Global Trend

The decommissioning of aging offshore units and related assets is escalating dramatically.

According to market analysis more than 600 projects are expected to be disposed of in the next 5 years. Following this trend, decommissioning costs are expected to increase over 540% when compared to current costs, reaching $13 billion-per-year by 2040 and summing up to $200 billion between 2020 and 2040.

The great number of units which cessation of production is to occur in the next years, along with stricter regulatory and environmental requirements and greater complexity of the structures to be decommissioned, may turn the disposal of units and subsea equipment into one of the greater challenges for E&P operators.

The North Sea should see most of the decommissioning activity in the next years, however, Mexico and Brazil are likely to concentrate the demand on the Central and South America countries.

Brazilian perspective

Brazil’s E&P’s industry experienced a turn around with Petrobras’s discovery and subsequent exploitation of large deep water oil fields in the 1970s and ’80s. Now, this generation of offshore platforms and subsea equipment is reaching the end of its life status.

According to the National Agency of Petroleum, Natural Gas and Biofuels (ANP), nowadays, there are 40 offshore units in Brazil, which have already ceased production and are ready for decommissioning. Such trend represents 42% of the 158 platforms currently operating in Brazil are scheduled to stop operating in the next 5 years. ANP also informs that other 19% of the units Country, age between 15-25 years.
As decommissioning of offshore platforms is still recent in the Brazilian industry, regulation is still in maturing and development process.
As an example of a recent Brazilian experience, the abandonment of the Cação Field in Espírito Santo, which involved 3 offshore production platforms and 13 oil fields, took 3 years to be approved by ANP (2014-2017).
ANP, Environmental Entities (IBAMA), Brazilian Navy and Federal Revenue regulate the decommissioning activity in Brazil. However, the regulatory framework is evolving to handle the current and rapidly increasing demand for decommissioning.

New Regulations

Looking at this scenario, the authorities have deployed a study group and ANP is currently revising its Resolutions 27 and 28/2006.

The referred Brazilian legislation set the procedures for selling and reversion of facilities included in the Production Systems, deactivation of installations and devolution of areas in the Production Phase. The decommissioning pillars aim to assure the safety and minimum risk to the environment and the human life. The Regulatory Agency (ANP); the Environmental Agency (IBAMA) and the Maritime Authorities (NAVY) having jurisdiction over the area oversee the performance of those activities.

The concessionaire’s payment obligations are ceased as of the date of rendering to ANP the Final Facilities Decommissioning Report, but the ending of environmental liability over the decommissioned facilities has been an open issue to be resolved.

The new rules should be based on an in-depth study of the decommissioning process carried out by ANP. It is expected that new regulation will foster good market practices, welcome new technology and provide for options for the operators (remove or not the subsea structures), to be determined in each specific case by technical, economic, environmental and safety criteria.

Meanwhile, the cost of the project is also a pressing factor in Brazil, since equipment to be used in decommissioning does not enjoy the special tax regime which exempts import duties applicable to the oil and gas sector (REPETRO).

Conclusion

However, it is certain that decommissioning is a challenge for the oil and gas industry, not only in Brazil, but also all over the world. The players involved in a project disposal, including authorities, operators and subcontractors engaged in all the activities (including, without limitation, waste removal, heavy lifting, wreck removal, tugs and barges, engineering and yards) should strive for being up to date with legal and regulatory requirements and best practices, as well as cooperate, in order to transform potential market crises into an opportunity to take a leap forward.

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