OGUK Decom Insight Report 2021

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BUSINESSOUTLOOK 2020

DECOMMISSIONING INSIGHT 2021

NEW – OGUK's Interactive Decommissioning Toolkit

Our vision is to ensure the UK Continental Shelf becomes the most attractive mature oil and gas province in the world with which to do business. Read all our industry reports at www.oguk.org.uk/publications

The UK Oil and Gas Industry Association Limited (trading as OGUK) 2021 OGUK uses reasonable efforts to ensure that the materials and information contained in the report are current and accurate. OGUK offers the materials and information in good faith and believes that the information is correct at the date of publication. The materials and information are supplied to you on the condition that you or any other person receiving them will make their own determination as to their suitability and appropriateness for any proposed purpose prior to their use. Neither OGUK nor any of its members assume liability for any use made thereof.

DECOMMISSIONING INSIGHT 2021

1. Foreword 2. Key Findings

4 6 6 6

3. Decommissioning in the UK – Pressing on Post Pandemic

3.1 Short term outlook 2020 – 2024

3.2 Decommissioning over the next decade

10 14 14 16 20 22 22 24 26 28 32 32 33

4. The UK in detail

4.1 Well activity over the next decade 4.2 Removals activity over the next decade

OGUK's Interactive Decommissioning Toolkit Scan the QR code above or visit oguk.org.uk/decommissioning

4.3 Subsea decommissioning activity over the next decade

5. The Wider North Sea Perspective

5.1 A look at North Sea activity over the next decade

5.2 A Focus on Norway

5.3 A Focus on the Netherlands

6. Decommissioning and the Energy Transition

7. Appendices

7.1 Maturity of Estimates

7.2 Glossary

7.3 Forecast Activity in the UKCS over the next decade – A detailed Snapshot

DECOMMISSIONING INSIGHT REPORT 2020

1. Foreword

use the tool to create data visualisations that build stronger business cases with more relevant inputs. I am sure the founders of WG4 would be proud that the Decommissioning Insight report continues to grow from strength to strength, embracing innovative ways to provide industry with ever more granular market intelligence on decommissioning. Industry’s decommissioning success will depend on driving continuous improvement in efficiency and cost reduction. The 2021 Oil & Gas Authority (OGA) cost estimate report said that the total cost of the industry’s decommissioning bill had fallen by 23%. In 2017 it was £59.7 billion compared with £46 billion this year. This is great progress, but there’s more to do if we are to reach our 35% target by 2022. Together with industry, OGUK developed the Supply Chain Principles which define excellent practice in business behaviour. During 2021, we’ve seen signs that our sector is increasing its support for these principles, with innovative ways of working becoming a key focus. Examples include new and creative contracting practices which enable the implementation of multi-operator campaigns and allow work scopes to be aggregated. This provides our world-class supply chain with much-needed visibility of future work. In this way, it can hone its expertise and further develop capabilities to achieve the commercial transformation ambitions outlined in the OGA’s decommissioning strategy. With £16.6 billion to be spent on decommissioning over the next decade, now is the time to act.

Welcome to OGUK’s Decommissioning Insight 2021 , marking the end of a year in which we saw some recovery after the challenges of the global pandemic and commodity price collapse in 2020. While some of those challenges remain, the UK decommissioning industry is looking to the future with purpose. We’re establishing our key role in the transition to a low carbon energy mix, and executing safe, innovative, and environmentally sound decommissioning. All while continuing our journey to be safely more cost effective and to maximise the export potential of our goods and services. The UK industry has been working on decommissioning projects for decades, and OGUK has been at the forefront. Many in the industry will remember workgroup 4 (WG4), first established in 2007 when the supply chain became an integral part of OGUK’s remit. This was a pivotal moment in the UK decommissioning industry, helping to drive collaborative behaviours which the wider industry can learn from. WG4 was responsible for launching many initiatives including the first of its market leading decommissioning guidelines, the annual Offshore Decommissioning conference and this Decommissioning Insight report. Together, this demonstrates that when operators and the supply chain work towards the same goals, great things can be achieved. Demand for OGUK’s Decommissioning Insight continues to grow, and for this 12th issue we are incorporating an interactive online tool to give users access to extensive information in more granular detail. Operators can compare their own data with their peers’ while companies providing goods and services can

DECOMMISSIONING INSIGHT 2021

New technology plays a key role in realising these ambitions with the Net Zero Technology Centre (NZTC) providing a hotbed for innovation. But we need to accelerate the deployment of technologies so we can realise the full benefits they will deliver. OGUK’s Decommissioning Forum Steering Committee is prioritising the implementation of new technologies while our Well Decommissioning Operators Network (WDON) is supporting an NZTC initiative to accelerate the implementation of alternative well barriers. As one of the world’s most mature oil and gas basins, the North Sea has become the incubator of significant decommissioning expertise, with UK services and goods, regulation and guidance in demand around the globe. Other countries around the world, including Australia, have based much of their own decommissioning strategy on the UK’s experience. OGUK’s well decommissioning guidelines, and the UK’s decommissioning work breakdown structure (WBS) are being widely adopted globally. This market-leading capability is recognised by the government’s Department for International Trade (DIT) and given the need to capitalise on early mover advantage in the market, DIT is developing an export strategy for decommissioning, which will help maximise the potential of the UK supply chain. In the year of COP26, this industry continues to play a vital role in the energy transition to a low carbon economy as the UK strives to cut its greenhouse gas emissions at pace. We’re focusing on greener ways to decommission and identify circular economy opportunities. That means re-purposing offshore infrastructure for hydrogen and carbon capture & storage projects,

encouraging industries to re-use components and promoting creative solutions for recycling decommissioned materials. This growing and broadening decommissioning expertise means our industry is becoming a powerful global brand. It has a crucial role to play in helping deliver the UK’s net zero ambitions, as outlined in the North Sea Transition Deal, while supporting the establishment of the low-carbon energy industries that will deliver the diverse energy mix of the future.

Katy Heidenreich Supply Chain & Operations Director, OGUK

DECOMMISSIONING INSIGHT 2021

2. Key Findings Industry remains resilient through pandemic

A decade of decommissioning- the time is now

spent in 2020

forecast spend for 2021

£1.07 billion

£1.46 billion

will be spent on decommissioning an increase from £15.1 billion last year

Central and Northern North Sea dominate decommissioning expenditure

£16.6 billion

In 2020 & 2021 combined industry decommissioned:

9 %

• 1,083 platform wells • 582 subsea • 117 Exploration and appraisal wells Well decommissioning accounts for 50% of the expenditure - £8.241 billion on 1,782 wells – up 1,616 from last year OUTOF SERVICE 50 %

9% of the expenditure will be on subsea infrastructure (£1.532 billion)

jackets

topsides

wells

234

OUTOF SERVICE 21

OUTOF SERVICE

~88,000 tonnes of subsea structures >16,500 mattresses Almost 350km of pipelines to be removed ~1.2 million tonnes* of infrastructure from UK alone *note – not including pipelines

of subsea structures

of pipelines

~4,500 tonnes

mattresses

~1,600

~50km

~1.2 million tonnes

125 topsides to be removed (~700,000 tonnes) 115 jackets to be decommissioned (~400,000 tonnes)

OUTOF SERVICE

12 % Decommissioning is 12% of industry expenditure in 2021

OUTOF SERVICE

1/3

1/3 of the infrastructure installed in the UK today

DECOMMISSIONING INSIGHT 2021

Decommissioning - a key part of the Energy Transition

Building a centre of excellence

Re-use and re-purposing

Industry working to become more effective and efficient:

Safe and environmentally sound Multi-operator campaigns

Opportunities to repurpose infrastructure for:

Academia

Operators

T I

CCUS

Hydrogen

OffshoreWind Geothermal

Supporting the circular economy

Natural decline

Exports

Over 1,000,000 tonnes of topsides from North Sea region coming onshore over the next decade. Much of which can be reused or recycled.

Technology

Supply Chain

Government & Regulators

OUTOF SERVICE

Oil and gas emissions falling as some older and larger assets come off stream

Innovative contracting models

Decommissioning insight 2017

Decommissioning insight 2021

Wells

1,624

1,782

Industry is becoming more efficient

Platforms

125

Subsea Structures Total Expenditure

49,373 tonnes

87,974 tonnes £16.57 billion

£17 billion

Low carbon decommissioning

Establishing the UK as a global hub

Decommissioning can be an energy-intensive exercise — we must find ways to reduce our total carbon footprint in decommissioning, like any other part of the industry and the rest of the economy

Insight develops with OGUK's Interactive Decommissioning Toolkit

DECOMMISSIONING INSIGHT 2021

3. Decommissioning in the UK – Pressing on post pandemic

3.1 Short term outlook 2020 – 2024

Figure 1 – 2020 actuals and short term outlook

Decommissioning area

Activity in 2020 (actual) Activity in 2021 (forecast) Activity from 2022–2024

589 wells • 407 platform wells • 141 subsea wells • 41 exploration & appraisal wells

OUTOF SERVICE 84 wells • 65 platform well • 13 subsea wells • 6 E&A

150 wells • 124 platform wells • 16 subsea wells • 10 E&A

Wells

OUTOF SERVICE

45 topsides to be removed 152,502 tonnes

14 topsides 56,641 tonnes

7 topsides 56,191 tonnes

Topsides

OUTOF SERVICE

44 jackets to be decommissioned 56,305 tonnes

11 jackets 27,108 tonnes

7 jackets 19,679 tonnes

Substructure

Subsea Infrastructure to be removed

57 km pipelines to be removed 8,956 tonnes of subsea structures removed 5,739 mattresses to be removed

3.865 km 2,528 tonnes 1,088 mattresses

44.458 km 2,002 tonnes 499 mattresses

DECOMMISSIONING INSIGHT 2021

An industry in action – the industry demonstrated resilience in 2020 despite the challenges presented by the global pandemic and volatile commodity prices. Figure 1 shows that the UK industry is actively dealingwith everything fromwell decommissioning and platform and jacket removals to subsea infrastructure decommissioning projects for the coming few years. There are signs of market recovery – The UK oil and gas industry saw lower expenditure in 2020 and this was true of the decommissioning sector too. As Figure 1 shows, the reduction hit well decommissioning hardest. These projects are expensive owing to the number of people and the kind of equipment needed. Last year, only 84 wells were decommissioned on the UKCS, whereas a typical year sees around 150. This year, 150 wells are forecast to be decommissioned, which is a sign of market recovery. From 2022 to 2024 the forecast shows business returning to its usual pace. With annual expenditures just over £1.5 billion, it is anticipated that almost 600 wells and around 45 topsides and jacket structures will be decommissioned. It is also anticipated that 69km of pipelines, almost 6,000 tonnes of subsea structures and just over 4,000 mattresses will all be removed. An evolving industry - As the oil and gas industry evolves into an integrated energy industry, it will play a vital role in the nation’s climate ambitions. Continued investment in barrel-adding activity to maximise economic recovery and energy transition projects, like asset electrification, to meet stringent emissions reductions targets, will impact decommissioning activity, and therefore this report will continue to provide valuable insight.

Survey methodology Data for Decommissioning Insight 2021 have been provided by all 31 operators across the UKCS as part of the Asset Stewardship Survey, overseen by the Oil & Gas Authority (OGA). The survey collates information from all UK operators between November and February each year. The forecasts in this report are provided by operators and represent their best estimates at the time of the survey. Timings are therefore subject to change.

For the first time ever, the data have been consolidated using PowerBI, providing the ability to gain insights in more granular detail. This report is accompanied by an online tool where the user can access and view the data in an interactive way. This allows operators to compare their own data with their peers’, and the supply chain to tailor data visualisations to its own business needs and so build better business cases.

OGUK's Interactive Decommissioning Toolkit Scan the QR code above or visit oguk.org.uk/decommissioning

DECOMMISSIONING INSIGHT 2021

3.2 Decommissioning over the next decade

Figure 2 – UKCS Decommissioning Expenditure (with forecasts for 2021 onward)

Figure 3 - Forecast Comparisons for Cumulative Expenditure

Project Management Well Decommissioning Topside Preparation Substructure Removal

Post CoP Running Costs

Facilities / Pipelines De-energising

Topside Removal

2.50

Subsea Infrastructure

2021Forecast 2020Forecast ReducedSpendScenario 2017Forecast

Topsides & Substructure Onshore Decommissioning

Site Remediation

Post Decommissioning Monitoring

2.00

£1.345 billion

£1.297 billion

1.50

£1.074 billion

1.00

0.50 Expenditure (£ Billion)

CumulativeDecommissioningExpenditure (£Billion -2020Money)

0.00

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source:OGA&OGUK

Source: OGA & OGUK

Figure 4 – UKCS Expenditure Over Time

Operating Expenditure Development Expenditure Exploration & Appraisal Expenditure Decommissioning Expenditure

10 15 20 25 30 35

0 5 Total Expenditure (£ b illion - 2020 m oney)

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Source: OGUK, OGA

DECOMMISSIONING INSIGHT 2021

In line with previous reports, Decommissioning Insight 2021 focuses on expenditure for ten years ahead, highlighting the near-term opportunities for the UK’s decommissioning supply chain. The UK industry should be able to use the information in this report to help position itself as a global leader in the decommissioning market. Industry becoming more cost effective – Figure 2 shows the annual expenditure broken down into the 11 elements of the work breakdown structure (WBS). There are clear peaks in the expenditure profiles in 2022 (£1.87bn), 2026 (£2.00bn) and 2028 (£2.24bn) which lift the average but otherwise expenditure remains around £1.5 billion per year as in previous insight reports. Decommissioning Insight reports for the years 2018, 2019 and 2020 all showed expenditure levels for the next ten years (in each case) of just over £15 billion. Decommissioning Insight 2017 showed a £17 billion anticipated expenditure. This year’s dataset has more wells, more platforms and more subsea removal weight, and is expected to cost over £400 million less.

be why we see an expenditure spike in 2022 with much of the deferred activity displaced to that year. This year, £1.45 billion is forecast to be spent, perhaps marking a return to business as usual. £16.57 billion will be spent on decommissioning in the UK over the next decade – Figure 3 shows the cumulative expenditure curves from recent Decommissioning Insight reports. The forecast cumulative expenditure in 2020 is shown by the purple line. At that point, there was no real certainty on a vaccine programme and the oil price in 2020 averaged $41.88/bbl (compared with $64.30/bbl in 2019) and $69.45/bbl as of the end of October 2021. The 2020 report therefore explored a range of “reduced expenditure scenarios” for decommissioning, with the low end at around £22.1 billion by 2030. The orange line shows the cumulative expenditure using the 2021 data set. The figures show that the industry will have spent just over £26.5 billion on decommissioning by 2030. The industry has effectively managed its offshore activity despite the pandemic, and while the virus means the future is still uncertain, many lessons have been learned and processes are now in place to mitigate many of the known implications to working offshore in this environment. Commodity prices remain volatile, particularly in the case of gas. Brent crude has seen some relative stability since mid-year, trading consistently above $70/bbl, following an increase from $50/bbl at the start of the year. However, gas prices have increased by more than 400 per cent throughout the year, reaching record and prolonged high levels. While this may result in the deferral of some decommissioning activity, the impact will be fully assessed next year. The light blue line shows the cumulative expenditure in 2017. This was the year the OGA introduced the industry target to reduce the total forecast costs of decommissioning by 35 per cent, from an initial 50% probability estimate (P50) of £60 billion to a target of £39 billion. The 2017 forecast would have seen about £32.2 billion spent by 2030. This shows that while there has been a minor increase in expected expenditure over the next decade, this year compared with last, it is significantly less than the 2021 spend forecast in 2017.

Decommissioning Insight 2017 Decommissioning Insight 2021

Wells

1,624

1,782

Platforms

125

Subsea Structures Total Expenditure

49,373 tonnes

87,974

£17 billion £16.57 billion Industry withstands the shocks of volatile pricing and COVID – Figure 2 also shows the actual expenditure in the UK decommissioning industry. In 2018 industry spent almost £1.3 billion, rising to almost £1.35 billion in 2019. This trend was expected to continue with Decommissioning Insight 2020 forecasting £1.47 billion in 2020. But like many other sectors, the industry was impacted by the COVID pandemic and the commodity price fluctuations. Still, it spent almost £1.1 billion, only 20 per cent less than it had the year before. While this reduction was partly due to cost efficiencies, much of the expenditure reduction in 2020 was due to activity being pushed to later years in the data set. This may

DECOMMISSIONING INSIGHT 2021

OUTOF SERVICE

Figure 5 – Work Breakdown Structure

Central North Sea Northern North Sea Southern North Sea West of Shetland Irish Sea

16%

43%

43% Central North Sea Northern North Sea Southern North Sea West of Shetland Irish Sea

Central North Sea Northern North Sea Southern North Sea West of Shetland Irish Sea

43%

16%

29%

OUTOF SERVICE

Source:OGA&OGUK

29%

Source:OGA&OGUK

1 Project Management

2 Post-CoP Running Costs

3 Well Decommissioning

4 Facilities & Pipelines Permanent Isolation & Cleaning

5 Topsides Preparation

6 Topsides Removal

7 Substructure removal

8 Topsides and Sub-structure Onshore Disposal

9 Subsea Infrastructure

10 Site Remediation

11 Post- Decommissioning Monitoring

Proportion of overall expenditure over the next decade (£million)

7% 9% 50% 4% 3% 9% 4% 3% 9% 1% <1% TOTAL

Northern North Sea &

£5,895.98

West of Shetland £436.87

£657.01

£2,858.12

£258.57

£157.77

£548.04

£214.07

£130.38

£582.81

£38.18

£14.17

£471.17

£724.75

£3,805.38

£126.36

£233.85

£461.24

£249.62

£215.26

£825.57

£42.12

£28.62 £7,183.95

Central North Sea

Southern North Sea & East Irish Sea £206.65 £187.41

£1,578.05

£50.72

£118.31

£466.51

£275.05

£113.77

£348.20

£113.44

£28.67 £3,486.78

TOTAL £1,114.69 £1,569.17

£8,241.55

£660.55

£509.92 £1,475.79 £738.73

£459.41

£1,531.69

£193.74

£71.46 £16,566.72

DECOMMISSIONING INSIGHT 2021

Figure 6 – UKCS Regional Expenditure Breakdown by year (2021-30)

100%

Decommissioning is 12.1 per cent of UK offshore expenditure – In 2021 the UKCS oil and gas industry is forecast to spend just over £12.1 billion across all activities, as shown in Figure 4. Around £1.46 billion of this is on decommissioning, representing around 12.1 per cent of the total expenditure. Deferral of well decommissioning increases forecast expenditure – This year’s dataset shows that over £8.241 billion (50 per cent of the total) will be spent on decommissioning 1,782 wells over the next decade, up from £7.390 billion (1,616 wells) in last year’s report. Looking at the 2019 Decommissioning Insight report, the industry forecasts that around £6.8 billion will be spent on decommissioning 1,630 wells over the ten-year period. This is £1.4 billion more and will include 152 additional wells over the decade. Well decommissioning was a key focus area in 2020, sparking initiatives within industry associations and regulators as industry looked to support the industry’s recovery by stimulating activity throughout the basin. Last year’s asset stewardship survey was conducted before the COVID pandemic took hold, and since then almost half the wells have had to be postponed for a year or more.

Decommissioning expenditure is dominated by central and northern North Sea – Almost £7.2 billion (43 per cent of the total) will be spent on projects in the central North Sea (CNS) over the next decade, with almost £4 billion going on well decommissioning. Figure 6 shows that decommissioning projects in the CNS account for almost 30 percent of the expenditure in 2021 but this rises to above 50 per cent by 2030. Expenditure in the Southern North Sea (SNS) accounts for almost 30 per cent in 2021 but this proportion falls in the middle of the decade, as some major projects come to an end. Then the focus shifts to the Irish Sea (IS) and West of Shetland (WoS). Expenditure profiles differ in regions throughout the North Sea - Figure 7 shows the total expenditure in each region, broken down into the different elements of the decommissioning WBS. This chart shows the nuances experienced in different regions. For example, post cessation of production (CoP) running costs play a larger role in the NNS and CNS compared with the SNS. This is because the assets are much larger, housing more people and being more complex. A greater share of decommissioning projects has been conducted in the SNS where tail-end decommissioning activities, such as site remediation, play a larger role.

90%

80%

70%

60%

50%

40%

30%

20%

10%

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

CNS NNS SNS WoS IS

Source: OGA & OGUK

Figure 7 – Breakdown of Expenditure by WBS element by Region (2021-30)

100%

80%

60%

40%

20%

CNS

NNS & WoS

SNS & IS

Post-DecommissioningMonitoring

Site Remediation

Subsea Infrastructure Substructure Removal Topsides Preparation Well Decommissioning Project Management

Topsides and Sub-structure Onshore Disposal

Topsides Removal

Facilities & Pipelines Permanent Isolation & Cleaning

Post CoP Running Costs

Source: OGA& OGUK

DECOMMISSIONING INSIGHT 2021

Figure 9a – Average Forecast Well Decommissioning Cost in the CNS, NNS,& WOS (2021-30)

4. The UK in detail

Average= £8.14m Median=£8.69m

Average= £4.69m Median=£3.78m

Figure 8 – Well Decommissioning Activity in the UKCS (2021-30)

Average= £4.50m Median=£3.44m

300

Platform Wells - Forecast Subsea Wells - Forecast Suspended Subsea Wells - Forecast

250

Average= £2.91m Median=£2.80m

Average= £8.56m Median=£9.20m

Average= £2.95m Median=£3.43m

Average= £7.99m Median=£8.33m

200

Estimated Cost per Well

Average= £4.77m Median=£5.55m

Average= £2.98m Median=£3.11m

150

2019 2020 2021

Platform

Subsea

E&A

100

Source:OGA& OGUK

Figure 9b – Average Forecast Well Decommissioning Cost in the SNS & IS (2021-30)

Number of wells to be decommissioned

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Average=£6.06m Median=£6.33m

Source: OGA & OGUK

Average=£5.42m Median=£5.09m

Average=£2.45m Median=£2.97m

NNS & WoS

CNS

SNS & IS Sub-Totals

Well Type

Average=£3.34m Median=£3.35m

Platform Well Subsea Well

275 208

325 319

483

1,083

61% 33%

Average=£2.45m Median=£3.04m Average=£2.34m Median=£2.70m

EstimatedCostperWell (£Million -2020Money)

582

Average=£6.00m Median=£6.28m

Suspended E&A

Average=£3.25m Median=£3.37m

117

Average=£2.88m Median=£2.38m

2019

2020

2021

2019

2020

2021

2019

2020

2021

Total

515

695

572

1,782

100%

E&A

Subsea

Platform

Source:OGA&OGUK

DECOMMISSIONING INSIGHT 2021

Well decommissioning forecasts increase – Figure 8 shows that 1,782 wells are to be decommissioned on the UKCS over the next decade. This is an increase from the 1,616 forecast in Decommissioning Insight 2020 . The data also show a fluctuating workload over the next decade with spikes occurring in 2023, 2026, and 2028 and 2030. The sporadic nature of this activity demonstrates the challenging business environment the industry faced in 2020, when the pandemic and price fluctuations hit the labour- intensive well decommissioning area particularly hard. Activity peaks are anticipated to level out – All thewells earmarked for decommissioning in 2020 but not completed were moved into later periods of the dataset. The data is compiled by each operator in isolation, therefore while individual operators will plan their portfolios of work to effectively manage their own workload and budget, they do not usually consider their peers’ plans when forecasting their own workload. This explains the spikes in activity. The reality is that, while the UKCS supply chain can adapt, each year there will only be the capacity to liquidate a certain amount of scope, so it is likely that we will see a steadier and more sustainable workload. NNS less impacted – The data shows a slight reduction in thewell numbers in the NNS and WoS regions, with 515 wells to be decommissioned in the next decade compared with 552 in last year’s dataset. This is because most of the well activity in the NNS earmarked for 2020 went ahead. The main differences come in the CNS, where 695 wells are now set to be decommissioned, compared with 615; and in the SNS & IS where 572 wells are forecast compared with 449 over the next decade as stated in Decommissioning Insight 2020.

E&A well forecasts increase – This year’s report states that 117 suspended exploration and appraisal wells are forecast for decommissioning in the next decade compared with 80 in last year’s dataset. This increase of almost 50 per cent is likely due to new guidance from the OGA on timelines for decommissioning suspended E&A wells, which recommends that operators have plans in place to decommission this well stock within two to five years, unless otherwise justified. 1 There is a collective drive by industry to collaborate to achieve multi-operator, multi-well decommissioning campaigns, and suspended E&A wells is one area where success could influence other well decommissioning areas. £509 million is currently to be spent on decommissioning suspended E&A wells over the next decade. Well decommissioning costs remain consistent – The cost of decommissioning wells in the CNS, NNS and WoS remains consistent for all well types. Platform wells cost about £2.98 million each, very close to the £2.95 million figure in last year’s report. Subsea well costs are also lower at just under £8 million which is not expected to change; and E&A well costs are also roughly the same in 2021 and 2020 at £4.77 million, although the range has reduced in this year’s report. There is similar softening of costs in the SNS and IS. In these regions platform wells are expected to cost £2.34 million, subsea wells £6.06 million and E&A wells £3.34 million, on average, over the next decade. Well decommissioning forecast costs are consistent with OGA actual benchmarks – When compiling cost estimates, it is important to note that the figures reported in the Decommissioning Insight are based on an average of operator estimates for the activity. The OGA produces its “ Decommissioning Benchmarking Report ” 2 which reports actual performance annually. In 2020, the industry reported that platform wells in the NNS and CNS cost £3.0 million apiece, subsea well cost £7.8 million and E&A wells cost £3.3 million to decommission. In the SNS and IS, platform wells cost £2.8 million, subsea £6.3 million and E&A wells £4.2 million (again, all at P50). 1 https://www.ogauthority.co.uk/media/5108/oga-suspended-wells-guidance.pdf 2 https://www.ogauthority.co.uk/media/7864/decom_benchmarking-report-2021_final111121.pdf

DECOMMISSIONING INSIGHT 2021

4.2 Removals activity over the next decade

Figure 10a – Tonnage of Topsides to be Decommissioned (2021-30)

Figure 10c - Tonnage of Substructure to be Decommissioned (2021-30)

Figure 10e - Average Forecast Topsides and Substructure Removal Cost in the CNS, NNS, & WOS (2021-30)

80,000

120,000

CNS

NNS &WoS

SNS& IS

CNS

NNS &WoS

SNS& IS

£9,000

70,000

100,000

£8,000

Average=£2,823 Median=£2,898

60,000

£7,000

80,000

Average=£2,190 Median=£2,304

50,000

£6,000

Average=£2,024 Median=£2,361

£5,000

40,000

60,000

Average=£2,110 Median=£2,061

Average=£1,772 Median=£2,105

Average=£1,794 Median=£1,974

£4,000

30,000

40,000

£3,000

20,000

£2,000

Topsides tobeDecommisioned (t)

20,000

£1,000 Estimatedcost per tonne (£ -2020money)

10,000

Substructure tobeDecommissioned (t)

£0

2019

2020

2021

2019

2020

2021

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Topsisdes

Substructures

Source:OGA&OGUK

Figure 10b – Number of Topsides to be Decommissioned (2021-30)

Figure 10d - Number of Substructures to be Decommissioned (2021-30)

Figure 10f - Average Forecast Topsides and Substructure Removal Cost in the SNS & IS (2021-30)

£16,000

Total CNS NNS &WoS SNS& IS

£14,000

£12,000

13 12

£10,000

£8,000

8 7

£6,000

Average=£3,033 Median=£3,368

£4,000

Average=£2,296 Median=£2,596

Average=£2,020 Median=£2,433

2 3

£2,000

2 1

1 2

2 1

Estimatedcost per tonne (£ -2020money)

1 0

0 1

£0

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Source:OGA&OGUK

Source:OGA& OGUK

Source:OGA&OGUK

DECOMMISSIONING INSIGHT 2021

Topsides and substructure removal activity on the rise – 125 topsides (704,230 tonnes), and 115 jacket structures (382,308 tonnes) will be decommissioned over the next decade. This is up from 93 topsides and 85 jackets as reported in Decommissioning Insight 2020 . Both topsides and substructure charts show tonnage being removed at a steady rate in the first half of the decade before rising in the latter half. Topsides removals between 2021 and 2025 will average around 50,000 tonnes per year, and substructure decommissioning around 20,000 tonnes. This increases to around 90,000 tonnes of topsides removed, and 60,000 tonnes of substructures decommissioned per year from 2026 to 2030. The data show the relationship between tonnage removed, and quantity of installations removed. For example, 2023 is the year with the lowest topsides tonnage removed: 33,666 tonnes. It is also a year of high activity with 15 topsides removed. All the removals activity in this year is conducted in the SNS, where assets are much smaller than in the CNS and NNS. The weight of individual assets being removed in 2023 is between 240 and 6,547 tonnes. More cost certainty for platform removals costs – The cost per tonne of both topsides and substructures has dropped slightly in the CNS, NNS and WoS. This year’s report expects topsides removal to cost £2,011 /tonne, down from £2,190 last year; and £1,722/tonne for substructures compared with £2,024/tonne in last year’s report. By contrast, in the SNS and IS we see a slight increase at £2,296/tonne, compared with £2,020 last year. Topsides and substructure costs are combined in this region as most projects remove the topsides and the substructure in the same campaign. They are smaller than assets in the CNS and NNS.

It should be noted that the top and bottom ends of the cost estimate range have moved closer together (see the charts in Figure 10) as the amount of data about project expenditure rises. Decommissioning lift market interacting with other markets – The offshore decommissioning market is now interacting with the offshore wind installation market. As of 31 December 2020, the UK had 2,291 offshore wind turbines, and 33 offshore substations installed around its shores with a further 719 offshore turbines and 11 offshore substations under construction. 3 The lift vessels and resources used to install offshore wind turbines are the same as those used to remove offshore oil and gas installations, particularly the smaller assets in the SNS. The oil and gas industry will normally offer long time windows of two to three years for a lift contractor to remove an installation. This has allowed contractors to remove assets during quieter periods, which increases vessel utilisation and cuts operator costs. Offshore wind farm installation projects are getting larger, with many installation campaigns for a lift vessel now running into the hundreds of days. This means that even though oil and gas removal projects have offered windows, the timeframes for removals are constrained. With many assets being removed during short time periods this could in future have a knock-on effect on onshore disposal facility capacity. Additionally, as offshore wind turbines get larger, this market could start to interact with those larger oil and gas installations in the CNS and NNS. Over time, as offshore wind farms age, these too will be decommissioned as will offshore structures to support industries like CCUS, hydrogen and geothermal. While these industries will benefit from a supply chain expertise born from decommissioning oil and gas structures, as many of the skills and infrastructure are easily transferable, competition for resources may also drive up prices.

3 https://www.thecrownestate.co.uk/media/3792/offshore-wind-operational-report-1.pdf

DECOMMISSIONING INSIGHT 2021

CASE STUDY: TAQA and Brae Bravo

The Brae Bravo decommissioning project is a landmark for TAQA and has set the standard for decommissioning programmes going forward. It has established a foundation for future decommissioning success, demonstrating TAQA’s ability to complete such programmes in line with its safety and sustainability goals. The structure, weighing over 36,000 tonnes, was sent to the AFOD Environmental Base in Vats, Norway, with the aim of reusing or recycling 95% or more of the material. The logistics and applied resources have placed Brae Bravo among the most intense projects performed in the North Sea over the past year. At peak, during the first phase, more than 500 personnel, many from sub-contractors based in Aberdeen and across the UK, were on the semi-submersible crane vessels. Nearly 400,000 working hours were performed across both phases without any major incidents recorded. For many people who worked on the decommissioning programme, this marks the end of an era. The safe and successful removal project, completed during an unprecedented global pandemic, was a fitting conclusion.

Earlier this year, TAQA Europe made history as it undertook its first major decommissioning project, which also happened to be one of the largest topside removal projects of its kind in the North Sea. The Brae Bravo platform produced about 500 million barrels of oil equivalent over its 33-year lifetime. With nearly 300,000 arrivals on its helideck since 1982, it is known to many in the industry for its sheer size. The successful completion of this project marked the culmination of many years of thorough planning by a project team which shaped a bespoke strategy for a programme of such size. When TAQA assumed operatorship of the Brae field in October 2020, the project remained on track for 2021 execution. The removal strategy centred upon a two- phased campaign – one that featured two of the world’s largest semi-submersible crane vessels: Heerema Marine Contractors’ Thialf and Sleipnir . Campaign 1, executed from the Thialf , removed the platform cranes and helideck, and prepared the remaining topsides for removal at a later stage. During these activities, Sleipnir simultaneously completed the removal of the Brae Bravo flare tower, bridge and flare jacket marking the first time these two semi-submersible crane vessels converged in the North Sea. Campaign 2 saw the return of the Sleipnir to remove the remaining topside modules and transport them to the dismantling yard.

DECOMMISSIONING INSIGHT 2021

Figure 11a – Subsea Decommissioning Expenditure in the UKCS (2021-30)

350

CNS NNS&WoS SNS&IS

300

250

349 km of pipelines to be removed over the next decade

200

150

100

50 Forecast Expenditure (£ Million)

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source: OGA & OGUK

Figure 11b – Subsea Structure Removal Tonnage in the UKCS (2021-30)

Figure 11c – Number of Mattresses Removed in the UKCS (2021-30)

30,000

3,500

CNS NNS&WoS SNS&IS

25,000

CNS NNS&WoS SNS&IS

3,000

2,500

20,000

2,000

15,000

1,500

10,000

1,000 QuantityofMattresses

5,000

500

Subsea StructureRemoval (tonnes)

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source:OGA&OGUK

Source:OGA& OGUK

DECOMMISSIONING INSIGHT 2021

Subsea decommissioning expenditure sees slight reduction – This year’s insight report looks in greater detail at the subsea infrastructure than in previous years. With 9 per cent of the overall expenditure forecast to be spent on subsea decommissioning, this is a key cost driver for the UK decommissioning industry. £1.531 billion is set to be spent in a fluctuating profile over the next ten years, a reduction from the £1.622 billion forecast in Decommissioning Insight 2020 . Invisible decommissioning – There are almost 350km of pipelines, 90,000 tonnes of subsea infrastructure, and 17,000 mattresses to be removed from the UKCS over the next decade. This is a side of decommissioning that goes relatively unnoticed by communities. While large topsides and jacket structures normally draw a crowd as they are brought ashore for disposal, these smaller pieces of infrastructure tend to escape public attention as they are landed and transported to their final destination for disposal, reuse or recycling. With a supply chain well set up to service the oil and gas sector, these smaller items are more “business as usual” for the logistics and disposal organisations in the areas used to dealing with this kind of infrastructure.

Subsea structure removal activity set to increase steadily over time – Around 2,000 tonnes of subsea structures are forecast to be removed between 2021 to 2023 rising steadily to over 11,000 tonnes in the middle of the decade. A spike is seen in removals activity in 2030 as a few larger subsea structures are set to be decommissioned in the CNS. Decommissioning Insight 2020 forecast that just over 70,000 tonnes were forecast to be removed but this has increased to almost 90,000 tonnes in this year’s report. Mattress decommissioning sees slight reduction – 16,661 mattresses are set to be removed from the North Sea over the next decade, down from around 22,000 reported in last year’s Decommissioning Insight . Of that total, 7,620 are in the CNS with slightly fewer expected to be removed from the NNS and WoS (4,886) and SNS and IS (4,155).

DECOMMISSIONING INSIGHT 2021

5. The Wider North Sea Perspective

5.1 A look at North Sea activity over the next decade The UK does the most North Sea decommissioning work – Decommissioning in the UK accounts for 67% of the North Sea’s well decommissioning workload, 69% of the topsides removal tonnage and 68% of the substructure decommissioning tonnage. North Sea well decommissioning remains steady over the next decade – Over 200 wells are forecast to be decommissioned each year across the North Sea with 2,679 wells in total. 528 wells are to be decommissioned in the Netherlands, 278 wells in Norway and 91 in Denmark. Again, there are spikes in the dataset for 2021, 2023 and 2026 in an otherwise smooth portfolio of work. Topsides decommissioning activity is steadily rising over the next decade – Just over 1 million tonnes of topsides infrastructure will be removed over the next decade, up from 900,103 tonnes as stated in Decommissioning Insight 2020 . There is a general increasing trend in topsides decommissioning with just under 60,000 tonnes to be removed in 2021, rising to almost 160,000 tonnes in 2029 before dropping back to just over 120,000 tonnes in 2030. Again, most of the topsides comes from the UK sector, with Netherlands scopes starting to rise from 2023, and a few large Norwegian scopes slated for the end of the decade. A game of two halves for North Sea substructure decommissioning – A steady workload of substructure decommissioning is anticipated for the North Sea where between 20,000 and 40,000 tonnes are expected to be decommissioned between 2021 and 2025. The activity then peaks in 2026, with a few large projects forecast to take place in the UK and Norway. The workload in the latter half of the decade remains high at above 70,000 apart from 2028 where just under 50,000 tonnes are forecast to be decommissioned.

Survey methodology Data have also come fromother countries around the North Sea, namely Norway, the Netherlands and Denmark. Data from the Netherlands came from Nexstep, a joint initiative of the state-owned Energie Beheer Nederland (EBN) and the Dutch oil and gas industry, represented by NOGEPA. OGUK also collected data directly from three operators in Denmark. For the first time, data from Norway were collected by Norsk Olje Og Gass (NOROG), a trade association representing the Norwegian oil and gas industry. The data came from a record eight operators, allowing greater insights as detailed in this section.

DECOMMISSIONING INSIGHT 2021

Figure 12a – Number of Wells to be Decommissioned in the North Sea (2021-30)

Figure 12b - Number of Topsides to be Decommissioned in the North Sea (2021-30)

Figure 12c - Number of Substructures to be Decommissioned in the North Sea (2021-30)

500

UK Norway The Netherlands Denmark

450

160,000

180,000

400

UK Norway The Netherlands Denmark

160,000

140,000

UK Norway The Netherlands Denmark

350

140,000

120,000

300

120,000

100,000

250

100,000

80,000

200

80,000

60,000

150

60,000

40,000

100 Numberof Wells to beDecommissioned

Topsides tobeDecommissioned (t)

20,000 Substructures tobeDecommissioned (t)

20,000

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source:OGUK,OGA, NexStep,NOROG

Source:OGUK, OGA, NexStep,NOROG

Country

Number of wells

Topsides (tonnes)

Substructure (tonnes)

1,782

67% 20% 10%

704,230 150,932 149,914

69% 15% 15%

382,308 77,913 76,072 26,095 562,388

68% 14% 14%

The Netherlands

528 278

Norway Denmark

12,107

TOTAL

2,679

100%*

1,017,183

100%*

*May not add to 100% due to rounding

DECOMMISSIONING INSIGHT 2021

Figure 13 – Wells Activity in Norway (2021-30)

5.2 A Focus on Norway

Platform

Subsea

OUTOF SERVICE

278 wells to be decommissioned • 237 platform wells • 41 subsea wells over the next decade

Well Decommissioning

Numberof wells to bedeommissioned

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source: NOROG

OUTOF SERVICE

Topsides removal 150,932 tonnes to be removed over the next decade

Substructure decommissioning 91,222 tonnes to be removed over the next decade

Removals

Subsea decommissioning Pipelines: 971km Subsea structures: 2,830 tonnes Mattresses: 547 tonnes

to be decommisioned over the next decade

Subsea Infrastructure

DECOMMISSIONING INSIGHT 2021

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