Well-Safe Solutions, a new decommissioning company comprised of oil industry mainstays including Alasdair Locke (non-executive chairman), Mark Patterson, and Paul Warwick, has noted the forecasted increase in expenditure on well abandonment in the UK continental shelf doubling to £1.1billion in 2017, with approximately 5,000 wells (of which 1,000 are subsea) will be decommissioned in the North Sea. Due to the fact that well plug and abandonment (P&A) activity accounts for around 60% of the overall costs associated with decommissioning, the company intends to offer a “one-stop-shop” for operators’ P&A requirements via dedicated marine assets and equipment, expertise and experience in subsea oil and gas, and safe and cost-efficient approaches to the associated challenges and regulatory imperatives.
Well-Safe’s funding model is a campaign-based approach to share knowledge across operating companies and leverage economies of scale through differentiated contracted strategy. This eliminates contracts with multiple service providers, instead relying on a combination of competitive asset day rates with long-term service and support contracts at a fixed day rate. This will allow for higher efficiency and utilisation at lower cost. The company intends to acquire high quality assets to carry out well abandonment work—including a semi-submersible rig, jack-up rig, and lightweight intervention vessel to be used exclusively for P&A activity—in the hope of securing long-term commitments from operators and retaining full control over the scheduling of long-term well P&A campaigns.
Executive director Mark Patterson said, “The market dynamics in oil and gas have changed significantly. Before the collapse in oil price, operators were focused on maximising production, costs were very high and assets scarce and, with no real regulatory imperative, decommissioning was pushed back. Cost and safety are still paramount but operators are now having to face up to the well abandonment challenge. They need to prioritise decommissioning activity and, with an increasing stock of “shut-in” wells, more incentives, low asset utilisation and therefore lower rates, the economics for P&A have become more compelling.”
The company hopes to attract £200 million in investment and create 400 new jobs. It is financed via initial private funding by the major shareholders, as well as funding from Scottish Enterprise, which includes an investment from the Scottish Investment Bank and a regional selective assistance grant.