Sea of possibilities
Collaboration will be the key to maximising the North Sea's remaining potential
After decades of prosperity, oil and gas production is in decline in the North Sea and reserves will be depleted within a decade, according to a new report by Edinburgh University.
This is despite a recent discovery by Statoil of around 25m recoverable barrels of oil close to the Scottish coast.
It's not all doom and gloom however. The North Sea Opportunity, a report published by the Netherlands Committee of the World Energy Council, highlights that there are opportunities to cut the costs of decommissioning and even open up new markets including wind and biomass.
"Oil and gas will continue to be an important source of energy for the foreseeable future," said Dr Uwe Franke, Chairman of the German committee of the World Energy Council and contributor to the report. "But with more and more offshore wind farms being built, the North Sea region is also supporting the energy transformation in northwest Europe."
The North Sea borders the United Kingdom, Scandinavia, Belgium, the Netherlands, Germany and France. The North Sea Opportunity found that the cost of decommissioning old oil and gas assets there between now and 2050 will reach between €80-100bn ($94-$118bn). On top of that, €250-500bn ($293-$585) in investment is needed for offshore wind assets and related infrastructure between now and 2030. That figure could even be higher if planned projects for offshore wind are confirmed by those countries who have not yet committed.
So how can governments avoid the burden being put onto the tax payer of each nation? "Efficiency is key," says Dr Franke. "Efficiency gains alone could lead to costs savings of about €38bn for the realisation of offshore wind projects and about €27bn for the decommissioning of oil and gas platforms."
Not all the old infrastructure from oil and gas will have to go to waste. About 25% of it could be used for other purposes, including the storage of renewable energy and carbon capture.
There are also potential savings to be made, as identified in the report, by combining energy activities with other maritime operations.
The report's authors found that seaweed farming in offshore wind farms could be an important source of biomass—the equivalent of more than 10% of total Dutch energy consumption.
As yet, this is a relatively unexplored option, and substantial regulatory and supply chain challenges remain.
"The North Sea presents concrete business opportunities for those willing to harness its long-term potential, but it also increases the need for cooperation and coordination across borders and sectors," Dr Franke says.
One of the difficulties of utilising these savings and new opportunities is that most activity is organised nationally rather than internationally—decommissioning is an example of this. Grouping several decommissioning projects together would allow the supply chain to organise itself in a more efficient way, the report says.
Jan Willem Velthuijsen, chief economist for the Netherlands at PwC, led The North Sea Opportunity report. "You can do decommissioning in the smart way or the stupid way and now is the time to decide which it is," he said, "We have shown that co-ordination will reduce costs, if companies go in together with government involvement."
This could ensure a standardised process, where all projects were carried out in the most efficient way, and information shared between different stakeholders. Decommissioning is no small task, involving over 300 oil and gasfields, around 5,000 wells, more than 500 platforms and 10,000km of pipelines.
The North Sea Opportunity found that 99% of the costs associated with decommissioning are set to fall on Norway, the UK and the Netherlands. That makes it even more imperative that some form of collaboration is worked out for the citizens of those nations, which could ultimately see an increase in costs for consumers as companies look to recuperate their losses between now and 2050.
Governments in Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and the UK signed a political declaration in June 2016 on energy cooperation which provides a framework for cooperation between borders.
25% - amount of North Sea oil and gas assets which could be repurposed
The fact that the agreement was signed after the UK's June 2016 vote to leave the European Union, signals a willingness from the country to work in tandem with members of the bloc even after leaving it, Velthuijsen says.
The next step will involve converting that commitment into practical action. Velthuijsen says talks have already begun with companies including Shell and DNV GL, the European Commission, and individual governments.
"There has been a wave of interest, such as conferences looking at offshore wind in combination with decommissioning, which we did not see a few years ago," he said. "I am under no illusions that this is going to be easy, but we can at least start with independently collected information."
The EU has promised to look at easing prohibitive regulations to make the process of collaboration on decommissioning and repurposing old assets an easier one.
Offshore wind has the potential to be developed in the North Sea. The report's findings suggest up to 250 gigawatts could be added by 2050.
But in a time of dwindling government subsidies for wind and solar in Europe, investment for that capacity will need to come from the private sector.
Dr Franke cites the He Dreiht offshore wind farm, a joint project between EnBW and Dong Energy which was confirmed in April this year, as an example of things to come. It will be the first in the world to be built without government funding.
"A number of developments in the offshore wind sector have lowered costs significantly, but further cost reductions are needed for the technology to become cost-competitive," he said.
"However, government subsidies will play less of a role in the future.
In some cases, the report's authors admit the technology needed to harness the potential they have outlined still needs to be developed.
In the case of repurposing old oil and gas assets to use for carbon storage or other uses, the idea is still at a very early stage of development and more pilot projects are needed.
Eni's rig-to-reef project, where old equipment was left at sea to become an artificial reef for marine life, and a pilot by Dutch operator NAM in which a gas processing platform was stripped down to install a solar array, were both cited as examples.
More work is needed, but for now, the message is clear as far as the report's contributors are concerned.
"Governments need to work closer together to realise the full potential of the North Sea," Dr Franke says.
"For example, a coordinated grid expansion is necessary for power from offshore wind to be distributed to where it is needed. This calls for an even stronger linking of regional markets, not least to avoid stranded assets and overcapacities."
This article appears in the latest issue of World Energy Focus, the magazine of the World Energy Council, with content produced by Petroleum Economist. For more information and to register, visit the site worldenergyfocus.org.