Oil & Gas UK (OGUK) has warned that the decommissioning market is increasingly interacting with that of offshore wind, increasing pressure on project deadlines and the space of onshore worksites.
OGUK’s latest Decommissioning Insight report noted a resumption of activity following the COVID-19 pandemic, with £ 16.6 billion now expected to be spent on decommission over the next decade.
OGUK said the increase in spending and activity was a sign of a “return to business at its usual pace” after an uncertain 2020.
The report also notes an increasing interaction between the dismantling elevator market and that of other offshore activities, especially offshore wind installation.
Both sectors need Heavy Lift Vessels (HLVs) to remove or install infrastructure – especially smaller oil and gas assets in the southern North Sea – and as project schedules fill up, the competition is likely to intensify.
Customers in the oil and gas industry will typically offer longer time windows of two to three years for an elevator contractor to remove a facility, OGUK said. This allowed contractors to withdraw assets during quieter times, increasing vessel utilization and lowering operating costs.
However, as wind farms and offshore turbines become larger, installation campaigns can now require a lifting vessel for hundreds of days at a time.
“This means that even though oil and gas extraction projects have offered windows, removal times are limited,” the Insight report notes.
He warns of a similar effect on land, where multiple surface removals could quickly eat away at the yard space. “With the removal of many assets over short periods of time, this could in the future have a knock-on effect on the capacity of onshore disposal facilities,” OGUK warned.
In addition, as the size of turbines and wind farms increases, larger capacity vessels usually reserved for oil and gas installations can find work in offshore wind. And, as older wind farms come to the end of their life, they will also need to be decommissioned, again drawing on the same pool of vessels and skills.
This is a positive signal for entrepreneurs and the supply chain, but competition can also increase costs for both sectors.
“While these industries will benefit from supply chain expertise arising from the dismantling of oil and gas structures, as many skills and infrastructure are easily transferable, competition for resources can also drive up prices,” noted OGUK.
Rystad Energy made similar predictions last year, warning of an “undersupply of installation vessels by the mid-2020s” for the offshore wind market.
At the time, he also warned that there were only four vessels in service capable of handling the larger next-generation turbines that will hit the market in 2021.
The post-2025 bottleneck would spur new orders for specialty vessels as well as “heavy lift vessel conversions for oil and gas,” he said.
“We identify the heavy vessel segment as the main bottleneck for the development of offshore wind from the middle of this decade, and the need for next generation vessels could slow the expected cost reductions in wind. offshore, “said Alexander, Rystad’s product manager for offshore wind. Flute, said at the time.
This is all the more noticeable as other regions such as Asia-Pacific and Australia are also starting to look at their decommissioning portfolios and the need to acquire or redeploy HLV capacities.