Decommissioning will be the North Sea’s biggest business by 2030

Article written by Laura Hurst. Originally published by Bloomberg and reproduced on World Oil.

Graeme Fergusson sees life in the death of an oil field.

Five years ago, the blonde-haired native of Aberdeen, Scotland had a fairly conventional role in the industry, focusing on squeezing every drop of crude from reservoirs in the North Sea. But a brush with the worst oil slump in a generation sent his career on a detour and he’s now more inclined to perform last rites on a field than to keep it alive.

Fergusson is the managing director of Fairfield Decom Ltd., which specializes in dismantling offshore oil and gas platforms. It may not be as glamorous as frontier exploration, but it’s potentially a huge business.

“Over 20 billion pounds ($26 billion) is to be spent on U.K. decommissioning by 2030,” said Paul Main, a Wood Mackenzie Ltd. analyst focused on the upstream supply chain. By the middle of the next decade, companies will be spending more on removing redundant oil and gas facilities than developing new fields in the area, he said.

Historic Slump

When Fergusson became chief financial officer of Fairfield Energy in 2015, the company managed the Greater Dunlin Area of the North Sea. Dunlin was an old field, first discovered by Royal Dutch Shell Plc in 1973, but was still pumping. Then came a historic slump in oil prices, from above $100 a barrel in 2014 to below $30 two years later.

Cheap crude and looming maintenance costs meant the business was no longer viable, Fergusson said in an interview. In June 2015, Fairfield turned off the taps at Dunlin after 37 years of production.

“We had to convert and become something else, which was the beginning of the Fairfield Decom story,” Fergusson said. There was lots to learn because the Greater Dunlin Area, which includes the Osprey and Merlin field, plus associated infrastructure is “as complicated as it can get from a decommissioning perspective.”

Cleaning Up

Dunlin is a concrete gravity-based structure, not dissimilar to Shell’s Brent platforms. On the huge submerged base sits a 20,000-ton structure made up of 30 modules, a drilling derrick, a flare boom and a helipad. Beneath the water are dozens of wells, some of which were drilled as far back as the 1970s.

Fairfield Decom is structured as a joint venture between Fairfield Energy’s parent Decom Energy, Heerema Marine Contractors and AF Offshore Decom. Dunlin’s decommissioning process is about two-thirds complete. All 16 subsea wells have been plugged and abandoned, plus a quarter of the 45 platform wells in the area. The company has removed subsea infrastructure and is now preparing to get rid of the topsides — the most visible part of an oilfield.

Shell actually built the Dunlin platform, but in recent years oil majors have been selling aging North Sea fields to smaller companies, in some cases also transferring the decommissioning liabilities.

In 2016, the largest companies in the North Sea were not willing to hand over their decommissioning activities to smaller operators, said Fergusson. “The dial has moved massively” since then as companies realize decommissioning isn’t their core business, he said.

The process can be controversial, especially for well-known companies like Shell. The Anglo-Dutch company is seeking to leave the legs of its Brent platform in place, saying that removing them would pose a greater environmental risk. Greenpeace opposes the plan and recently boarded two of the field’s platforms, calling on the company to “clean up your mess!”

Fairfield has yet to submit a final decommissioning program to the government for the field’s concrete legs, each of which weigh as much as the Eiffel Tower.

Business Opportunity

So far, Greater Dunlin is Fairfield’s only decommissioning project, but Fergusson said the company has drawn interest from a number of North Sea players, from which it has “a number of propositions.”

The U.K. Department for Business, Energy & Industrial Strategy has required operators to set aside 844 million pounds so far to cover decommissioning costs. Fairfield Energy, with its partner Mitsubishi Corp. as a backstop, put in place the funds for the Greater Dunlin Area before the fields ceased production.

The U.K. Oil & Gas Authority estimates that the total cost of decommissioning in the country currently stands at 49 billion pounds. The government body reduced its estimate this year by 10% from 2018 as improved planning and execution practices resulted in lower costs. The OGA says that there is still “considerable opportunity” for improvements, which would help meet its 39 billion-pound decommissioning cost target.

Decommissioning has typically been done by a number of service providers focusing on different elements of the process, from plugging wells to operating vessels that remove platforms. Fairfield Decom aims to capture this business by offering an integrated approach that will cut costs, Fergusson said. Because companies can offset some of the expense of shutting down platforms against their tax bill, doing it cheaper could also benefit government coffers, he said.

“It’s to everyone’s benefit that we do decommissioning at the lowest possible cost,” said Fergusson. “The taxpayer is clearly on the hook for a substantial portion of this.”

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Hat-trick combo for next generation decommissioning operations

Article taken from the Petroleum Review. The original article can also be downloaded.

Three leaders in the oil and gas decommissioning sector launched a new company, Fairfield Decom, in June 2019, to provide an end-to-end solution for P&A, salvage and disposal of ageing oil and gas assets.

Fairfield Energy is a subsidiary of Decom Energy, who is one of the partners in Fairfield Decom, which is well advanced in decommissioning of the Greater Dunlin field (including Dunlin, Osprey and the Merlin subsea satellite fields and infrastructure), with Dutch marine contractor Heerema and specialist Norwegian offshore removal and recycling contractor AF Offshore Decom.

The combined venture claims to be the first fully outsourced, end-to-end, late-life decommissioning operator in the North Sea. ‘The three companies have unrivalled experience in decommissioning and there is great alignment in terms of our responsible approach to business and core values,’ said Graeme Fergusson, Managing Director of Fairfield Decom.

The company is initially targeting the UKCS, which has the largest decommissioning market globally, with a projected expenditure of £15.3bn over the next decade. ‘We have had some very encouraging conversations with operators looking to outsource their decommissioning operations to a company like ours,’ said Fergusson.

‘We’ve taken the bold step to create a company to handle full end-to-end decommissioning projects of significant scale. This is a global opportunity – but for the time being we are focused on the UKCS.’

So, how does he see the key lessons learnt on Dunlin?

‘Expect the unexpected. Planning is key. We arrived at Dunlin COP very quickly and unexpectedly, when the oil price fell. There were many technical issues and the wells have involved huge learning. We tried to create an “agricultural process” around the wells, harvesting new knowledge as it was gained.’

Continuous improvement is key. However, the biggest lesson has been about organisations and led to the creation of Fairfield Decom. ‘Taking on the decommissioning challenge in the traditional capex mindset doesn’t work for [this sector],’ insisted Fergusson. ‘The frustration of three companies operating in isolated boxes meant much value is lost if you can’t integrate those parties closely. Thinking about that led us to combine forces and put all of our skills in decommissioning and our value chain in one entity, so you can break through barriers as one integrated entity – that creates a lot of value and saves a lot of costs.’

Fairfield Decom Commercial Director Ronald van Waaijen added: ‘The first thing we tried to stop was the traditional contractor/client relationship, which is confrontational. Our approach is smarter and trust-based.’ The team is also relatively small, with a footprint of 10-15 in Fairfield Decom, with further personnel available from Fairfield Energy, as well as a vast skill-base in Heerema and AF Gruppen. Interestingly, Fergusson doesn’t expect decommissioning to become a huge job creator. ‘Success will be defined by the North Sea having efficient decommissioning through a number of models like ours. But there’s only the demand for a handful of companies.’

As for new technology, ‘from a wells perspective there is exciting technology out there, but it’s yet to be proven,’ commented Fergusson. ‘Dunlin started its well campaign in 2016. We trialled a number of different technologies, none of which gave us the confidence as a responsible operator to use it for our wells. So Dunlin has been a relatively conventional P&A campaign. We have used good technology for the subsea wells that we removed. But Dunlin has not been the opportunity to demonstrate game-changing technology, like thermite plugs, bismuth plugs etc.’

However, according to van Waaijen: ‘Digitalisation is important, and as a new start-up company, it’s fairly easy to implement.’ What’s more, Heerema is to install the first lift with its new 20,000 tonne Sleipnir vessel, which offers a lot of sustainability, powered by LNG. Heerema also has a simulation centre in The Netherlands, where it can practice on decommissioning projects virtually and benefit from lessons learnt in a safe environment.’

So, what’s the main barrier to success? Fergusson maintained: ‘Lack of quality records and data is a major issue for decommissioning operations. That’s why starting early is key to efficient decommissioning.’

Want to know more about Fairfield Decom?

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Fairfield Decom says ‘first customer needs to be as visionary as we are’

By Allister Thomas. Original article was published in the Energy Voice.

Fairfield Decom was launched in May as a joint venture between operator Fairfield Energy and decommissioning heavyweights AF Offshore Decom and Heerema Marine Contractors.

The business model involves taking over operatorship of fields in their final years of production and guiding them through to decommissioning.

Managing director Graeme Fergusson said the company has approached several operators and is in “material conversations” with three or four.

It comes after Jon Clark, oil and gas transactions leader for Europe, Middle East, India and Africa at EY, told Offshore Europe delegates last week that operators will need to make a strategic decision to either carry out decommissioning or do a deal with a specialist supplier like Fairfield.

The company’s commercial director Ronald van Waaijen, said: “We would not have gotten this far if we were not confident about a couple of opportunities out there.

“At some point it will take a big decision for the first mover.

“I think our first customer needs to be as visionary as us, to take the step and to go for it.

“There are plenty that elect to do it themselves, that’s fine. But there are even more who, now that there is an opportunity to outsource it, are really interested to do so.”

Fairfield Decom brings together the expertise of Fairfield Energy, Dutch heavy-lift crane vessel owner Heerema and Norway’s AF Gruppen.

The company aims to not just focus on the decommissioning side, but to also draw value out from the final stages of an asset’s production life which might otherwise be overlooked.

At Offshore Europe last week, Andy Samuel, chief executive of the Oil and Gas Authority said he “hoped” operators would give specialist decom suppliers like Fairfield their backing.

The company estimates it is around six months to a year away from landing their first contract and there has been “fantastic” feedback from the operating and regulatory communities since setting up.

Mr Fergusson, managing director of Fairfield Decom, said: “I would say we’re in more advanced conversations with three or four operators and there is a number of factors that drive that.

“Appetite – wanting to do something different, if they do then we’re further along in the discussion – but also portfolio.

“The step to form the company and put ourselves together was not easy and we did it based on a lot of good conversations with operators and regulators. The feedback from having taken that step has been fantastic.

“So to have taken such a material step and said ‘right, we’re here now, do you want to do business with us?’ has been very well received by the operators. So I would say that has taken us a number of steps forward.”

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Fairfield Decom is evidence of evolving decommissioning market

Opinion piece by Penelope Warne, Senior Partner, CMS. This article was originally posted on the Energy Voice.

Fairfield Decom is a joint venture between Decom Energy, Dutch heavy lift vessel operator Heerema Marine Contractors and Norwegian AF Offshore Decom, an experienced player in the decommissioning sector. Heerema and AF each have a 45% share in Fairfield Decom, while Decom Energy has 10%.

CMS advised Decom Energy on the creation of the joint venture, which will be registered in the UK and based in Westhill.

The core workforce will come from Fairfield Energy, which has 90 employees in Westhill, but staff are expected to join from Heerema and AF.

This deal builds on the ambitions of Decom Energy to take the experience it has through subsidiary Fairfield Energy’s decommissioning of the Greater Dunlin Area to become a major decommissioning project firm.

Its aim is to take over the operatorship of fields in their final years of production and guide them through late life operations to decommissioning.

Consortia are nothing new in oilfield services – we are now seeing a particular trend for integrated well services with a driller or well services firm taking the lead and sub-contracting other well services for an operator on a turnkey scope basis.

Fairfield Decom wants to extend the integrated services model into the decommissioning sphere. Similar goals have been announced by other new players. For example, Maersk Decom was created as a 50/50 JV between Maersk Drilling and Maersk Supply Service in April 2018.

But this is the first example in the UK market of a service provider combining the capability of an operator with a significant decommissioning vessel fleet, facilities and expertise.

The expectation is clients will save time and cost by only needing to agree a single contract.

This approach may reduce risk as securing a wide range of decommissioning services from a single source reduces the interfaces the client needs to manage. This may be of particular interest to small and medium sized companies which do not have a sufficient regular flow of late life assets.

On the UKCS between 2019 and 2035, around £1-1.5 billion a year will be spent decommissioning.

Fairfield Decom has stated it will primarily focus on UK North Sea fields but would also look to capitalise on demand from a global decommissioning market estimated to be worth more than £60 billion over the next decade.

The government is keen to see the UK develop as a hub for decommissioning services and to build its share of this export market – it is currently consulting on how to achieve this and Oil and Gas UK has recently submitted a response to the call for evidence. Almost two-thirds of OGUK’s members are already involved in decommissioning services outside the UK.

The UK service sector is strong in preliminary engineering and project management, late life operations management, decommissioning of wells, onshore dismantling and onshore facilities management.

It also has expertise in environmental sciences and, if we say so ourselves, commercial law.

However, there are notable gaps, specifically in topsides and substructure removal and in deepwater quay facilities.

One area where the UK could build a significant advantage is in relation to technology.

With the creation of the Oil and Gas Innovation Centre, the National Decommissioning Centre and the Oil and Gas Technology Centre, there is scope for collaboration between industry, academia and government to develop technology.

The OGA’s recent report on technology, drawing on the technology plans which the OGA requires operators to prepare, and identifies emerging technologies. These include:

  • Advanced cement bond logging and logging through multiple casings
  • LWIV riserless P&A for subsea wells
  • Next generation tubing and casing removal solutions
  • Improved section milling tooling
  • New barriers as an alternative to cement, like the use of natural barriers such as swelling shale and swelling clay or squeezing salt
  • Thermite and bismuth alloy plugs

Finally, standard forms are emerging for the decommissioning market.

As well as the recently LOGIC Decommissioning Contract, BIMCO’s Documentary Committee has approved an international standard contract for offshore decommissioning projects to provide a balanced set of terms and conditions.

Want to know more about Fairfield Decom?

We have a range of ways you can get in touch and find out more about Fairfield Decom. Use the link below to go to our contact page – we look forward to hearing from you.

Major Decom Players Combine to Create Platform for Next Generation Decommissioning

Three leaders in the Oil and Gas industry’s decommissioning sector have launched a new company: Fairfield Decom. Headquartered in Aberdeen, this new platform combines the knowledge of a highly experienced operator with the expertise and capabilities of the world’s leading offshore decommissioning contractors. Through this bold step, a unique late-life operations and decommissioning operator is created to provide an all-encompassing solution for ageing offshore oil and gas assets, primarily in the UK Continental Shelf (UKCS).

Fairfield Decom represents a major leap towards a more innovative and sustainable offshore decommissioning industry where customers will benefit from a new business model designed to reduce complexity and the number of contractual arrangements and deliver operational efficiency, cost-effectiveness and predictability, whilst contributing to the 35% cost reduction targets set by the Oil and Gas Authority (OGA). Fairfield Decom’s customers will have direct access to the expertise and assets of Decom Energy, Heerema Marine Contractors and AF Offshore Decom, with Fairfield Decom having the capability to manage, integrate and then execute end-to-end late life operations and decommissioning activities. This is what Fairfield Decom calls ‘next generation decommissioning’.

Heerema has over 50 years of experience in the offshore oil and gas and renewable industries, transporting, installing, and removing all types of offshore facilities, including fixed and floating structures in shallow, deep, and ultra-deep waters. AF Offshore Decom, a subsidiary of the Norwegian contracting and industrial group AF Gruppen, is a specialised contractor that has been developing and executing solutions for the removal and recycling of offshore installations for the past 15 years. Decom Energy is the first fully outsourced end-to-end, late-life and decommissioning operator in the North Sea with its subsidiary, Fairfield Energy, well-advanced in the decommissioning of the Greater Dunlin Area.

Graeme Fergusson, Managing Director of Fairfield Decom comments ”We have built a strong business relationship with Heerema and AF Offshore Decom as contracting partners in the Dunlin topsides removal and as alliance partners for integrated decommissioning business opportunities. The three companies have unrivalled experience in decommissioning and there is great alignment in terms of our responsible approach to business and our core values. Our operator background means that we understand what the E&P community wants – an integrated solution that is technically robust, commercially creative and that will deliver a safe, cost-effective and environmentally-sound solution.”

In support of the new venture, Koos-Jan van Brouwershaven, Heerema CEO comments “Heerema is proud to be part of this unique new venture. Three leaders in the global decommissioning market have joined forces, providing a smarter, cost-effective and more sustainable approach to decommissioning and recycling offshore structures. As an experienced offshore contractor, Heerema is continuously seeking opportunities to further strengthen our position in the international offshore market through innovation, pro-activity and reliability. Fairfield Decom is a great example of how we are achieving those ambitions.”

Highlighting the importance of the new company, Bengt Hildisch, Managing Director of AF Offshore Decom comments “AF Offshore Decom is very pleased to collaborate with partners who are aligned with our goals.  The establishment of Fairfield Decom represents an important step change in the decommissioning business model. It responds to the call from the UK Regulator, the Oil and Gas Authority, to create new business delivery models to reduce complexity to support the next generation of decommissioning.”

Fairfield Decom will not only access the expertise of the three companies but will rely heavily upon local talent and the supply chain in Scotland to support its business. Fairfield Decom is determined to be at the forefront of the drive to establish a thriving decommissioning hub in Scotland.  This ensures that it will not only be a major player at home, but will have the potential to access a global decommissioning market estimated to be worth more than $80 billion over the next ten years. What is clear is that those companies that are successful in decommissioning in the North Sea will have a competitive advantage in the global market.  It is Fairfield Decom’s ambition to be one of those companies.

* The venture was subject to the approval of the Norwegian Competition Authority.

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