New tools and approaches are set to benefit the Gulf of Mexico decommissioning market in 2012, reflecting the confidence of some of the market. But uncertainty remains over the true impact of the Idle Iron Notice To Lessees (NTL) in the years ahead.
The Idle Iron NTL, issued in October 2010, was expected to be a watershed in the Gulf of Mexico (GOM). It would prompt an expansion in the decommissioning market, driven by a government requirement to remove idle wells and structures. These predictions appear well founded.
At least 150 structures have been decommissioned in the past 12 months according to the preliminary findings of Decomworld's 2012-13 GOM report. With further structures yet to be included in the data released by the Bureau of Safety and Environmental Enforcement's (BSEE) in November 2011, predictions for 2012 and beyond should be positive.
The forecast for next year is mixed, with interviewees quoted in the forthcoming Decomworld report demonstrating a significant divergence of opinion. But expectations remain high – notably among contractors – that decommissioning levels will reach or exceed 150 platforms in 2012 and beyond.
Innovation
Market uncertainty has spurred companies to introduce new technology and improve the efficiency of decommissioning processes. Both operators and contractors, interviewed in the 2012-13 Decomworld report, are tackling cost efficiencies of decommissioning directly: through technology and strategy innovation as well as operators offering their own decommissioning services.
Niche service providers are developing new hardware to cut up and remove damaged and idle platforms. One contractor is marketing a specialised pin drilling system and a new vertical caisson cutting tool. Another is constructing up to eight rigless pulling and jacking units for tubulars.
Operators are innovating too. One operator interviewed within the report, has contracted a liftboat specially designed and fitted out to perform decommissioning in a single mobilization. The liftboat owner modified the vessel to target the growing decommissioning market in the GoM <300' water depth market. This vessel is fully equipped to remove their decommissioning liabilities and is due for deployment in 2012.
On the contracting front, strategies are also changing. Providers are continuing the shift from turnkey operations to day-rate work, citing higher efficiency levels. This entails more detailed planning for offshore operations, according to one of our respondents.
Idle Iron ripples
Regulatory compliance will undoubtedly continue to be a major factor in operators' decommissioning strategies but financial resources are of crucial importance too. "The reality is, companies can only do what they can afford to do both in terms of resource limitations and finance," one operator said. While both Chevron and Apache have talked of a significant rise in their decommissioning spend, this might not apply to smaller players, our research suggests.
The question arises of whether the government can force operators to comply with the Idle Iron NTL if doing so would be beyond their budgetary capability. On the other hand, some operators have cited difficulties in obtaining regulatory permits for work that might forestall decommissioning plans.
Overall, the market looks well underpinned for 2012 but the degree of uncertainty has left some contractors reluctant to commit extra investment in personnel and equipment.
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