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Labuan is ideal for O&G decommissioning works
Published on: Friday, June 03, 2016

Labuan: The island, renowned in the past for oil and gas sector fabrication, maintenance, logistical support and storage works, is ideal as a base for decommissioning works.However, for such project management, there are less than five locals who have the actual experience in managing decommissioning projects subject to the Best Practicable Environmental Option (BPEO).

Although cutting tools, marine spread and engineering teams are available locally, the police will not approve explosives as the best option for decommissioning, leaving only abrasive water jetting and diamond wire cutting as the preferred choices.

Ir. Dr Dasline Sinta, CEO and principal consultant of Dream Catcher Energy Sdn Bhd, said about 300 platforms in Malaysia are located in water depths of eight to 138 metres.

In his presentation at the 5th Sabah Oil and Gas Conference and Exhibition titled "Decommissioning of offshore oil and gas facilities in Sabah and Sarawak", he said based on field life estimation, about 15 platforms could be decommissioned soon.

These platforms are located in water depths of 11 to 76 metres from 60 to approximately 800 metric tonnes.

"Petronas and its petroleum sharing contract (PSC) partners are very tentative in implementing decommissioning projects, particularly during low price scenario.

"However, this low price scenario may make decommissioning more economic in terms of marine equipment rates and the need to provide local contractors with work.

"There is budget accumulated under the Cess fund for future required decommissioning activities by every PSC.

"There were two platform decommissioning projects and both were undertaken by Shell in 2003 and 2004.

"Petronas Carigali also completed decommissioning of Samarang SM4 and SMV in 2011 to 2012," said Dr Sinta.

Currently there are approximately 80 ageing platforms with the offshore installations exceeding the 25-year design life.

"Marine vessel spread for decommissioning is in short supply, in particular, competing with hook-up construction commissioning and topsides maintenance projects," Dr Sinta said.

Costs of decommissioning depend very much on vessel charter rates (month-dependent) and team experience in pricing/scheduling of offshore (cutting, lifting) activities and pipeline cleaning.

Sometimes, Dr Sinta said, his firm had to flush up to six times to clean a pipeline.

"There is huge scope for decommissioning for local contractors. It all depends on Petronas," he said.

Petronas, in general, will evaluate the decommissioning option on case-by-case basis, in line with legal framework (local and international requirements) and will consult with all interested parties.

"From past experience in Malaysia, unlike in Europe or the US, NGOs are not taking much interest in such decommissioning projects.

"For platforms installed before 1987, the Department of Environment (DOE) approval is not required, but DOE must be kept informed or briefed.

"For platforms installed on or after 1987, DOE approval is required. Some state governments are interested in artificial reef options for decommissioned platforms, but the process of taking over reefed structures is very lengthy as there are issues of liability transfer, cost of maintenance, bureaucracy, political interests and many stakeholders to consult, etc.

"In a case, we cannot give away free so it was sold to the state government for RM1, but we still have to maintain safety as the state authority indicated that they have no resources for such work," Dr Sinta said.

According to figures released by Malaysian Investment Development Authority (Mida) last year, oil and gas projects approved totalled RM27.18 billion.

The Malaysian Government is aiming to make the country as the No. 1 oil and gas hub in Asia with a targeted 2020 GNI impact of US$42.39 billion or RM160 billion.

This achievement is calculated to bring in 52,300 new jobs by 2020, and Labuan and Sabah are in great need of employment opportunities for youths and those laid-off.

Labuan and Sabah are touted as along international cargo ship established trading route, in a zone protected by international law and the United Nations (UNCLOS), in a disaster-free zone with high potential commercial area and potential hub for the Asia-Pacific zone.

Hence, under the 11th Malaysia Plan for the oil and gas services sector on re-engineering economic growth for greater prosperity, the focus area lies in transforming services and expanding modern services towards higher value-added sub-sectors.



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