With the decommissioning projects undertaken so far in the North Sea, many contractors have come out poorly because they did not properly understand the task ahead of them, says Greg Coleman of Petromall. Conversely, there should be business opportunities for companies who can help better plan, or manage the risks.
There have been a few standalone decommissioning projects in the UK and Norway where the contractors “have come out of it very poorly,” says Greg Coleman, consultant with Petromall.
“All of the projects done so far, with one exception, have seen significant cost overruns, both in terms of expenditure and time taken to deliver the project,” Mr Coleman says.
“It wasn't planned properly, the right equipment wasn't made available.
They hadn't really understood the scope of what was asked to be done,” he says.
“It’s in the interest of contractors to get that right, so they're not stuck with having to accept the risk without understanding what they're doing.”
However, if companies have seen big losses due to work being poorly defined or cost overruns, then, conversely, there ought to be business opportunities for companies who can help improve planning, or better understand the risks, or actually cover the risks, he says.
There should also be business opportunities for major contractors who are able to get the decommissioning planning right, he says.
To indicate the size of the potential business, consider that total spend to decommissioning UK oil and gas infrastructure is estimated to be between £50bn and £100bn in the UK – and most of the work will go to contractors.
Mr Coleman also serves as CEO of a small cap exploration and production firm, and was formerly head of investor relations and head of Group HSE (health, safety and environment) at BP.
One of the main areas for reducing costs, or avoiding cost escalation, is from having a better understanding of the task to begin with.
This leads to business opportunities for companies offering technology and services which can help better understand a decommissioning task and do surveys, include drones, underwater cameras, laser scanning services, corrosion detectors and more.
Technology is being developed which can help you get a sense of internal corrosion on places which cannot be accessed directly.
“You can see the outside of the pipes and vessels, it’s more difficult to see the insides, and that's where the damage will be,” he says.