Decommissioning-the next “big thing” in logistics for Australia

The Australian Oil and Gas sector has entered another phase in terms of its maturity -Decommissioning. A plethora of aging assets and low production fields are due for the final phase of the development cycle decommissioning over the next 10 years, following a similar pathway as the North Sea industry, which began over 10 years ago, but only 12% of assets have been decommissioned.

Decommissioning is the final step of the whole asset lifecycle, which can be as long as 30-40 years, from initial fabrication and installation, through maintenance, and production, into the late-life asset management phase, including the suspension of operations and finally, decommissioning.

Early indicators for the potential Australian decommissioning activity value is some USD $20B over the next 40 years, however much of this is front end loaded (40%) with decommissioning activity to be commenced in the next 10 years. We should look to the precedents from the experiences in decommissioning in the North Sea production fields (which saw a peak of activity in 2019), where the traditional Exploration and Production process is used in decision-making for decommissioning.

Australia will need to evolve an approach to decommissioning that is distinct from that of exploration and production. Recognising the different drivers in the construction phase of an Oil and Gas project versus decommissioning, should enable the market to develop an approach that is optimised for each respective project and look to specialist contractors to plan and execute.

As in most offshore activity, Logistics is a central pillar in the successful completion of decommissioning projects, with logistics costs (Marine vessels, crew change, and freight) estimated to be in the range of 15-25% of total costs. The decommissioning marine spread is by far the largest single cost and represents the most significant Logistics asset exposure. Vessels with significant lifting capabilities can be used to decommission both topsides and substructures using a single lift, or multiple lifts. Semi-submersible vessels can also be used for removal of topsides with a reverse float over being the prefered techniques. Each vessel type has an operational envelope which is dictated by a range of criteria including crane capacity, deck area, draft, transit speeds, weather working windows (including cyclone avoidance) and water depths. This envelope influences the projects in which they can feasibly be deployed, and the manner in which they are utilised, shallow versus deep water, cyclone versus non-cyclone prone areas. A significant cost driver for all offshore activity (despite the phase) is crew change activities, which is the predominant domain of helicopters in Australia. Offshore helicopters are high cost, and relative to other people movement mediums, high risk. New approaches to crew change services are required, with high-speed marine vessels and walk to work solutions being tried and tested overseas, but are fairly novel in the Australian setting. Internationally, it is common for offshore workers to be mobilised for work activities via marine vessels travelling overnight to the work fronts. With future decommissioning projects, the opportunity to adopt marine crew change as the ‘norm’ is in front of us. Personally, I would much prefer to travel 6 hours on a high-speed crew change vessel, than two hours cramped on a helicopter (my military past catching up).

A decommissioning base is the cornerstone of a successful project, and this has been seen in the North Sea decommissioning campaigns in which contractors with bids that include fit for purpose and a capable decommissioning base have won the majority of work, especially for the top side asset scopes. Australian options here are narrow, but they do exist. The Port of Ashburton in Onslow is one such facility which was designed for construction and heavy lift activities which also makes it attractive for decommissioning work. Deep berth pockets, concrete pads for heavy lift cranes, large laydown areas, and utilities add to this locations potential use for some of Australias largest decommissioning projects.

Decommissioning - Logistics WA

Decommissioning of FSO’s and FPSO’s generally require ship breaking facilities with green passport requirements and only select facilities globally are available (generally in Southern Europe) to meet this requirement. With some forward planning, a number of locations in Australia could be made suitable for this activity. Locations such as Cockatoo Island in the West Kimberley and Wyalla is South Australia have attributes which lend themselves towards creating capabilities for environmentally-friendly (hydrocarbon free) shipbreaking. Contract spend and jobs for Australia….. not Turkey!

The most important factor in the Australian logistics industry’s ability to respond to this unprecedented wave of activity is its ability to field logistics companies and subcontractors that can plan and execute major logistics activities in the field, under the compliance requirements of oil and gas safety cases, on cost and schedule. Marine spread rates and the daily field activity costs are at risk of major blowouts if logistics is not planned and executed with military-like precision. Who is ready? I am getting close!