Three years after launching, Maersk Decom, a collaboration between Maersk Drilling and Maersk Supply Service, has received confirmation that there is indeed a market for decommissioning worn-out oil platforms.
For Maersk Decom, it initially took a while to convince oil companies of the need for a decommissioning company dedicated to the oil industry, as the company's CEO Lars Banke told EnergyWatch's sister media, ShippingWatch, in 2019.
In terms of where we started three years ago, the market has matured considerably from where we were.
But the company has now succeeded in establishing this fact, says the company's CCO, Jens Klit Thomsen, to ShippingWatch.
"In terms of where we started three years ago, the market has matured considerably from where we were. The market for decommissioning exists because the oil installations exist. It's a question of when – not if – it needs to be done. We see a clear tendency in the market in relation to a positive development of fields to be decommissioned," he says, referring to the fact that companies spend an average of GBP 1.5bn on decommissioning in the North Sea every year.
Maersk Decom expects this level to continue on the heels of several recent tenders in the market.
"From my perspective, we're definitely on our way to achieving the targets we want," says Klit Thomsen without going into further detail.
Calculator developed from expertise
Establishment of the joint venture was announced in April 2018, and the experiences gathered over the past three years have now led to a new free cost calculator, just launched by Maersk Decom.
The new tool helps calculate and estimate what a decommissioning project will cost. And, according to Klit Thomsen, the purpose is to create more transparency in the industry. When a company holds significant experience and data, it is duty-bound to help, he says.
"Historically, not a lot of decommissioning has happened, and that's one of the reasons for the industry's opacity. If there hasn't been a very active industry, it's difficult to have sufficient data for how much a service like ours costs. For good reasons, there hasn't been a lot of structure because it's all been about development," says Klit Thomsen.
Maersk Decom also expects the new calculator to bring in more customers and thus a financial gain in the long run.
"Seeing as it's a free tool, it won't directly impact our revenue. But it creates a way in for oil and gas operators, which may need a further explanation from us after the calculation. We hope it provides a better and more open dialog with potential customers," says Klit Thomsen.
Stable despite Covid-19
Although Maersk Decom's customers operate within the oil and gas industry, which has suffered greatly due to both the pandemic and the oil price drop, the Maersk company has not felt those challenges to the same extent.
Historically, not a lot of decommissioning has happened, and that's one of the reasons for the industry's opacity.
"We haven't experienced a poorer market due to corona. It only extends to the time frame being extended for one project. We've been able to execute all that we've promised," he says.
But the oil price still remains an important factor that has the potential to affect the market. Because the oil price affects oil companies' willingness to invest in decommissioning projects.
"If the price is lower than what it costs to extract the oil, a field is not profitable. In that sense, more fields will need to be decommissioned, but operators may struggle to pay for our services. If the oil price is very high, some fields will remain profitable, which will result in decommissioning being postponed. Our sweet spot is therefore somewhere in between."
In 2019, Maersk Decom booked a deficit of USD 4.3m. In total, Maersk Drilling and Maersk Supply Service have put USD 20m into starting the venture and covering the costs of the first year of operations.
(This article was provided by our sister media, ShippingWatch)
English Edit: Ida Jacobsen