"North Sea Decommissioning : Market Forecast"

Transcription

1 "North Sea Decommissioning -: Market Forecast" Douglas-Westwood Limited 19 th April Ben Wilby, Analyst 1 1

2 Oil Price Average Spot Price (USD/bbl) Spread Mean Average Annual Brent Spot Price Forecasts, Source: EIA, RBC, Goldman Sachs, EIU, S&P, Macquarie, Citigroup, SocGen, Deloitte, HSBC, Fitch Ratings, UBS, Evercore ISI 6

3 Methodology Field data from DWs Offshore Oil and Gas Database Abandonment dates are calculated through a comparison of O&G revenue and M&O if the M&O costs are higher the field is abandoned All cost assumptions are forecasted to Two scenarios HLV (scenario 1) and SLV (scenario 2) Scenario 2 is the best case outlook for SLV operators

4 Subsea Surface Wells Removed by surface/subsea Denmark Germany Norway UK Well Removals by Country Well P&A and Removals Almost 7,800 well P&A - Subsea Well P&A major opportunity UK to dominate P&A work 4,624 in total Subsea well work to increase over forecast period growth of Norway Higher number of Surface well removals but lower costs Well removals will dominate spend in both scenarios total cost almost $49bn $27bn Subsea, $21bn Surface Number of Well Removals Number of Well Removals

5 Denmark Germany Norway UK Number of Platforms Removed by Country Denmark Germany Norway UK Platform Removal and Weight Total number of platforms removed: 398 UK will dominate number of platforms (289) and tonnage removed especially before Total weight removed: 5.4 million tonnes Substructure: 2.74 million tonnes Topsides: 2.73 million tonnes Majority of tonnage will be from Extra Large Platforms 82% substructure, 79% topsides This is the market SLVs will target Tonnage Removed (Thousands) Tonnage Removed by Country Number of Removals

6 FPS Removal PSV Total Decommissioning Costs Total cost -: S1- $82bn, S2 - $70bn Well decommissioning highest proportion of spend 59% scenario 1, 69% scenario 2 Scenario 1 Total Decommissioning Cost. North Sea to become one of the key areas for decommissioning in next few years Mature region, high MMO costs and ageing infrastructure are key drivers SLV cost savings are clear platform removal costs 26% total costs S1, 10% S2 FPS Removal PSV+DSV Scenario 2 Total Decommissioning Cost.

7 FPS PSV UK Decommissioning Costs Total cost -: S1- $50bn, S2 - $44bn Extremely mature region many fields already past design life Scenario 1 UK Decommissioning Cost. FPS PSV+DSV Brent topside removal project first major test for Pioneering Spirit and the entire concept of SLV 288 platforms expected to be removed -, more than other countries in report combined Scenario 2 UK Decommissioning Cost.

8 FPS PSV Norway Decommissioning Costs Total cost - of $27bn S1, $23bn S2 Less mature than the UK, Norwegian spend will grow over the forecast period Scenario 1 Norway Decommissioning Cost. FPS PSV+DSV Well decommissioning will account for 63% of costs in S1 and 74% in S2. There is a difference of 12% between the scenarios with scenario 2, lower in cost Major Decom projects expected include the Ekofisk Complex and Valhall hubs Scenario 2 Norway Decommissioning Cost. Statoil will be responsible for much of the decommissioning work offshore Norway.

9 FPS Removal FPS Removal PSV Scenario 1 Denmark Decommissioning Cost. PSV+DSV Denmark Decommissioning Costs Much smaller than Norway and UK spend in two peaks, driven by hub removals S1 spend $4.8, S2 $3.9bn larger difference (22%) than elsewhere Subsea well costs negligible, only 4 removals -, 517 surface removals As a result spend is driven by platform removal not well P&A work Well removal 32% spend in S1, 41% S2 Scenario 2 Denmark Decommissioning Cost.

10 Scenario 1 Total Scenario 2 Total Expenditure ($m) Cost S1/S2 Clear difference in costs between scenarios Scenario 1: $5.4bn Scenario 2: $7.5bn This is a result of longer time required onshore Still cheaper overall less vessel days required

11 Image courtesy of Statoil Conclusions The oil price collapse will drive decommissioning activity UK expected to lead the decommissioning charge Norway to follow later Opportunity for specialized decommissioning companies to capitalise on work to be completed Well decommissioning to dominate spend, still represent substantial costs SLVs have the potential to reduce costs but are unproven Pioneering Spirit could lead to change, depends on day rates and additional work required