Gunther Newcombe

Operations DirectorNovember 2019

Transforming our approach

to decommissioning

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Outline

Context

OGA

Industry

Key Messages

Context

Safety

Need to ensure decommissioning is undertaken in a safe manner 4

Buchan

Alpha

Curlew

Brent

Bravo

Working at heights

Lifting operations

Hot work

Confined space entry

Business at scale

$32bn predicted global decom spend

over next 4 years*

Europe is largest & fastest

growing market by value

for offshore decom

Offshore

market to reach

$8.9bn by 2027

4.8% CAGR annual

growth rate (2019-2027)**

UK & Norway to see

highest offshore

decom spending

UK has around 85%

of projects yet to

be completed

Will be responsible for ca. 1/3rd

of upcoming global decom

activity in next decade

Decommissioning is big business in UKCS and globally 5

Data source Woodmac & Research & Markets

Projected Annual Decom Spend

UKCS annual decommissioning spend £1.5 – 2.5bn p.a.

£51bn

2019 Est.(£49bn like-

for-like)

6

UKCS decommissioning

UKCS cost challenge

Reduce costs from £59.7bn end 2016 baseline to <£39bn by end 2022 7

Subsea

CoE

OP

ER

AT

OR

SS

UP

PL

Y C

HA

IN

£59.7bn

£56bn

£49bn

Cost estimate Vs Time

UKCS cost progress

Significant cost reductions, and range uncertainty has been reduced 8

Reduction to Cost and Range Cost Progress towards Target 2018 Actual v Plan

2017 2019 2022

£49bn(P50) like-for-like:

2017 inventory

£59.7bn(P50)

INDUSTRY TARGET

35% reduction

£39bn(P50) like-for-like:

2017 inventory

£0.4bn

(24%)

OGA Approach

Online portal Real life case studies

Sharing lessons learnedDecommissioning dashboard

Integrated approach

20+Success

stories

Activity benchmarking

Mock data

OGA stewardship

OGA works closely with operators through review processes 10

Supply Chain Action Plans

Requirement for all Decommissioning

Programme approvals from 1st April 2018

Validates Operator’s Supply Chain activities

and promotes non-adversarial relationships

Over 30 SCAP’s submitted with early

indications of a change in behaviours with

operators embracing innovative contracting

strategies

29

+

Ongoing project monitoring to verify

project delivering as per SCAP commitment

SCAP helping drive a new culture in contracting strategies

SCAPs are a tool to:

• Monitor market conditions

• Promote lessons learned

• Improve project performance

• Understanding of cost schedule overruns

• Collaboration and innovative contracting

Aligned scope delivery with collective

commercial risk and reward models

between operator and suppliers

11

Reuse and repurposing important part of energy integration

Platform

FPSOTerminal

PipelinesO&G install.

OFTOsOil

GasCond. I/Connectors

WindfarmsPower

Energy integration

UKCS infrastructure

12

The project aims to:

• Unlock UKCS energy integration opportunities

• Leverage oil and gas infrastructure for CCS, wind

and hydrogen

• Enable partnering of oil and gas operators and

supply chain with renewables.

The project comprises two phases:

1. Technical options (completed)

2. Economic and regulatory

assessment (ongoing)

This report describes the findings from Phase 1.

Funded by £1m grant from the Better Regulation

Executive’s Regulators’ Pioneer Fund

Led by the OGA, in collaboration with:

OGA working collaboratively with government to identify

infrastructure with potential for re-use and to develop re-use policy

OGA considers re-use opportunities as part of the Cessation of

Production process

OGA actively involved in CCS licensing in OMF, SNS & EIS

Huge re-use and storage potential for CO2

Positive steps in BEIS policy development

78GtCO2

Storage

Infrastructure

Re-use for CCS

13

Project in concept stage seeking support and funding from BEIS

Flotta Oil Terminal Orkney

14

Repurposing

Industry Approach

£59.7bn 2016 baseline

35%

~£1-2bn

(20-40%)

£15bn £6bn £4bn

~£2-5bn

(15-30%)~£9-18bn

(35-65%)

~£2-3bn

(30-50%)

£27bn

18% 14%14% 21%

P&A

1. Barrier technology

2. Maximise well P&A rig-less/thru tubing

3. Campaigns

Subsea

1. Scope aggregation

2. Technology development for bundle removal

Removals

1. Alternative technologies from heavy lift

2. Contracting models

3. Innovative transportation technologies

Post CoP Running Costs

1. Early execution of well P&A before CoP

2. Simulation technology to enhance planning and

facilitate scope aggregation

3. Improved clean and flush technology

Forward priorities/commitments

Decommissioning cost reduction target

46% 26% 10% 7%

£39bn end-2022 target

Achieved to

Date

Key Costs

Reduction

Potential

Target

Reduction

Technology, scope aggregation & campaigning are key focus areas 16

Well P&A

Removals

Subsea

Post COP

PathFinder

managed by OGA,

being improved &

needs to be utilised

Sharing data

Requirement for industry to share information more openly with supply chain 17

Decom

Stewardship

Expectation

refreshed, published

in June 2019

Decom

Learning Website

publishing industry

learnings

Contracting

for Decom

adopting a different

approach

Campaigns

Need for industry to increase amount of campaigning 18

• Campaigns under review

• Suspended E&A well portfolio(>200 wells)

• East of Shetland Area Plan(>10 large platforms, ~500 wells)

• All WBS categories and geographic areas to

be followed-up

• Critical for Supply Chain & Operators to align

to deliver campaign benefits

UKCS Suspended E&A Well

campaign opportunities

Commercial models

Industry needs to seek new approaches to developing commercial models 19

Ease of Implementation

Va

lue

Area

Operator JV

Operator

Collaborations

Operator Internal

Optimisation

Supply Chain

AggregationArea Operator

& Supply

Chain JV

Commercial Models, and enablers

Ris

k &

Re

wa

rd

Equity

Level of

integrationTransactional

SupplierIntegrated Project

Partner

Contract

Margin

Key enablers

✓ Establish requirements for decommissioning at scale• Overcome the barriers to scope aggregation

• Redesign contracts/ commercial terms and business models

• Focus on the opportunities – not the liabilities

✓ Integrate transformational technologies into a risk

based approach• Be dynamic and innovative– challenge the status quo

• Contracting strategy to facilitate continuous improvement & technology

development.

✓ Develop a people strategy• Build truly diverse team

• Capture knowledge of the Ops team

• Focus on culture & transition management

Key feedback from Offshore Europe 2019 around decommissioning 20

Miller Heavy Lift Saipem vessel

STATS Group subsea flowline

de-oil & abandonment

CNR Ninian North decom team

Key messages

Significant cost

improvements have

been made in reducing

decommissioning costs

across UKCS

We need to be more transformational in our thinking 21

UKCS decommissioning

supply chain is ideally

positioned to become a

world leader

Requirement to be more

open and strategic in our

approach to

decommissioning & allow

supply chain to lead

Energy integration is a

key factor when

considering

decommissioning

OGA Decommissioning Team

Head of Decommissioning

Nils Cohrs Pauline Innes

Ian FozdarDecommissioning

Manager

Peter CacelaNNS/WOS

Lisa ZardoniSNS/EIS

Rebecca AllanCNS

Louise WoodCost

John IbbotsonSeconded SEPA

Come talk to the OGA Decommissioning Team 22