The trend of plummeting oil prices continued in spectacular fashion during much of January. At one point the price of oil fell below $28 per barrel.
To put things into perspective, Brent crude hovered around the $110 per barrel mark throughout the early part of 2014.
The finger of blame seems to point at a reduction in demand, coupled with an oversupply of oil, which has largely been caused by the recent US production boom and improved output in Russia.
And although some are revelling at the prospect of buying fuel for less than £1 per litre, the oil and gas industry is in turmoil.
Many of the major players, including BP and Shell, have announced job cuts – with hundreds being cut in the North Sea.
Yet despite the sector’s issues, pockets of opportunity still exist. Perhaps most surprisingly, graduates could prosper in the years to come.
“As a graduate going into the oil and gas industry, there is potentially a career path just focused on decommissioning,” says Steve Andrew, head of ABB UK’s asset closure business.
“People refer to decommissioning as a ‘new industry’ which means there is an opportunity to go right in at the start and progress as the knowledge gets better,” he says.
Decommissioning is expected to play a major role in the UK oil and gas industry over the next decade. Indeed, a survey published by industry body Oil & Gas UK suggests nearly £17 billion will be spent on decommissioning on the UK Continental Shelf (UKCS) by 2024.
People refer to decommissioning as a ‘new industry’ which means there is an opportunity to go right in at the start and progress as the knowledge gets better
Steve Andrew, head of ABB UK’s asset closure business
A similar study, published by ABB last July, highlights some of the most cost-effective methods of platform removal – such as ‘piece small’, which involves the removal of a platform in small sections; and ‘piece large’, which comprises the removal of a platform in sections or modules of up to 5,000 tonnes.
Andrew says operators must plan for decommissioning projects early, even if it feels counter-intuitive. Getting to cessation of production (COP) – where production at an active well is terminated – and then beginning the decommissioning process means you will probably miss opportunities, Andrew suggests.
“Platform cranes might be out of service, for instance. A crane might have to do more work on ‘plug and abandonment’ in a few months than it has in the last 35 years of its life,” he says.
By planning ahead, Andrew says operators could save a substantial amount of money by the time a platform is scheduled for removal.
Cost reduction is a major part of decommissioning, Andrew says, and technological advancement will undoubtedly help the sector progress.
“You are starting to see a lot of really good innovations around the plug and abandonment of wells and the removal of pipelines, in particular,” he says.
Oonagh Werngren, Oil & Gas UK’s operations director, says innovative technology will play a key role in decommissioning activities.
Like Andrew, Werngren says an example of the oil and gas industry’s focus on technology can be seen via its updated guidelines on the qualification of materials for the abandonment of wells.
“These guidelines, aimed at well-operators, manufacturers and regulators, comprise the current industry expertise on qualifying materials for suspension and well abandonment,” Werngren says.
She adds that while cement is commonly used to safely seal and permanently abandon wells no longer used for exploration or development, industry is developing and proposing new barrier materials such as polymers, metals, grouts, rock formations and composites.
“There is a commitment to constantly advancing technology to ensure the industry remains competitive,” Werngren says.
However, although decommissioning is underway and advances are being made throughout the sector, Werngren says there is still a vast amount of work being conducted to extend the life of ageing assets.
“It is in all our interests that we maximise the life of the UKCS, which is so important to the UK economy.”
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According to the Wood Review, an independent government report conducted by offshore industry businessman Ian Wood, the objectives of decommissioning strategy should be to achieve the maximum economic extension of field life and ensure key assets are not decommissioned prematurely to the detriment of production hubs and infrastructure.
“This is fully supported by the industry and its regulator, the Oil & Gas Authority,” Werngren says.
She says that while industry remains focused on maximising recovery, large-scale decommissioning will likely take a back seat.
“It is important to remember that billions of barrels of oil and gas remain to be extracted from the UKCS and that oil and gas is expected to continue to make up around 70% of the UK’s primary energy needs well into the 2030s.
“The whole of our industry – from exploration through to decommissioning – will continue to support hundreds of thousands of jobs, plus a supply chain that currently generates £39 billion in revenue,” Werngren says.
She does, however, admit these are uncertain times for the offshore industry, particularly as the focus shifts onshore, and to the opportunities made possible by a thriving UK shale industry.
How to co-exist
Will Leonard, oil, gas and chemical marketing manager for ABB UK, says the UK shale industry and the offshore industry will co-exist for the foreseeable future.
“There isn’t going to be a sudden flurry of activity within the UK shale sector, but people are beginning to watch with real interest,” Leonard says.
In December last year the Oil & Gas Authority issued 93 onshore exploration licences across 159 blocks throughout the UK – all of which were taken by the likes of Cuadrilla and Ineos.
“These companies will first and foremost be checking the resources in place,” Leonard says.
“Although multiple surveys and reports have been conducted in the past, checking resources can only happen effectively with exploration, and that involves drilling and fracking. Only then can we start considering the economic viability of shale,” he says.
However, Leonard fears there is a distinct lack of relevant information, which is creating unnecessary obstacles for the UK shale industry.
“There is a lack of fact in the UK because there hasn’t been much fracking activity yet,” Leonard says. “We need more information that is related specifically to the UK exploration of shale.”
Leonard says academia also has a vital role to play.
“For instance, the Natural Environment Research Council (NERC) will establish an Energy Security and Innovation Observing System for Subsurface (ESIOS) at Chester University’s Thornton Science Park after receiving government funding to establish research facilities where new subsurface activities such as fracking for shale gas can be tested and monitored under controlled conditions,” he says.
One thing that I think is vital for the UK in terms of employment for onshore oil & gas and shale is if we launch the industry with real expertise.
Will Leonard, oil, gas and chemical marketing manager for ABB UK
This will help the government and industry find out what would really happen in a burgeoning UK shale industry, Leonard adds.
Technological advancement will also play a key role in the UK shale industry.
For UK shale to be viable, Leonard says water considerations will have to be handled very carefully.
“Fortunately, the water sector in the UK is mature and they have a programme of continued investment in new technology and the technology they use on a daily basis.
“I think we have the right expertise within our utility firms and within the supply chain to handle any water and environmental challenges posed by shale exploration,” he adds.
Another issue the industry could face is the reskilling of engineers from other sectors.
Leonard argues that although some disciplines may struggle, many engineers, including process, automation and electrical engineers, will be able to transfer their skills to work in the shale industry.
“One thing that I think is vital for the UK in terms of employment for onshore oil & gas and shale is if we launch the industry with real expertise.
“We could be seen as the benchmark for shale around the world. This would give us the opportunity to export our knowledge globally,” he says.
It is likely UK shale will also positively impact a wide variety of sectors.
Stan Higgins, chief executive of the North East Process Industry Cluster (NEPIC), says the importance of energy supply and raw materials for the UK chemical industry cannot be underestimated.
“Large scale industries locate close to raw materials supply and a shale gas revolution could encourage new investment into the UK foundation industries,” Higgins says.
“Furthermore, the need for UK energy security should not be forgotten. Relying totally on oil and gas supplies from around the world, often from volatile political and economic regions, is not a long term strategy that I, for one, can support,” he says.
Innovation – All at sea?
Despite the current oversupply of oil, production on the UK Continental Shelf (UKCS) rose in 2015.
Indeed, figures taken from 10 months of government data suggest it was the first rise in production for more than 15 years.
The production of liquids increased by 10.6%, while gas production increased by 6.1%. Overall, the data reveals the total volume of oil and gas produced was 8.6% higher than in comparison to 2014.
Bruce Calder, chief technology officer at Honeywell Process Solutions, says there is definitely a future for the North Sea.
“It is going to be more and more difficult and it will get more competitive, but I think the firms who will survive and thrive will be the ones who can bring their costs down and deploy the right technologies,” he says.
Innovation could have farreaching implications for the North Sea, says Stan Higgins, chief executive of the North East Process Industry Cluster (NEPIC).
“For example, utilising the old wells to store carbon dioxide to supplement its storage in deep underground aquifers might offer the opportunity to drive out more oil from previously unproductive wells,” he says.
He also says the acceptance of shale gas technologies could strengthen the case for underground coal gasification (UCG).
“One such project is aimed at opening up the energy and raw material potential of the Durham Coalfield by implementing the latest UCG technology,” Higgins says.
He says the technology, which is already widely used elsewhere, has the potential to provide more energy from the Durham Coalfield than the UK could use in 10,000 years.
“The modern advance in the technology is [such] that any carbon dioxide produced - or returned by industry or power generators - can be put back into to the part of a mine from which the coal has been partially or wholly removed,” Higgins says.
He says this presents a real opportunity for the production of energy and materials that are essentially carbon emission free.
“What’s more, UCG technology operates well below the depths that can be reached by traditional mining. Therefore, there are no surface interactions and because the UCG platforms can be operated offshore, any NIMBY (not in my back yard) issues can be avoided.”
He also claims the technology would utilise the strengths of local people in both the process and offshore industries.
Scientists and engineers in the North East of England have been trying to get a pilot plant for this technology established here for the past five years, Higgins says.
“This pilot project needs about £30 million, while a fully operational facility would need £5 billion,” he suggests.
“Any government with industry, energy security and a deep understanding of science and technology would have already ensured this was already done.
“In the UK the scale of UCG has the potential to completely overwhelm the scale of energy from our shale gas resources.”