Re-using oil and gas equipment

The future holds many possibilities for equipment re-use in the oil and gas industry.

The future holds many possibilities for equipment re-use in the oil and gas industry. The US is already an area that capitalizes heavily in handling the removal, marketing, and re-use of offshore structures and modules, some of considerable magnitude.

In contrast, the re-use of equipment in the North Sea has, to date, been limited. It is precisely this area, however, that is set to benefit from a great deal of used equipment availability over the next two to three decades, as the decommissioning of North Sea platforms takes off.

While many in the industry may understand the concept of re-use, there are elements of equipment re-use that people may have concerns and misconceptions about. By sharing experiences of where, how, and why equipment has been re-used, some of these concerns can be allayed, and those involved will be able to see the feasibility and validity of using second-hand equipment in planning projects

A recent project in Eastern Europe employed oil field equipment consisted of twin Russian Mig fighter jet engines mounted on a Russian T52 tank chassis. This unique vehicle, called The Big Wind, was designed to extinguish onshore wellhead fires and had been effectively used in Kuwait and Libya. Although considerable engineering went into the main component of the vehicle, the project demonstrated the resourceful use of available equipment and an ability to secure a market share in a competitive environment while working within a tight commercial framework.

The strength of re-use lies in environmental issues, delivery time, and cost factors. The environmental benefits of equipment re-use are obvious. While buyers may have concerns about delivery times, re-use offers the buyer an effective means of developing a project, generally within an approved time frame. Cost factors are beneficial for both buyers and sellers.

To the seller of redundant equipment, re-use provides an opportunity to maximize a return on the original investment, and minimizes the net cost of decommissioning where the equipment can be modified or made suitable for further use.

For example, a Mideast operator was supplied with a twin water injection pump package for offshore use that was sourced in the US, refurbished under Lloyd's approval, and delivered in four weeks. The project cost was about 55% of equivalent new equipment and about half the delivery time. Despite many benefits of equipment re-use, the marketplace is typically averse to the risks involved and individuals may often be reluctant. Multi-tasking in the industry leads individuals to pursue the easiest options, though these may not be the most commercially viable. The "shiny new" philosophy has killed many projects in infancy.

There are frustrations in promoting the concept of re-use. Though engineering specifications are frequently a hurdle, these need not be so inflexible. Commonly cited concerns are the cost uncertainties of refurbishment, even though these costs are not very complicated to explore. Health and safety is another issue, although those in positions of authority would agree that there are other equally challenging marketplaces where second-hand equipment is frequently used.

When considering warranties on used equipment, often the case that the environment in which the equipment will be used may make such warranties unnecessary. Equipment prepared from a production line can be re-engineered to higher environmental tolerances through the individual attention available in a re-engineering workshop, where reputations are staked on workmanship. Nonetheless, issues of liability cannot be dismissed and can vary from deeply complex to one requiring little attention.

The North Sea operating sector is beginning to embrace the re-use of equipment more widely and this has been driven to a large extent by the arrival of energetic independent operators taking an interest in mature fields.

For those embarking upon equipment disposal, there are a number of planning issues to consider. One of which is market research. Sellers must consider questions, such as: Is my equipment likely to be bought? Is it in suitable condition for re-sale? How will the cost of removal affect its value? Is it going to recover sufficient cash return to make the exercise worthwhile?

It is important for companies to dedicate a team with previous experience of an equipment re-use project. Projects can range in complexity, so the team should be able to deal with scheduling, health, safety and environmental, liabilities, insurance, handling, and possibly shipping and customs.

Those seeking re-use opportunities need firstly to identify whether the equipment they require is available in the marketplace and how well it might contribute to their project. While technical specifications and certifications are necessary, physical inspection will provide the buyer with the confidence to alter, adapt, and employ the equipment. Almost without exception, delivery times for re-use equipment are more attractive than waiting for new equipment.

The used equipment marketplace is worldwide and whether as seller or buyer, a large number of organizations in the offshore sector already contribute in some way. With an ever-widening knowledge base, improved facilities for sharing information and current competitive initiatives, now is the right time to embrace the re-use of equipment as a serious alternative to existing practices.

Richard Newman
Managing Director
Carrack Ltd.

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