Oil and gas is showing signs of improvement, but innovation and development will be driven by an overriding need for predictability in all areas, reports Brian Attwood.
Seven months from now, teaching will start for what is described as the world’s first MBA in oil rig and platform decommissioning.
For those concerned about Britain’s ability to compete in the post-Brexit marketplace, the launch of this pioneering course at the University of Aberdeen in partnership with neighbouring Robert Gordon University offers a reassuring sign.
That decommissioning will be a major focus over the next decade, not least on the UK Continental Shelf (UKCS) of the North Sea, is not in doubt. Progress will be constrained however by the understandable caution of a sector that has yet to emerge from one of the most challenging periods in its recent history.
In 2016 the UK offshore industry saw:
- Oil prices plunge below $42 for the first eight months of the year
- Investment spending fall to around £9 billion in 2016 (from £14.8 billion in 2014)
- Wells-based activity revenues plunge 53% in two years
- Supply chain revenues fall nearly a third in the same period
- Jobs reduced by 120,000 over two years
- Development spending on new resources drop 40% between 2014-2016
- Exploration and appraisal activity at an all-time low.
[Source: Oil & Gas UK Economic Report 2016]
Underpinning much of this has been the monumental drop in oil prices in the last two years that saw Brent Crude nosedive from around $100 a barrel in 2014 to below $35 at its worst point last year.
So $50 may not be all the industry might dream of when it comes to its own future but it recognises at least we are no longer losing money at current prices
Mike Tholen, upstream policy director at Oil & Gas UK
After an earlier 10% Budget cut to the supplementary charge on UKCS upstream oil and gas activities, the Chancellor’s Autumn Statement response was at best lukewarm: recommitment to its Driving Investment strategy for fiscal reform of the industry and simplifications to the petroleum revenue tax regime.
Key omissions remain, namely concrete action on decommissioning tax relief, encouraging exploration and supporting infrastructure.
Mike Tholen, upstream policy director at Oil & Gas UK – representing the country’s offshore producers and contractors – is sanguine about the outcome: “What we were asking for included confirmation the fiscal policy would continue and the Chancellor was kind enough to give us that confirmation. So if you get what you ask for you can hardly complain.”
Global watch
Government rectitude has been balanced by an upturn in the global situation, with OPEC and major non-OPEC nations such as Russia agreeing to production caps.
While predictions that oil could soon hit $70 a barrel still look rosy, prices are safely past the $50 mark and hovered around $57 in early January.
Consistent higher prices are vital though for the North Sea industry to improve its fortunes, whether the focus is on decommissioning, asset maintenance or improving extraction.
“So $50 may not be all the industry might dream of when it comes to its own future but it recognises at least we are no longer losing money at current prices,” states Tholen.
It helps that the improved margins are the result not only of global changes, but also the sector’s more rigorous cost improvements imposed during the hard times.
Oil & Gas UK’s 2016 economic report cites operating costs down 45% through efficiencies, with a 10% YoY production increase – bucking the trend for the rest of this century.
In the absence of more generous oil prices and early government assurance of a more competitive fiscal regime, cost performance will still play a more vital role in attracting investment.
It has a long way to go. The massive decline in investment levels since 2014 underlines the need for the oil and gas sector to expand beyond its present base. Yet UKCS secured less than £100 million in fresh capital commitments last year, compared to £4.3 billion in 2015.
How then will this impact on development in the three spheres of North Sea activity – decommissioning, asset maintenance and exploration?
It can be summed up in a single word: predictability.
Whether the focus is the collection of information, the extraction of fuels, repair of equipment, technological innovation or corporate governance, the overriding concern will be the efficient management of risk – in which cost challenge will be as much a determining factor as access to resources.
There are sound reasons for this, not least because the sector has made remarkable strides with efficiencies and has little room for accommodating error. While it will not mean a block on innovation, it will see a greater demand for new techniques to be tested in the field to client satisfaction.
Combined with this is a growing emphasis on a more standard approach to procedures to ensure a more uniform use of the most effective current technologies.
Inspection calls
Lockheed Martin’s recent Asset Integrity Theme Landscaping Study provides a case in point. It identified pressure vessel inspection (PVI) and management of corrosion under insulation (CUI) as major sources of inefficiency.
PVIs make a substantial contribution to downtime while CUIs contribute to 60% of pipe leaks and up to 60% of pipe maintenance costs, noted the report.
A variety of technologies are on offer in both cases, but analysis of the competitors produced recommendations in favour of low frequency electromagnetic technique (LFET) and pulsed eddy current (PEC) technique for PVI and CUI testing respectively.
LFET injects low frequency magnetic field into a metal plate and uses scanner mounted pickup coils to detect the induced magnetic field in the material measuring distortions in the field over a flow.
On the technology front, this means growth in an existing trend towards more connectivity and data capture, leading to a better ability to increase unit uptime
Shree Dandekar, VP, Honeywell Connected Plant, Honeywell Process Solutions
PEC measures corrosion in steel without the need to de-lag or for direct contact; the instrument tests wall thickness by multiple readings measuring the depletion of eddy currents in order to map corrosion.
Together with the introduction of standardsbased IT architecture, the adoption of uniform approaches to promote PVI and CUI efficiencies and introduce cost reductions could contribute to unlocking hundreds of millions of pounds to the sector, suggests Lockheed Martin.
Meanwhile – and not only for asset maintenance upstream – the now-ubiquitous Big Data has a vital role across the sector. Shree Dandekar, vice president and general manager, Honeywell Connected Plant, Honeywell Process Solutions, explains: “On the technology front, this means growth in an existing trend towards more connectivity and data capture, leading to a better ability to increase unit uptime.”
Key to this shift will be intelligent systems that, underpinned by innovative breakthroughs like machine learning, are set to be explored for their potential to help interpret the mass of plant and platform data that will be available
Shree Dandekar, VP, Honeywell Connected Plant, Honeywell Process Solutions
A growing number of ‘things’ in plants, pipes and offshore platforms, he predicts, will form part of the Industrial Internet of Things (IIoT), generating “unprecedented volumes” of information. This will cause a shift in approach to data gathering and interpretation.
“Key to this shift will be intelligent systems that, underpinned by innovative breakthroughs like machine learning, are set to be explored for their potential to help interpret the mass of plant and platform data that will be available.”
Where extraction and exploration are concerned, the drivers will be better exploitation of reservoirs and more efficient techniques to pinpoint sources of oil and gas in smaller quantities and at greater distance. Accuracy, cost competitiveness and greater automation will be key.
This may be less a climate for game-changing advances such as the development of subsea operations a generation ago, or the first North Sea structures previously; more one for incremental advances that serve specific purposes.
All about technique
For Mike Tholen, long-distance multiphase flow modelling is one such technology. For ConocoPhillips, compressed seismic is another that provides better, faster and cost effective data for exploration.
BP takes a similar view: “Seismic data provides our most important lens into the subsurface. It allows us to see the reservoir rock structure.”
Broadband methods that capture the higher and lower frequencies and 4D modelling provide users with increasingly accurate maps. No longer just of the surface rock structure but of its properties too.
When financial, material and human resources are at a premium and exploration and extraction activity on the wane, accurate detection offers the chance to translate a calculated gamble into something more certain.
Allied to this is the development of fibre optics, in particular distributed fibre-optic systems; permitting continuous, real-time measurement along optical fibres rather than relying on discrete sensors at certain points.
Previously cable vulnerability to damage and weakness beyond restricted lengths limited the potential of this technology. Yet, last year in the USA, Silixa conducted its first 4D offshore survey with its iDAS product.
Both this and the company’s Ultima DTS are targeted at upstream activity. Again, there is a cost attraction for operators wanting to avoid quitting older wells for new. Small wonder that the American fibre-optic market topped $1 billion in 2015, with nearly two thirds derived from the oil and gas sector.
Back home, the University of Aberdeen, home to the first decommissioning MBA, is simultaneously playing a role in enhanced extraction.
John Scrimgeour, executive director of its Aberdeen Institute of Energy, outlines: “In terms of extraction, amongst other work we have several teams looking at different methods of enhanced oil recovery (EOR) that can help maximise economic recovery in the North Sea.
“These include polymers, varying salinity and varying wettability, foams with nanoparticles and ultrasonic waves. In addition, we are also looking at quicker more efficient means of screening EOR techniques to assess the benefits of any project.”
But like its city’s main industry, the university is wise to decommissioning potential: 100 platforms forecast for removal from the UK and Norwegian continental shelves, 1,800 wells to be plugged and 7,500 km of pipeline according to U&G UK. The estimate is that £17.6 billion will be expended on the UKCS alone up to 2025.
There could still be up to 20 billion barrels of oil and gas to recover from the UKCS. It is important that the industry continues…to attract fresh investment, avoid premature decommissioning
Mike Tholen, upstream policy director at Oil & Gas UK
Scrimgeour highlights the work by Dr Richard Neilson (pictured above) and team at Aberdeen’s School of Engineering, developing laser-based underwater cutting techniques for decommissioning.
“The use of lasers has many advantages, including relatively low power consumption compared to conventional cutting techniques, the use of a small deployment system, virtual no cutting forces and inexpensive consumables.
“The system could be deployed from a single container and an umbilical spooling unit. Steel thicknesses of up to 40mm have been cut in tests so far, but thicker material could be cut with a more powerful laser.”
For Mike Tholen though, the pressure to decommission will be tempered by continued efforts to extend field life.
“There could still be up to 20 billion barrels of oil and gas to recover from the UKCS. It is important that the industry continues…to attract fresh investment, avoid premature decommissioning, retain the critical infrastructure needed to access future reserves, and ensure decommissioning is carried out in a timely and most cost-effective way.”
