maintaining focus in late life - oil & gas uk · oga call to action february 2015 2003 2015 $45...

Maintaining Focus in Late Life

Chaired By

Mick BorwellEnvironment Director

Oil & Gas UK

The Golden Thread of an Integrated Asset Retirement Strategy

Frank SmitsAssociate Director

One6 Consulting Ltd

The Golden Thread of Asset Management

Frank Smits – Associate Director One6 Consulting Ltd

Oil & Gas UK Annual Conference

Late Life

18 Jun 2015

2015 One6 consulting Limited 5

Declining

Basin

Government

pressure for

MER

Capital

Project

Failure

North Sea Basin UKCS – An Environment for Change

High

Lifting

Cost

Brent price trend: 11 Jun 2015; source: CNBC.com


Point of View on Decommissioning Strategy

• Published July 2013:

Decommissioning as

strategic opportunity

• Presented in Oct 2013

• … silence…

• June 2014:

… an operator calls…

No one size

fits all…


Development Pre

Late Life

More than 10

years to CoP

10-5 Years

before

CoP

5-3 Years

before

CoP

3 Years before

CoP

Post CoP

CoPFirst

Oil

Leverage Planning and Budgeting process

2

3

4

5

7

1

Production / Asset Related Scenario


Design Develop

Invest Acquire Integrate

Divest SellCarve

Out

InvestDevelop

Wells

Brown Field

Minor Mods

Operate OptimiseMaintain

Wells/

Facilities


Wells/

Facilities

5

6 InitiateDecom

Programme

Pre-

Sanction

P&A Decom Remove

BD and Portfolio Related Scenario

Decommissioning / Removal Scenario

Development

Scenario

Asset Related Scenario (in parallel)

Related Business Scenarios – How the Work Gets Done

Asset Management & Retirement

Late Life

Asset Life Cycle model with business scenarios


Development Pre

Late Life

More than 10

years to CoP

10-5 Years

before

CoP

5-3 Years

before

CoP

3 Years before

CoP

Post CoP

Golden Thread of an Asset Retirement Strategy

CoPFirst

Oil

Leverage Planning and Budgeting process

2

3

4

5

7

1



Design Develop

Invest Acquire Integrate

Divest SellCarve

Out

InvestDevelop

Wells

Brown Field

Minor Mods


Wells/

Facilities


Wells/

Facilities

5

6 InitiateDecom

Programme

Pre-

Sanction

P&A Decom Remove

BD and Portfolio Related Scenario

Decommissioning / Removal Scenario

Development

Scenario

Asset Related Scenario (in parallel)

Related Business Scenarios – How the Work Gets Done

Asset Management & Retirement

Late Life

Asset Retirement as

part of Integrated

Asset Plan


A Leadership vs Functional Conversation

Wells Subsea

OperationsSupport

Functions

Decom &

other projects

Coherence

Regional leadership

conversation


Tactics vs Strategy

“Strategy without tactics is the slowest route to

victory…

… Tactics without strategy is the noise before defeat”

Sun Tzu –孫子兵法 (The Art of War) – 6th century BC

Battle of Waterloo – by William Sadler

WHAT and HOW

at the same time


Operating

Model

Business

Process

Fiscal &

Corporate

Structure

Organisation,

People &

Capability

Governance

Performance

Management

Technology

& Data

Risk &

Controls

Vendor &

Partner

Management

OLD

NEW


So… what is next?


How to set up and design your

transformation journey?

FoundationIntermediate

High

Performing

Sustainable

Performance

Decommissioning in the North Sea: The Influence of Major Oil Price Fluctuations

Richard HeardManaging Director

Strategic Decommissioning Consultants Limited

Strategic Decommissioning

Consultants Ltd

DECOMMISSIONING IN THE UKCS:

THE INFLUENCE OF MAJOR OIL PRICE

FLUCTUATIONS

Richard Heard, Managing Director Strategic Decom

Content

• Context

• Forecasts

• Influence on Key Stakeholders

• Operators

• Government (Regulators)

• Supply Chain

• Conclusions

Shaping the Decommissioning Landscape 1998-2015

Frigg Cessation

Plan Approved

First Derogation

under 98/3

End 2002

Decommissioning

Relief Deed

Finance Act 2013

Wood Review

March 2014

OSPAR 98/3

Comes into

effect

February

1999

NW Hutton Jacket

Removal

First SPJ

Derogation

2009

1998

20

00

20

20

2018

20

10

OSPAR 98/3

Review

March 2018

OSPAR 98/3

Review

March 2013

OSPAR 98/3

Review

March 2008

OSPAR 98/3

Agreed at OSPAR

1998

2002

2008

2013

2014

1999

OSPAR 98/3

Review

March 20032

00

9

Brent

Decommissioning

Announced

February 2006

2006

OGA

Call to Action

February 2015

2003

2015

$45 Oil

January 2015

Forecast Decommissioning Expenditure 2014

, 2014 Activity Report

Forecast End EPL – $60 Oil: NNS and CNS

Ref: Strategic Decom in-house analysis

0

20

40

60

80

100

120

140

20

19

20

20

20

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20

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20

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20

26

20

27

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28

20

29

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30

20

31

20

32

20

33

20

34

1,0

00

s To

nn

es

Tonnage at End of Economically Productive Life - 2019 onwards (CNS & NNS)

Jacket Topside

0

1

2

3

4

5

6

7

20

19

20

20

20

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31

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32

20

33

20

34

Facilities at End of Economically Productive Life – 2019 onwards (CNS &NNS)

CNS Facilities NNS Facilities

• Shortening of economic life of assets

• Advancement of CoP

• Assets more vulnerable to operational issues

• Unprecedented number of decommissioning ‘candidates’

• Key infrastructure under threat

• Risk to MER

• Supply chain readiness

• Pressure to downsize due to project and budget cuts

• Should / can we maintain capacity to meet decommissioning demand?

• Should we invest in new decommissioning technology?

Implications of a Low Oil Price Era on

Decommissioning

• Operators

• Short and Long-term liability

• Technical know-how

• Government and Regulator(s)

• Tax policy/ Regulatory framework

• MER

• Compliance

• Supply Chain

• Expectation/Anticipation of the Market

• Technology development

Decommissioning – The Key Stakeholders

• Timing:

• Begin consultation 3-5 years pre-CoP (DECC)

• Decommissioning Programme approval can take several years

• Scope

• Defined by regulation, subject to regular review (OSPAR 98/3)

• Execution:

• Well P&A may drive the decommissioning schedule

• Post-CoP Operating cost will be significant

Operators: Focus on Cost and Schedule

• Timing

• Key infrastructure (MER Action 27, OGA Call to Action)

• Scope

• Policy and regulation (MER Action 29)

• Execution

• New business models (MER Action 28, OGA Call to Action)

• Cost effectiveness (MER Action 26, OGA Call to Action)

Regulators and MER: Focus on Policy and Regulation

Supply Chain: Focus on Supply and Demand

• Timing and Scope

• Requires visibility of scope and timing

• Execution

• Needs to be responsive to the call for cost-effectiveness

• Bring creativity and innovation

• Operators:• A strategic plan will provide readiness to ensure the timing, scope and (future)

execution of the decommissioning of their asset portfolio is optimised

• Regulator:• Needs a plan to ensure the timing, scope and execution of decommissioning

the UKCS is optimised for MER

• Supply Chain:• Needs visibility of the market to ensure it is able to support the North Sea

decommissioning programme and becomes the global leader in delivering cost

effective decommissioning solutions

The Time is Now …

Conclusions - In an era of oil price fluctuations:

Strategic Decommissioning Consultants Ltd4 Albyn Terrace Aberdeen AB10 1YP

+44 (0) 1224 651270

A Blue Print for Maximising Economic Recovery in the UKCS?

John HargreavesManaging Director

Peak Global Consultancy

A Blue Print for Maximising Economic

Recovery (MER)

John Hargreaves, Managing Director, PEAK

Oil and Gas UK ConferenceJune 2015

Production Efficiency/ Operating Efficiency/ Life Extension

Hardening of ArteriesScaling and Corrosion

Heart attackLoss of Power

Kidney StonesBlocked Drains

Less PowerGas Deficient

ArthritisFabric Maintenance

DimentiaReservoir Depletion

Increased Sick Days (M)Unplanned Shutdowns

Recovery Program.

WindypopsLoss of Containment

A Blue Print for MER

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=1smmnfsh0jJYRM&tbnid=8nCciYhfJXfC0M:&ved=0CAUQjRw&url=http://www.medscape.com/viewarticle/777402&ei=HmTfU5bGK6mr7Abln4HgBw&bvm=bv.72197243,d.ZGU&psig=AFQjCNGR7NsinRMjnX8GiKqJvNKrdpSm0Q&ust=1407235460328819

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=1smmnfsh0jJYRM&tbnid=8nCciYhfJXfC0M:&ved=0CAUQjRw&url=http://www.medscape.com/viewarticle/777402&ei=HmTfU5bGK6mr7Abln4HgBw&bvm=bv.72197243,d.ZGU&psig=AFQjCNGR7NsinRMjnX8GiKqJvNKrdpSm0Q&ust=1407235460328819

The UKCS Challenges (1 of 4)

Wellwork (1)Reservoir (1)Annual Shut Down (2)Planned Plant (2)Unplanned Plant (2)Planned Export (3)Unplanned Export (3)

Three Key Areas:1. Reservoir / Wells (18%)2. Equipment: Process,

Power, ESD/Controls (70%)

1. Production Efficiency:Average only 65% Available:



Wrench Time

Data Management

Tax

Basin 2014 UOP $/boe

NNS 40.3

CNS 25.4

SNS 19.4

IS 25.4

WoS 32.8

UK Ave 27.6

2. Operational EfficiencyOPEX Increasing 10% / yr

POB

Stewardship

Competency

Planning

Procedures

Leadership

Roles and Responsibilities

Collaboration

Logistics


InspectionMaintenance



3. Ageing Assets

- OPEX

- Integrity

- Base Production- Field life


0

20

40

60

80

100

120

0 5 10 15 20 25 30 35

OPEX

Life Extension

Production

Pro

du

ctio

n /

Co

st

Year

90%

$$$

Summary:Production / OPEX Profile


Approach (1 of 3)

2. LLX & Operational Efficiency

People: POB, Competency, Leadership

Processes: Wrench time, Stewardship, Planning, Procedures, Supply Chain, Logistics

Systems: Data Management, Inspection, Maintenance,

1. LLX & Production Efficiency

Wells: 2P Profile ; 2ndary recovery

Power: Power; Plant Availability

Process: Plant Avail, Export Route, Equip failures

Control ESD/FG: Safety, Plant Availability

Integrity: Equipment Failures, ageing assets, Safety, KP4

1. Simplify:


Approach (2a of 3)

Operating EffnProdn Effn

DATA GATHERING

– OPEX Costs– Production Logs– Future Profiles– Inspection &

Maintenance data.– Duty and Capacities

KNOWLEDGE GATHERING

APPRAISE

– Structured Operator Reviews

– Structured Sub Surface Reviews

– Site Visit

1.Generate Peak Improvements

2.Assess against Agreed Metrics

3.Cost the Options (Eng, proc, install & benefit)

4.Optimise solutions5.Recommendations


2a. Method

Enhanced Prod’n

Approach (2b of 3)

CLIENT REVIEW

– Sponsors– Stakeholders– Technical Authorities– Operators

SELECT DEFINE & EXECUTE

1.Further Develop Options against Metrics

2.PFDs, H&MB, Tech Notes

3.Develop SORs

– Define & Execute

– Rapid Implementation

Not taken to Select


2b. Method

0

20

40

60

80

100

Initial PE Improvements

S/D Impact

Design improvements

Further availability

improvements

Implementation Schedule

Forecast Prod Effn

Forecast $/bbl

Recovery

Revenue

Cost

Appraise

Select

Early Wins Detailed OE

Improvements Knowledge Transfer

Approach (3 of 3)3. Field Improvement Road Map

time

Effi

cien

cy$

/bb

l

Case Study (1 of 4)


Benefit: 5 mbd to 12 mbd

Project: LLX & Prod Effn1. Infill Drilling

2. Power Reliability

3. Process Simplification

4. Control /ESD Upgrade

5. Structural Integrity

Case Study (2 of 3)3. Process Simplification :


Typical MER Study Benefits

3-6Month

Study length

10-20%*

Additional

Production

5-10%Reduced

OPEX

90%Of Facilities

Benefit

*depends on asset condition and reservoir potential

Case Studies (3 of 3)


Some numbers:10% Production improvementFor 10 mbd field = $ 60K /day

Questions & Discussion


Management of maturing assets against the backdrop of low Oil prices

Tim WalshChief Operating Officer, Assurance Operations

Lloyd’s Register Energy

Working togetherfor a safer world

Asset ManagementTim Walsh

Chief Operating Officer, Assurance Operations


Lloyd’s Register Energy’s Perspective

• 255 years experience in safety critical business

• Involved in North Sea from the outset

• Broad range of oil & gas experience

• Bring experience from other safety critical infrastructure industries

including marine, nuclear, rail, power and petrochem


Share observations on...


Asset Management Context

• Direct connection between business objectives, strategy,

Asset Management strategy, Asset Management plans

and Asset Management activities

• Circumstances change but the connection remains

• Management of asset portfolio & investment

• Role of asset stewardship

• Structured management process to pull all this together


Risk Profiling & Operating Models (I)

• Changing risk profiles

- Probability

- Consequences

• Acceptable risk

- Safety/Environment

- Business

- Who decides and how?


Risk Profiles & Operating Models (II)

• Required performance standards – change over time

• Operating windows

• Case by case approach linked to plans and portfolio

management

• Risk based approaches – getting the basics right


Information Management

• Information management challenges

- Integrity and completeness

- Sources and systems – “single version of the truth”

- Information and data strategy linked to asset

management strategies and plans

- Data acquisition – increasing options –

but keep the end in mind


Working Practices & Technology

• Challenging “how we do stuff”

• Some good innovative technologies

• Taking the risk

• Enabling different ways of working

• Silver bullets

• Shared experience collaboration


Regulatory Change

• Threat or opportunity?

• Requirement of EU directive – 2015 SCR

• Safety case material needs to be reassessed

and resubmitted

• Opportunity to rethink risk and consider what

has changed and the impact on SECEs

and Performance Standards


Culture

• Culture vs. process

• Leadership

• Empowerment

• Speed of decision making

• How to account for differences in performance between

similar organisations


Summary

Lloyd’s Register and variants of it are trading names of Lloyd’s Register Group Limited, its subsidiaries and affiliates.

Copyright © Lloyd’s Register 2015. A member of the Lloyd’s Register Group.

Tim WalshChief Operating Officer, Assurance Operations

T +44 (0)1224 267784 E [email protected]

Lloyd’s Register

Denburn House, 25 Union Terrace, Aberdeen AB10 1NN

Working togetherfor a safer world

mailto:[email protected]

Maintaining Focus in Late LifePanel Session

Chaired By

Mick BorwellEnvironment Director

Oil & Gas UK

maintaining focus in late life - oil & gas uk · oga call to action february 2015 2003 2015 $45...

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