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Decommissioning could be Australia's next boom industry

Decommissioning down under estimated to be worth more than US$21 billion (A$28.3 billion) over five decades

Decommissioning of ageing oil and gas facilities could open up a new wave of business for service contractors in Australia’s upstream industry.

The upcoming decommissioning wave represents a perfect greenfield opportunity for the nation’s oil and gas industry to apply innovative thinking, new technologies, new workforce skills and collaborative approaches, according to a new report from Deloitte.

The current cost of decommissioning Australia’s oil and gas infrastructure is estimated at more than US$21 billion (A$28.3 billion) over the next 50 years.

“Decommissioning is an opportunity for Australia to demonstrate global leadership in this inevitable final stage of the oil and gas lifecycle,” said Deloitte Australian Oil & Gas Leader and report co-author, Bernadette Cullinane.

“With the recent focus on the massive investment in liquefied natural gas, it is easy to forget the Australian oil and gas industry is nearly 100 years old and many assets are reaching the end of their producing life.”

However, the Oil and Gas Competitiveness Assessment recently published by the National Energy Resources Australia Growth Centre ranked Australia at the bottom of 30 oil and gas producing nations in abandonment and decommissioning.

“With more than 100 platforms and subsea structures located in Australian waters, spread across its vast coastline, founded in notoriously fickle carbonate seabed deposits, in some of the most pristine and unique marine environments on the planet, offshore decommissioning is going to be complex, challenging and costly,” said report co-author, UWA Professor Susan Gourvenec of the Centre for Offshore Foundation Systems and Oceans Institute.

“The industry needs to work together, and with the government, regulators and research sector to facilitate the trans-disciplinary, transformational strategies needed to address this looming challenge, to reduce the cost and risk of decommissioning and deliver the best outcomes for Australia,” added Gourvenec.

Cullinane and Gourvenec highlighted four key areas that the oil and gas industry, government and regulators need to address to efficiently tackle the upcoming wave of decommissioning activity.

Firstly, the evaluation of a range of approaches from complete removal to allowing assets to remain in situ. “The base case for decommissioning offshore infrastructure is complete removal, which presents technical challenges, risk to personnel and the environment and is complex and costly.

“ The optimal decommissioning solution may not be complete removal and will depend on what is technically feasible and desirable from an environmental, economic and societal perspective,” they said.

There is also the need to develop multi- and inter-disciplinary solutions based on the collaborative input of all stakeholders and ocean users to develop a framework suited to our location and environment. “ Any decommissioning decision must be based on scientific evidence. The holistic body of knowledge applicable to the unique challenges of Australian waters is still being developed.

“ Decommissioning will require a balance of learning from best practice globally while also leveraging local knowledge, capability and services. This phase of the lifecycle provides a perfect opportunity to develop and apply many new techniques, equipment and skills,” they added.

There is too the requirement to develop fit-for-purpose policies and regulations to support the most appropriate decommissioning framework for Australia.

“ Policy and regulation play an important role in shaping decommissioning solutions. Australia needs clear evidenced-based policy and regulation, relevant to its location and environment, to enable optimal decommissioning solutions to be realised. A one-size-fits-all approach may not be practical for existing developments and deter future investment in the industry.”

The report co-authors said that fourth, there is the need to build workforce capability and capacity to support efficient decommissioning activities and stimulate economic growth.

Decommissioning challenges particular to Australia include its geographical remoteness with offshore hubs across three coasts - Bass Strait, North West and Northern Australia - and its “notoriously variable” carbonate shallow-water seabeds in contrast to the soft muds encountered in the Gulf of Mexico, said the report.

The Australian supply chain today lacks some of the required vessels, tooling, disposal facilities and the trained workforce for offshore decommissioning and importing these capabilities will be costly.

“So it is important that Australia develops expertise locally. Significant opportunity exists to export this capability to the broader Asia-Pacific region where nearly 50% of offshore platforms are older than 20 years and more than 600 fields, the majority offshore, are expected to cease production in the next 10 years.”

Cullinane added: “With so many offshore decommissioning projects on the near to medium-term horizon, Australia has the potential to become a leader in end of life-cycle asset management, further building on the experience in the construction, operations and maintenance of major capital projects. “Developing regional-specific techniques and technologies for decommissioning presents a great opportunity for both operators and our services sector in Australia and in APAC.”

The report entitled Decommissioning: The next wave of opportunity in Australian oil and gas was launched today at APPEA 2017.