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Date: 5/9/20063 : P143710 Time: 9:17:36 AM P143710 \\server\name PSCRIPT Page Separator Technology Play Map (TPM) Decommissioning Technologies for Offshore Installations by M. Hartenhof, EPT-RPT Buy Partner In-house Technology Strategy Project name: Technology Play Map (TPM) Decommissioning Technologies for Offshore Installations Sponsor: Ben van den Brule, EPT-RH Reviewed by: Mohd-Shah Rahani, EPT-RPT Approved by: Christiaan Luca, EPT-RPT Date of issue: October 2005 Period of work: February 2005 through October 2005 Account code: A-800047-DD-01 Technology Play Map (TPM) Decommissioning Technologies for Offshore Installations Master Thesis Author: M. Hartenhof University: Technical Business Administration Faculty of Business Administration University of Groningen Landleven 5 9700 AV Groningen University supervisors: Ir J. Slagter Prof. Dr. A.A. Broekhuis Company: Shell International Exploration and Production B.V. Kessler Park 1 2228 GS Rijswijk The Netherlands Company supervisors: M.S. Rahani Ir. C. Luca EXECUTIVE SUMMARY The end of the productive life of offshore oil or gas installations is inevitable. At a certain moment in time, the fields will no longer be commercially viable, and the installations need to be removed, or decommissioned. In this report, decommissioning is defined as dismantling of the entire offshore installations and wells, which includes upfront engineering activities, well plugging and abandonment, structures and facilities removal, cleaning up of seabed, and monitoring the sites after abandonment. Shell Exploration & Production (EP) has been producing oil and gas from offshore and onshore fields for decades, and many of these fields are becoming matured fields, with the operational costs exceeding the revenue, and would become economically unattractive to operate. In this scenario, Shell would decommission these fields that include its well installations and facilities. This phase is known as abandonment and it’s the last phase of the field life cycle, which necessitates the start of decommissioning process. One key aspect of decommissioning is to have relevant technologies in place at the right time in order to be able to decommission these fields. Within Shell EP, the EP R&D Leadership Team known as EP R&D Council, is responsible for the technology research, development and deployment and they acknowledged that decommissioning of offshore installations will be an important issue in the forthcoming years. In order to be well prepared for decommissioning, the EP R&D Council would like to be informed if future decommissioning of Shell’s offshore installations need to be supported by new technologies, and if so, what would be the best strategy for Shell to acquire those new technologies based an a thorough understanding of the business needs, internal competencies, external opportunities and the competitive environment. In order to provide answers on what to do with decommissioning of offshore installations, the following research question was raised: "How can EPT R&D Leadership Team support future decommissioning of offshore installations with technology to increase effectiveness?” In order to answer this research question, the question was broken down into three phases: - How does the competitive landscape of the decommissioning look like? - What are the key technical challenges facing decommissioning within this competitive landscape? - What would be the best strategies to overcome these technical challenges? The competitive landscape sets the boundaries of the research scope of decommissioning and provides focus to the scope of work. When looking at the scope, Shell has many offshore installations world wide, but most of the mature fields are in the North Sea area where decommissioning of matured fields are required by regulations. The focus of the TPM scope is therefore focused in the North Sea. Within this area, all the oil companies cooperate with each other on decommissioning, as all operators face similar challenges. Moreover, as they all see decommissioning as high cost activities rather than revenue generating activities, and not something that creates value, their approach is to collaborate rather than something that they want to differentiate themselves in. When looking at the size of decommissioning, it can be seen that the cost of decommissioning is substantial. The application of new technologies could potentially have a major impact in reducing these costs. Although cost reduction is an important objective for decommissioning, equally important is that decommissioning should provide a permanent solution to abandonment i.e. permanent abandonment. It should also be effective. The next criterion is that it should be done in an acceptable manner, acceptable for operator, authorities and the general public. These are the minimum criteria before starting decommissioning. When these two criteria are satisfied, then the next criterion is that decommissioning should be done in an efficient way. After setting the boundaries, the second part deals with the technical landscape. It shows most of the technical challenges within decommissioning. The focus in this report was on those challenges that were considered as the key technical challenges, which would have the highest impact in fulfilling the criteria or objectives Though technology could potentially be applied at several phases during decommissioning, it’s biggest impact is in well plugging and abandonment; and cleaning and removal of the structures. The key and major technical challenges that were identified during the TPM exercise include: The last step was the determination of the technology strategy for each of these key technical challenges. By looking at the technology strength and the value generating potential of the different technologies, technology acquisition strategy for Shell is divided into four categories: Develop in-house develop jointly with industry as JIP (joint industry project), Steer the market towards developing certain technologies or let the market develop it by itself. Most of the above-described technologies were identified as technologies with potentially high cost reduction and thus would create much value. These technologies, however, are also considered as non-differentiating technologies by the IOCs. This category of technology would be developed jointly by the international oil companies and service companies as a joint industrial project, JIP. Another category of technology development options IOC steers the industry to develop certain technologies, technologies which in itself do not create value, but not having the technology would increase the decommissioning costs. Another option would be that Shell’s Technology Ventures (STV) to invest in these technologies and thus taking up part of the development risk. They will make the technology available worldwide for all parties. There also have been identified technologies, which have a much wider impact than decommissioning alone. Technologies that both can be used for decommissioning and during production life could be something that Shell can differentiate itself in. The report recommends to look into more detail in these technologies and the possibility for doing internal R&D. Key Words: Decommissioning, Decommissioning Technology, Technology Play Map, Technology Strategy, Well plugging and abandonment, Preface "Writing is an exploration. You start from nothing and learn as you go." E. L. Doctorow In February 2005 I started my master thesis for the University of Groningen in the Technology, Strategy and Planning Team, in Shell International Exploration and Production B.V. in Rijswijk. Now, about eight months later, I am writing the last parts of the report and realise this period has been an intense exploration of the oil and gas business with a very steep learning curve. It has been a period with a lot of confusion, stress and desperation, but also a time with much laughter, joy and excitement. I would like to thank everybody who supported me and helped me having such a great time. Writing a master thesis is balancing between the needs and requirements of business science and the needs and wishes from the company. From the perspective of science in general, the Faculty of Business Administration of the University of Groningen, and especially the specialisation Technical Business Administration, the way and how the results are obtained is important by using the correct methodology and the recent theoretical insights, in order to develop reliable and relevant results. On the other hand, from the perspective of the company the final outcome and practical recommendations are more important. The report, which lies in front of you, is the result of this last half-year struggle and is the balance between science and business practise. This struggle, the writing of a master thesis, is more difficult than it might look in first instance. Many people have contributed and have helped me during this period. First of all I would like to thank my supervisors within Shell International Exploration and Production B.V., Christiaan Luca and Mohd-Shah Rahani, as they gave me the opportunity to do this research and work as a real team member within Technology, Strategy and Planning team. I would like to thank especially Mohd-Shah Rahani as he guided me through all the phases of the project, for discussing my interim findings and for helping me going in the right direction in times I lost track. Also I would like to thank all my colleagues in the Technology, Strategy and

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