By Stephen Eisenhammer
LONDON (Reuters) - A giant catamaran strong enough to lift four Eiffel Towers will set off from a South Korean shipyard next year with the task of decommissioning North Sea oil rigs - a $3 billion bet that bringing derelict platforms ashore can be a profitable business.
Since the 1970s, 500 oil rigs and 45,000 km of pipelines have been installed in the North Sea to tap reserves that have fed Britain and Norway. But ageing infrastructure and dwindling productivity mean some of the fields are no longer profitable.
Oil companies have considered turning redundant rigs into casinos or hotels but most are destined for dismantling to prevent environmental damage from rust or leaks. Oil services companies are developing equipment for a decommissioning market that Deloitte estimates could be worth $50 billion over the next 30 years. The question nagging the firms is one of timing.
New technology is enabling oil companies to squeeze more out of ageing fields, continually pushing back the date of decommissioning. Contractors do not want to miss out on the work when it comes, but many are also struggling to pull together skills and equipment that require serious investment. Getting the timing wrong could be costly.
Edward Heerema, chief executive of engineering group Allseas, is hoping the Pieter Schelte, the 382-metre-long, 124-metre-wide catamaran he commissioned and named after his father, will capture a large part of the business.
"This is the biggest bet of my career," said Heerema.
"It's very difficult to show that it's really going to be extremely profitable," he added.
The concept of the boat is 25 years old, according to Heerema. But only now has a pipeline of work coincided with his company having the financial muscle to build the ship.
A video on the company's website shows a digital mock-up of the boat, resembling two oil tankers joined together, in action.
The ship sails up to the oil rig guiding the steel platform above the water between its two hulls. Hydraulic clamps stick to the under part of the platform which is then lifted with seeming effortlessness in one quick movement and carried to shore.
Named after Pieter Schelte Heerema, an oil engineer whose vessel designs have been installing offshore rigs for decades and whose sons still dominate North Sea muscle-ships, the ship can lift up to 48,000 tonnes, more than quadrupling the current top capacity.
The vessel caused controversy in 2008. Heerema was a member of the Nazi Waffen SS during the Second World War and was jailed briefly as a collaborator by a Dutch court. Jewish groups complained when they learnt the name.
A BIG BET
The Pieter Schelte has already been signed up to remove platforms from Shell's Brent North Sea field, beginning with Brent Delta in 2015 or 2016.
The ship's size and stability give it an advantage in the rough weather of the North Sea where many fields are nearing the end of their life. But over the ship's lifetime decommissioning projects could take it to the Gulf of Mexico, South East Asia and on to Brazil and West Africa.
The decommissioning market involves everything from shutting down the field, closing the wells, removing the steel and disposing of or recycling it. Design for lifting vessels has changed little since the 1970s and only a handful of ships do most of the work.
"I don't see the Schelte being anything other than a one off, but by taking the risk they've cornered the market in advance," David Thomas, analyst at Credit Suisse, said.
With oil companies delaying dismantling and shutting operations as long as production remains viable, there are uncertainties. Improving technology and fluctuating oil prices are influencing factors.
"As I tell my boss I'm not the Grim Reaper, I'm here to do a job but I'm not hovering to get it done any quicker than is appropriate," said Austin Hand, project director for the decommissioning of the Brent field at Shell (LSE:RDSA), whose North Sea fields produce over 12 percent of UK oil and gas.
Decommissioning is a dead cost to oil companies involving complicated procedures which come with environmental risk, particularly because when the platforms were installed there was little thought as to how they would be taken away.
"It's easy to look at the number of installations in the North Sea and think it's bonanza time for oil services, but it's incumbent on the industry to try and push back the decommissioning date as long as possible and to maximize recoveries," Thomas said.
This has meant many service companies have taken a more conservative approach than Allseas, but nonetheless do not want to miss out.
Alan Johnstone, Europe Brownfield Director at British engineer Amec (LSE:AMEC), said decommissioning has been a small market in the North Sea but predicts this is about to change.
The company is developing analysis of the integrity of oil installations to predict how they will react when lifted and dismantled.
"The decommissioning is becoming a more consistent pipeline than it's ever been before," Johnstone said. "The size of the prize here is significant," he said.
Oil firms are eager for services and technology able to reduce time and cost of the process, an opportunity for innovators. Norwegian equipment maker HydraWell, for example, developed a system able to cut the time to plug and abandon a well, major part of the decommissioning process, by 70 percent.
The UK government has stepped in to help oil companies fund decommissioning with tax relief worth about 20 billion pounds over the next 30 years, a global first according to British Chancellor George Osborne. The scheme is meant to free up capital kept aside for decommissioning, to go into fresh exploration and further production.
One result might be to delay decommissioning even further, with oil firms using the money to chase barrels in ageing fields with new technology and replacing equipment.
"From the supply chain side there appears to be more appetite to extend the field life, with that certainty of the decommissioning deed freeing up capital," Johnstone said.
(Editing by Andrew Callus, Anna Willard, Janet McBride)