17
woodmac.com Trusted Intelligence Neivan Boroujerdi, SPE conference, December 2018 UKCS Decommissioning market overview
woodmac.comTrusted Intelligence
Neivan Boroujerdi, SPE conference, December 2018
UKCS Decommissioning market overview
woodmac.com
2
Have many fields have ceased globally and what is the outlook?
Around 300 fields ceased production over the last five years, activity was focused
in the North Sea, Gulf of Mexico and Asia Pacific
woodmac.com
3
The UKCS has the highest number field cessations globally to 2022
Over 30% of offshore field cessations are in the UKCS between 2013-2022
Where does the UK sit in a global context?
Source: Wood Mackenzie GEM Q2 2018
2013-2022 Cessations by
country
2013-2022 North Sea field cessations
207
884626
25
20
19
16
148
UK US (GoM Deepwater)
Netherlands Norway
US (GoM Shelf) Egypt
Malaysia Brazil
Other
0
10
20
30
40
50
60
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Denmark Norway Netherlands UK
woodmac.com
4
The UKCS is at the forefront of global decommissioning
Near term decommissioning spend in the mature UKCS is higher vs. the rest of the world
Where does the UK sit in a global context?
Source: Upstream Data Tool Q2 2018
Total decommissioning spend by country 2013-2022
0 2 4 6 8 10 12 14 16 18 20
United Kingdom
United States
Norway
Thailand
Australia
Brazil
Netherlands
Indonesia
China
Denmark
Nigeria
Timor-Leste/Australia
Mauritania
Malaysia
Congo
Gabon
Canada
Vietnam
Angola
Others
Decommissioning Spend, US$ Billion
Only 25% of ceased fields have
been decommissioned
While UKCS is at the forefront, 85%
of activity has yet to take place
Around 33% of near-term
decommex is in the UKCS
woodmac.com
5
There are around 350 platforms and 3,000 wells to decommission
About 50% of the market is well P&A, with platforms making up 25%...
Source: Infield Systems Ltd
Includes operational, installed, planned, shut-in, under construction and under conversion platforms
Platforms by sector Wells by sector
0
200
400
600
800
1000
1200
1400
CNS NNS SNS AtlanticMargin
Other
No
. o
f w
ell
s
Subsea wells Platform wells
0
20
40
60
80
100
120
140
160
180
200
0
50
100
150
200
250
300
350
NNS CNS SNS AtlanticMargin
Other
No
. o
f p
latf
orm
s
Pla
tfo
rm t
on
nag
e (
'00
0 t
on
nes
)
Jacket Weight Topside Weight
Number of platforms (rhs)
Brent, Ninian,
Cormorant,
Brae, Piper,
Britannia,
What, when and where is activity in the UKCS?
woodmac.com
6
2018-2030 Decommissioning vs development spend
Without new investment decommissioning will overtake development spend in 2025
Decommex falls just short of new investment between now and 2030 (US$40 billion v US$44 billion)
Source: Wood Mackenzie Upstream Data Tool Q4 2018
Project gap
Low
exploration
Low reserve
replacement
Challenges
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
201
8
201
9
202
0
202
1
202
2
202
3
202
4
202
5
202
6
202
7
202
8
202
9
203
0
Devex Decommissioning spend
What, when and where is activity in the UKCS?
woodmac.com
7
Field cessation timing can be a moving target
A number of factors influence the timing of cessation
Decommissioning, an evolving picture
Source: Wood Mackenzie database Q2 2018
2014-2030 CoPs – 2018 view vs 2014 view
0
5
10
15
20
25
30
35
40
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
# o
f fi
eld
s c
ea
sin
g p
er/
ye
ar
2018 view 2014 view
CoP was deferred on ~20
fields. The Anasuria fields
CoP has been delayed from
2020 to 2032 due to M&AMarginal life
extension of fields
i.e. Brent
woodmac.com
8
How to tackle decommissioning
What’s next for the industry?
Late-life players are emerging, but it is still early days
What's next for the decommissioning industry?
Previous liability retention deals
LLX to defer decommissioning
Investment in facilities
Explore near field
M&A
Vendor financing
0
50
100
150
200
250
300
350
400
450
500
GreaterKittiwake
Thistle Heather
Dec
om
mis
sio
nin
g c
os
t (£
mil
lio
n, re
al te
rms
)
Abex estimate (at deal) Abex estimate (current)
Source: Wood Mackenzie
woodmac.com
9
2017 UKCS value traded
UK M&A was booming in 2017, but did decommissioning liabilities change hands?
The Majors retained US$2 billion of decommissioning on assets sold last year
What's next for the decommissioning industry?
Source: Wood Mackenzie M&A Tool, Upstream Data Tool Q2 2018
0.0
1.0
2.0
3.0
4.0
5.0
6.0
201
8
201
9
202
0
202
1
202
2
202
3
202
4
202
5
202
6
202
7
202
8
202
9
203
0
US
$ B
n (
rea
l te
rms
)
Other Private equity
Large North Sea independents
Major
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Sh
ell
-Ch
rys
ao
r
To
tal-
Ma
ers
k
De
lek
Gro
up
-Ith
aca
Nep
tun
e-E
ng
ie
Ine
os-D
ON
G
Ce
ntr
ica-B
ay
ern
gas
Pre
mie
r W
ytc
hF
arm
ON
E -
Ste
rlin
gR
eso
urc
es
Ine
os-B
P F
ort
ies
Oth
er
Co
ns
ide
rati
on
US
$ B
n
2018-2030 decommissioning spend by company
type
Over 25% of recent deals include a
form of decommissioning retention
woodmac.com
1010
woodmac.com
M&A changes
Decommissioning, an evolving picture
Source: Wood Mackenzie GEM Q2 2018
0
50
100
150
200
250
300
350
400
450
500
0
10
20
30
40
50
60
70
80
90
100
1101
99
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
202
2
202
3
202
4
202
5
US
$ M
illi
on
Pro
du
cti
on
kb
oe
/d
Production kboe/d Cash flow
Case study: Chrysaor’s late life investment in the Armada hub
2015 2017
MarApril January
2018
Planned CoP
+ 7 years
+ 25
mmboe
- US
$110M
+ US$380M
CF
woodmac.com
11
Introduction of TTH could help move more assets into the right hands
How many fields would benefit?
Profit v abandonment ratio for UKCS fields
Cla
ir
Ma
rin
er
Gre
ate
r C
atc
he
r A
rea
To
lmo
un
t
Lo
yal
Ve
rbie
r
Lan
ca
ste
r
We
ste
rn Is
les P
roje
ct
Rh
um
Co
ron
a
Fin
lag
ga
n
Ma
ch
ar
Cap
tain
Ne
vis
So
uth
Wy
tch
Farm
Clip
pe
r S
ou
th
Ev
ere
st
Bri
gan
tin
e
Ho
we
Tre
nt
an
d T
yn
e
Fle
min
g
Mo
na
n
Ba
bb
ag
e
De
ve
nic
k
Min
erv
a
Bla
ne
UK
Ca
rav
el
Ma
ule
Sh
am
rock
Cy
rus
Nic
ol
We
nlo
ck
Ap
ollo
Ma
rkh
am
UK
Sk
en
e
Jo
hn
sto
n
Pic
t
Millo
m &
Da
lto
n
Bre
nd
a
Gry
ph
on
Bla
ke
Ind
efa
tig
ab
le W
est
Lem
an
We
st
Bra
e E
ast
Mo
rec
am
be
So
uth
We
st
So
le A
rea
Bra
e A
rea
Nin
ian
Around 50% fields could benefit
from TTH
woodmac.com
12
Estimate of potential decommissioning cost reductions by category
The opportunity in cost reductions
OGA target of 35% reduction looks ambitious, but achievable. Technology the key enabler
What's next for the decommissioning industry?
Source: Wood Mackenzie
0
10
20
30
40
50
60
2017 estimate Scope change Technology Execution Potential reduced estimate
Dec
om
mis
sio
nin
g c
os
t (£
billi
on
)
£56 Bn
e.g.
Derogation
of 10 kte+
structures
e.g.
New well
P&A
techniques
e.g.
Batch and
shared
programmes
£41 Bn
25-30%-6%
-12%
-9%
woodmac.com
13
Some final thoughts …
The impact of new ways of working
• The UK is at the forefront of decommissioning
• But most activity has yet to take place
• There is a huge uncertainty over timing
• The M&A market has evolved to help prolong facilities
• The industry has made progress on costs – but yet too see clear evidence of sustainability
15
woodmac.com
Neivan Boroujerdi
Senior Analyst, North Sea Upstream
Biography Connect with Neivan
Neivan has been an Analyst in the North Sea Upstream Research team since
2014.
Neivan has authored Insights looking at a variety of topical subjects including the
economics of the Southeast Barents, corporate response to the drop in oil price and
impact of private equity in the North Sea.
Neivan also carries out consulting projects and presents at conferences. Recent
consulting work includes helping companies with long-term strategies, due diligence
and project benchmarking.
Prior to joining the Norway Upstream Research team, Neivan worked as an analyst at
Interconnector UK carrying out a variety of commercial and regulatory work.
Neivan graduated with a Masters degree in Chemical and Process Engineering from
Strathclyde University.
+44 131 243 4591
16
woodmac.com
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