By Daniel Canty
Maersk Oil’s approach to late-life asset management is unlocking millions of barrels of hydrocarbons from its North Sea heartland.
Significant value remains to be captured even after operators acknowledge assets have reached late life. Maersk Oil’s heartland North Sea assets are at a crossroads where fine tuning production, managing costs and exemplary safety performance can mean years of responsible extra production.
Upstream operators had witnessed a decade of spiraling costs up to 2014, falling operational efficiency and declining reserves. This heady cocktail eroded profitability across the basin, even before oil and gas prices declined two years ago.
As prices tumbled and opportunities to stay profitable became ever more elusive, the new reality demanded change. Designing efficiencies into newbuild assets like Culzean is one thing, retrospectively unlocking value in the later life can be even more complex due to issues around shared or common infrastructure – such as pipelines – and the increasingly intensive maintenance older assets require to keep them producing safely.
Safely squeezing extra production from mature facilities requires meticulous planning and the constant fine tuning of activities to ensure the financial yield justifies the additional work.
Finding the sweet spot, where capital required to keep the asset producing safely and profitably, can keep assets on stream beyond their intended service life. This maximises economic recovery and delivers relatively cheap barrels into the portfolio.
“Data shows that the gains we have been able to deliver are largely attributable to better safety performance, improved uptime, adherence to maintenance schedules and more effective tool time – all of which are made possible through leadership and planning,” says Gretchen Watkins, Chief Operating Officer.
"Acknowledging late-life for an asset means recognising that it’s not carry-on as normal. We must strike a balance between safe and reliable operations and maximising hydrocarbon recovery and that means really tight management and a having team - both offshore and onshore - willing to put in some hard yards and keep delivering outstanding work,” says Watkins.
Often it is possible to bring in a team of late-life field specialists in order to reverse field decline. However, these come at a cost, and contractors won’t know the asset or the reservoir as well as we do. With this in mind, Maersk Oil has focused on doing as much of this in-house as possible, and the outcome in the UK and Denmark has been the steadily improving production picture, reflected in solid Q2 results.
Brian Welinder, Quad 15 and 30 Asset Manager, shares his thoughts on how Maersk Oil UK is handling late-life production optimisation.
“Late-life field management is very much a focus area for us. When we took over the Dumbarton field, just over 15m barrels had been produced – so it was recognised as a maturing area. Since then, we’ve produced another 40m barrels and brought on two new fields around the installation – Lochranza and Balloch. In total, we’ve produced nearly 60m barrels of oil as operator. However, older installations have a tendency to drift into lower production efficiency, and we’ve worked very hard to reverse that,” says Welinder.
A disciplined approach to operating efficiently can help free up time and resources to think creatively about the future of the asset and the exploration potential that could be tied back to the installation. That can be very cost effective and defer decommissioning. “It is vital that great scrutiny is placed on meeting economic returns in any project or work scope that is being planned,” adds Welinder.
Size of the prize
Many millions of dollars’ worth of oil and gas remain in Maersk Oil’s license areas in the UK and its oldest heritage assets in Denmark.
Maersk Oil has shown that by taking a proactive approach the decommissioning process can often be pushed out, sometimes by several years. By excelling at mature asset management there could be low hanging fruit in the market where Maersk Oil’s pedigree, technical expertise and tenacity could produce some real value-creation opportunities, as less experienced and resourced operators walk away from smaller accumulations or mature assets.
“We are working very hard to make sure we are high-grading the assets and opportunities that will unlock the most value for Maersk Oil and our partners. That is where the added investment deserves to be,” says Watkins.
The largest operators have been open about the fact they are streamlining aspects of their businesses and that North Sea interests are up for sale. In Denmark and the UK, Maersk Oil is showing its capability in rolling out an effective operating model, with strong cost discipline, which could unlock real value when applied to attractive assets, or packages of assets, which could include mature assets.
“Maintaining safe and reliable operations across Maersk Oil’s older installations can in itself create new opportunities. Near field developments produced from existing assets represent a heavily de-risked and crucially, extremely cost effective development.
We have an operating model with our mature assets that proves we can maximise recovery and returns during late field life, skills that position us well for a bright future in the North Sea and beyond,” Watkins concludes.
In May, Maersk Oil UK’s Floating Production Unit (FPU), Janice, delivered its last barrels of oil. Shepherding an asset through to decommissioning safely and efficiently is a crucial and inevitable part of the lifecycle, and progress in the UK will be followed closely by many operators as more assets approach their natural retirement. Janice is a good example of how late-life management can add value. The FPU eventually turned off the taps a full nine years beyond its original design life.