How would you characterise the global decommissioning market?
The decommissioning and repurposing of existing oil and gas assets are key enablers of the global energy transition. According to industry estimates, the offshore decommissioning market exceeded US$10 billion in 2022, and it’s expected to grow at more than 6% a year for the next decade at least.
So, it’s already a large market, and it’s a rapidly growing market. The trouble is, it’s an activity many asset owners dread. It tends to be high-cost and high-risk, it’s highly regulated, and there’s no financial return. So, understandably, people are tempted to put it off until the last minute.
That’s an issue for our industry. Because the sooner the decommissioning phase is addressed, the safer, more cost-effective, and more predictable it becomes. And what we’re trying to do at Petrofac is to change the mindset, driving more integration between late-life asset management and decommissioning – so the former becomes more productive, the latter becomes more predictable, and everything becomes more carbon efficient.
How about Petrofac’s position in the market? What are your credentials?
We are the first and only tier-one global contractor with the in-house capability to manage all well engineering, late life, and asset decommissioning phases. We are also heavily active in the North Sea, which is one of the world’s most mature basins, one of the most innovative, and the place where many new approaches to decommissioning are developed and proven.
But we don’t think of decommissioning as a discrete activity. We are also an operator, and we bring an operator’s mindset to the task. The ideal project for us is one that also entails late-life asset management – so we can squeeze every last drop of economically viable production from the asset while simultaneously planning for its managed decline, identifying those components that can be repurposed or re-used, and working out the details of the eventual plugging and abandonment and, ultimately, the removal of all infrastructure.
Of course, not all projects work out like this. We’ve seen several scenarios where a field has ceased production, and the infrastructure has been left to decay. That’s when cost and complexity can really escalate and typically, we have to do significant remedial work to make things safe before the actual decommissioning begins.