ANALYSIS - Big oil faces bigger challenge in platform recycling
STAVANGER, Norway - The worlds biggest oil companies face a major new challenge in trying to squeeze final revenues and gain environmental accolades from recycling production platforms in the North Sea.
At Norways premier oil event of the year, the Offshore Northern Seas conference, delegates are keen to highlight their efforts in "investment recovery" - the somewhat optimistic term given to reselling redundant platforms and parts.
Although some have met modest initial success in passing on bits and pieces of older rigs, no company has managed to sell an entire North Sea structure intact due to technical and psychological hurdles, industry officials say.
Efforts continue, however, since the public relations value of recycling - particularly for the embattled oil industry, which has faced strong opposition from environmentals who accuse it of polluting the seas and skies - is priceless.
And for companies facing hundreds of millions of dollars in decommissioning costs, any chance for salvaging a dollar from the process will be eagerly examined.
"As an industry, were really just embarking on the period for re-use. Were not that far along so theres some way to go," says Hugo Halvorsen, resource manager at BP Amoco in Norway.
Most of the rigs draining oil from the roughly 600 fields in the North Sea are less than 25 years old. Only now are the first of those being decommissioned, forcing the industry to grapple with the thorny task of finding a home for tens of thousands of tonnes of steel.
BP, which recently rebranded itself "beyond petroleum" in an effort to paint itself as an environmentally friendly company, is considering re-using one smaller platform in the North Sea to assist with extraction in the Valhall area to the south, Halvorsen said.
In the past, companies weighed a variety of options for decommissioning oil and gas installations at minimal cost, ranging from towing them out and dumping them in deeper seas to blowing them up to make artificial reefs for fish.
In 1995, Royal Dutch/Shell was forced to abandon plans for deep sea disposal of the Brent Spar oil strorage platform after a public outcry. The installation now forms the base of a quay in western Norway.
U.S. Phillips is among the leaders in this nascient field and is in the process of disposing of some 15 dormant platforms that are part of the Ekofisk system in Norwegian waters, the first major offshore North Sea system. Production started in 1971.
The estimated eight billion ($900 million) cessation plan, which is over two-thirds funded by the Norwegian government, calls for bringing the steel structures ashore and selling off the parts, with the Ekofisk tanks left in place.
BIG MAUREEN A CHALLENGE
But for Phillips, the biggest headache is Britains Maureen - a nearly $1 billion, 17-year-old steel gravity-base platform, which is scheduled to be refloated next year. It will be the biggest North Sea structure to be decommissioned so far and a benchmark for whether investment recovery is feasible on a grand scale.
Geoff Tilling, Phillips decommissioning manager, says the structure could readily be towed anywhere in the world. But five years of searching have yet to turn up a buyer.
It is not only a question of finding a buyers with technical specifications that match - including water depth, oil density and other conditions - it is a matter of overcoming a reluctance to commit to "used" material.
"For a lot of companies, theres a certain attitude toward buying second hand equipment. It comes down to a value judgement," says Tilling.
EXAMPLE OF U.S.
Officials readily admit that the psychology of recycling oil equipment has yet to seep into the corporate minds of Europes larger companies, but is already fairly widespread in the U.S. Gulf area, where smaller, more flexible exploration firms are eager to gain access to cheaper equipment for quicker drilling.
Some say that may never happen in Europe.
"Recycling components will become an industry, but its really a drop in the bucket," said TotalFinaElf Exploration Norges deputy general manager Rene Palacin. He says the industrys needs are too standardised to ever make recycling a whole platform a regular occurance.
But the potential financial reward for recycling platforms may keep companies interested in trying for some time more, says Sverre Rott, managing director of Valiant, a Norwegian company that specialises in all aspects of investment recovery.
A study conducted by Valiant found that the sale of a platform in its entirety can fetch 30-50 percent of the original cost. In comparison, hiving off the parts may only get the seller five to six percent of the original value - a potential difference of hundreds of millions of dollars.
"Were a bit behind here in the culture of re-use," says Rott. "But I think the re-use of a smaller platform may be possible in the next few years."
Story by Jonathan Leff
REUTERS NEWS SERVICE
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