North Sea oilman finds opportunities in dying oil fields
Graeme Fergusson sees life in the death of an oil field.
Five years ago, the blondehaired native of Aberdeen, Scotland, had a fairly conventional role in the industry, focusing on squeezing every drop of crude from reservoirs in the North Sea. But a brush with the worst oil slump in a generation sent his career on a detour and he’s now more inclined to perform last rites on a field than to keep it alive.
Fergusson is the managing director of Fairfield Decom, which specializes in dismantling offshore oil and gas platforms. It may not be as glamorous as frontier exploration, but it’s potentially a huge business.
“Over ($26 billion) is to be spent on U.K. decommissioning by 2030,” said Paul Main, a Wood Mackenzie Ltd. analyst focused on the upstream supply chain. By the middle of the next decade, companies will be spending more on removing redundant oil and gas facilities than developing new fields in the area, he said.
When Fergusson became chief financial officer of Fairfield Energy in 2015, the company managed the Greater Dunlin Area of the North Sea. Dunlin was an old field, first discovered by Royal Dutch Shell in 1973, but was still pumping. Then came a historic slump in oil prices, from above $100 a barrel in 2014 to below $30 two years later.
Cheap crude and looming maintenance costs meant the business was no longer viable, Fergusson said in an interview. In June 2015, Fairfield turned off the taps at Dunlin after 37 years of production.
“We had to convert and become something else, which was the beginning of the Fairfield Decom story,” Fergusson said. There was lots to learn because the Greater Dunlin Area, which includes the Osprey and Merlin field, plus associated infrastructure is “as complicated as it can get from a decommissioning perspective.”
Dunlin is a concrete gravitybased structure, not dissimilar to Shell’s Brent platforms. On the huge submerged base sits a 20,000-ton structure made up of 30 modules, a drilling derrick, a flare boom and a helipad. Beneath the water are dozens of wells, some of which were drilled as far back as the 1970s.
Fairfield Decom is structured as a joint venture between Fairfield Energy’s parent Decom Energy, Heerema Marine Contractors and AF Offshore Decom. Dunlin’s decommissioning process is about two-thirds complete. All 16 subsea wells have been plugged and abandoned, plus a quarter of the 45 platform wells in the area. The company has removed subsea infrastructure and is now preparing to get rid of the topsides — the most visible part of an oil field.
Shell actually built the Dunlin platform, but in recent years oil majors have been selling aging North Sea fields to smaller companies, in some cases also transferring the decommissioning liabilities.
In 2016, the largest companies in the North Sea were not willing to hand over their decommissioning activities to smaller operators, said Fergusson. “The dial has moved massively” since then as companies realize decommissioning isn’t their core business, he said.
So far, Greater Dunlin is Fairfield’s only decommissioning project, but Fergusson said the company has drawn interest from a number of North Sea players, from which it has “a number of propositions.”
The U.K. Department for Business, Energy & Industrial Strategy has required operators to set aside 844 million pounds so far to cover decommissioning costs.
The U.K. Oil & Gas Authority estimates that the total cost of decommissioning in the country currently stands at 49 billion pounds.