The Re-Use Market - Is It Worth It?
Authors: Regan C. , McCall M.R. 
Published: December 2007

The requirements for fast-tracking at minimum capex is becoming the norm for offshore developments, particularly for marginal field developments. Topside equipment has traditionally been a major cost driver and critical path item for the majority of projects. This paper identifies what value reusing second hand equipment could bring to future projects:–Is there business value in the re-use of second hand equipment for offshore developments in the UK?–What type of equipment would maximise the benefits?–Do second hand markets exist and how do they operate?–What are the potential pitfalls and risks in re-using second hand equipment?–Is there merit in encouraging industry to create such a market?–What role can CRINE play?

Introduction

The requirement for fast tracking projects at minimum capex is becoming the norm in offshore developments. Future development reserves in the North Sea are likely to remain moderate in size. The ability of these developments to compete for corporate funds against other world-wide projects is becoming increasingly challenging.

Topsides equipment have traditionally been a major cost driver and critical path item for the majority of projects. This paper is aimed at identifying what value second hand equipment may bring to future projects and provide an informed insight to the potential "prize" of second hand equipment, where it can be obtained from and the pitfalls to be aware of.

Do Second Hand Markets Exist and Where?

General. Second hand markets are beginning to develop in a number of areas world-wide such as the Former Soviet Union and the Far East. It was recently reported that a Chinese delegation has visited the Norwegian Petroleum Directorate with a view to buying and re-using platforms and equipment from the Norwegian Continental Shelf. This could solve a huge environmental problem for Norway. China is currently producing oil at the same levels as Norway but is thought to have treble the potential reserves.

Second hand markets exist in the Middle East and West Africa. It is understood that some countries such as Nigeria and India are passing regulations which will restrict the import of second hand equipment to a maximum of 10 years old.

While Europe and Australia are only just beginning to take an interest, the second hand business is particularly well developed in the Gulf of Mexico (GOM) where the offshore industry is far more mature.

GOM Market. Since the start of the offshore industry in the United States, more than 4,000 structures have been installed in the Gulf of Mexico. As a condition of state and federal lease agreements, each concession, upon suspension of production, must be restored to original condition. Figure 1 shows that in 1992 a turning point occurred whereby more platforms were and continue to be removed than installed. Thus a significant industry exists in the removal of offshore platforms and associated production facilities.

It all started in the early 1970's, when Tenneco utilised the same drilling deck on multiple jackets. The drilling deck was moved along with the tender assisted drilling rig to a preinstalled jacket. By contrast, production decks were site and production specific. At this time in the industry, there were very few fabricators servicing the Gulf of Mexico.

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