Fighting decom fatigue

Recently it seems much of the discussion in the UKCS has centred on two key topics – collaboration and decommissioning.

Indeed, I’ve written and presented on both topics a number of times myself, with more opportunities to do so in the pipeline.

But is all this talk of decommissioning giving rise to the risk of fatigue in the industry before this work even gets started?

The primary driver in the UKCS oil and gas industry is, following the Wood Report, maximising economic returns. This means there’s an industry-wide desire to extend field life for as long as economically possible, delaying decommissioning. In short, this means while many operators are planning for decommissioning, they see it as a long-term project, not an imminent requirement.

Plus, the supply chain is being encouraged to plan for decommissioning too, but rising oil and gas prices mean previously-stalled projects are now demanding more resources: leaving less time to prepare for the end-of-field-life boom.

With such a positive trend, it would be easy to push decommissioning down the list of priorities, but that would be a mistake, especially if companies want to be at the front of the decommissioning queue when the time comes.

So what can businesses do now?

Resourcing

There have been indications since 2014 of a growing skills gap, and this is particularly true of decommissioning. At the point of removal of infrastructure for some assets, it’s expected that key personnel with years of asset-specific experience will have moved on or retired. Similarly, the service sector workforce of the decommissioning generation will have limited experience and knowledge of older kit and constructions.

So, the focus now for operators and service sector organisations should be on building that knowledge, and structuring teams to make sure valuable experience is shared well throughout the planning stages. Plus, efforts to hold on to people with the relevant skills and knowledge, perhaps on a part-time or consultancy basis, will no doubt prove invaluable.

Innovation

One of the key drivers for decommissioning will be ensuring work is carried out quickly, efficiently and at low cost. Yet, the development of technology and solutions for safely do so is typically not a quick process. As such, companies should start assessing now those areas and concepts that will prove their worth when it comes to decommissioning.

Your terms of mine?

The last area usually addressed in any project is the legal terms or contract needed to pull everything together.

Decommissioning, by its very nature, is bespoke work and will require bespoke terms. The usual production-focused contracting policies and principles will need to be reviewed and amended. Of course, the industry has made a start with LOGIC set to formally publish the new Decommissioning Work Agreement, but many companies still prefer to use their own terms and conditions, so should start the job of reviewing and revising now.

Given the resurgence in the UKCS market in recent months it would be all too easy to lose focus on decommissioning, but this area of the market is still growing, both in the UK and abroad, and all too soon will be a very real workstream with huge potential.

So will your organisation be fatigued, or fighting fit?

An earlier version of this post appeared in Oil and Gas Vision magazine.

Laura Petrie

Aberdeen-based partner Laura is a corporate and commercial lawyer with significant experience in upstream oil and gas. She frequently advises operators on a range of exploration and production matters and also undertakes transactional work, both on an asset and corporate basis, advising on due diligence preparation or review, SPAs, allocation of decommissioning liability on acquisition/divestment.

Posted, 30 November 2018 by Laura Petrie
Categories: Commercial contracts | Corporate | Oil and gas

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