rebound in oil price Late life extensions High decommissioning costs and insufficient capital v liabilities Factors influencing cost build up Topsides removals Topsides making safe& prep Owners project mgmt Facilities running costs Sources: OGED/OGA spend model 2015 P&A Platform Wells Risk of creating an inflationary hot spot as decommissioning increases

11 Decommissioning efficiency Cumulative spend to 2050 Annual spend estimate ( ) % -20% -30% Base case - 47bn Efficiency case - 31bn -40% -50% Tactical improvements programmes already 2.0 underway (-10%) New programmes: Experience and collaboration kick in (-20%) Disruptive technology is introduced (-30%) Disruptive technology is introduced Continuous improvement and further industrialisation (-40% to -50%) ( bn, 2015 money) ( bn, 2015 money) Targeting 40% reduction in overall cost

12 Efficiency Levers Regional plans and scale Industrialise execution Market efficiency Fit-for-purpose solutions Decommissioning plans looking at broader hub and regional scales Agree timing of infrastructure removal -- minimise negative impact Lessons learned fully shared and employed Pooling scope and share resources Improve early stage planning and guidelines More standardisation across operators and supply chain Fit-for-purpose, efficient methodologies and equipment Efficient technologies (mature, developed, and novel) Mitigate obstacles to M&A Clarity on future scope and activity profiles Adequate supply chain response and capacity in the market Transform to commercial and operational collaboration at scale Simpler and lower cost options developed (with safety & environmental safeguard) Evolve and improve standards and guidelines Monitor regulatory trends and mitigate risks Delivering 35% cost efficiency improvement

13 Clear strategy to build a sustainable low cost supply chain market Decommissioning Supply Chain Export growth Increasing efficiency OGA approach World-class supply chain 35 billion annual turnover 375,000 highly-skilled jobs Service companies vital role Deliver efficiency solutions Increase competitiveness Alliances and campaigns Improve program execution Promote the capability Early planning, preparation & process: review costs Collaborate & industrialise supply chain market Plug & Abandonment of Wells 35% reduction on costs Technology: develop & deploy Lift methods & removal of topsides & jackets Subsea & pipeline decom 6 key areas of cost reduction Balance what, when and how Support building stable supply chain & exports Five-year strategy and plan Sector-based activity approach Create visibility of supply chain opportunities Work with UKTI and SDI on overseas opportunities Support development of workforce expertise Working with industry to give supply chain a voice

14 SNS Well Plug and Abandonment Approach 8 operators brought together at MD level Joint portfolio of 550 wells identified Encouraging multi operator campaigns Sharing of learnings Providing market visibility to the Supply Chain Next steps Taking advantage of current market deflation Encouraging development and uptake of new technology Tangible progress already being made Provides a platform for transformation SNS concept will be used as transformative model for the wider UKCS Collaboration on 500 wells with up to 40% cost savings SNS well plugging and abandonment initiative

15 Current Themes Harnessing Technology Decommissioning Small Pool Development Unlock 1-3 bln barrels potential cost effectively Well Construction Reduce wells cost by 50% Integrity and Inspection Cost reduction, unlock x-sector & exports Decommissioning Reduce costs by 40% Developing TLB strategic plans, 5+ year roadmap Identify new priorities and value propositions Develop new & deploy mature technologies Early-stage planning, business cases & funding Strengthen Decommissioning Technology Leadership Introduce a new Decommissioning Theme - Make 100 ft. of tubing and casing disappear - Through tubing logging - Dealing with downhole cables Target MER through 35% decom cost reduction With Industry, Academia, Consultants & Trade Groups Share knowledge and benchmark OGA TB (TLB) Focus Dedicated Technology Team : Deliver MER UK, Support themes, Provide support via Wells TA Industry Lead with OGA Chair & Secretariat : Strengthen TB focus and drive outcomes Improve performance & prospects: Transformative solutions Approach Collaborative: Outcome focused, evidence based and integrated approach Develop and deliver new, transformative solutions to MER UK

16 Core Work PROTECTIVE Area MARKING Boards Purpose Objectives Leadership Core work areas Deliver tangible benefits in support of MER UK and maximising UK value from the oil and gas industry as a whole 1. Develop a clear strategy and five year plan 2. Create leadership alignment and leverage tripartite action 3. Deliver tangible and quantifiable results 1 5 Industry-led with tripartite support Exploration 2 Asset 3 Regional development & 4 Cost & Stewardship infrastructure Efficiency Phil Kirk, Chrysaor Ray Riddoch, Nexen Paul Goodfellow, Shell John Pearson, AMEC FW Gunther Newcombe Gunther Newcombe Gunther Newcombe Stephen Marcos-Jones Technology 6 7 Supply chain & 8 Decommissioning exports Skills Paul White, GE Collette Cohen, Centrica Neil Sims, Expro Group Mike Horgan Angela Seeney Angela Seeney Angela Seeney John McDonald Frequency Quarterly Support OGA/BIS/UKTI/OGUK Industry lead OGA OGUK lead Focus: avoid gaps and overlaps between core work area boards

17 To effectively deliver MER UK decommissioning objectives Approach Current Plan Decommissioning Board Board structure Themes Leadership Industry Lead Colette Cohen OGA Chair Angela Seeney Asset reviews across NS Core Members Gov t & Trade Operator Members (5) Supply Chain (5) OGUK (1) DNS (1) BIS/SE (2) UKTI (1) Deliver 35% cost reduction plan Support Supply Chain Development Policy Review Expert advice and support DECC OGED (2) ACADEMIA (2) Enhance Data & Knowledge Sharing & Benchmarking Adopt mature & develop new Technologies Key links Technology Board Data Mgt. Board RD&I Board Government forum on decommissioning HMT LLE workstream Optimise Regional Solutions LLE and M&A Models to MER Improve Operator & Contractor Collaboration & Alignment

18 Key Challenges and Opportunities Changing the mind set Promoting collaboration & alliances Efficient technologies Reducing costs Developing capability Establishing a competent and competitive supply chain to deliver decommissioning Changing the mind set and cost base from reverse engineering to deconstruction Providing the industry with clarity and scale of the upcoming market opportunities Defining and delivering cost reduction programs, technologies and models in line with a new strategy Phasing the program to ensure a stabile project flow and avoid inflationary pressures via early stage planning Introducing a true spirit of collaboration to the decommissioning landscape To develop and deliver new, transformative solutions to MER