Oil firms sweat ageing North Sea assets to stave off shutdowns

* Services firms compete for late life assets

* $335 billion prize still up for grabs

* More "wrench time", less form filling

* Streamlining processes and better planning are vital

By Claire Milhench

LONDON, April 25 (Reuters) - Smaller oil producers are teaming up with engineering and oil services companies in Britain's North Sea to squeeze extra drops from ageing facilities before rising costs force them to close.

Improving "wrench time" - hours spent at worksites rather than on assessments and form-filling - and bringing in specialist teams to boost recovery rates, will help prevent early decommissioning, industry participants say.

Oil services companies are competing to take on "late life" asset work, providing the expertise that smaller producers lack.

"There's more of a reliance on our engineering and construction project management knowledge to fill the void that may be there," said Alan Johnstone, managing director, brownfield and asset management at oil services company AMEC (Other OTC: AMCBF - news) .

The prize is substantial, with as much as $335 billion worth of oil and gas output still up for grabs in Britain's North Sea. By overhauling veteran platforms that are operating beyond their design life, producers can hold off decommissioning for another few years.

"This approach is gaining traction again because over the last few years we have seen assets changing hands," said Walter Thain, senior vice president for Europe at oil services company Petrofac (Frankfurt: A0HF9Y - news) .

EnQuest (LSE: ENQ.L - news) , Talisman Sinopec , Ithaca Energy and Fairfield Energy are all extending the life of their North Sea assets by bringing on new crude streams with tie-backs to existing platforms, or by adding pumps to wring the last oil from a depleted reservoir.

Talisman Sinopec is in the midst of a major project to extend the life of the six oilfields at the Montrose/Arbroath complex - one of the oldest in the UK.

New fields Shaw and Cayley will come onstream via subsea pipelines, requiring modifications throughout the existing platform and the installation of a new bridge-linked platform.

But major platform refurbishments are only part of the challenge. The industry also has to address a rapid fall in production efficiency, down from 80 percent a decade ago to an average of 60 percent in 2012. And that means making changes to day-to-day operations.

"Some of the assets in the North Sea could be 50-75 percent better in terms of production efficiency - it's about streamlining processes and better planning," said Neil Bruce, president, resources, environment and water at SNC (Shenzhen: 002246.SZ - news) -Lavalin . "It's not unheard of for operators to get five to six hours of productive work in, over a 12-hour day."

The industry has wrestled with this challenge for years, but is under more pressure to address it following the publication of the Wood Review in February. This stressed the need to maximise recovery from the basin, and argued that boosting production efficiency would help achieve this.

RISING COSTS

Part of the problem is that rising costs have encouraged oil majors to focus on more competitive projects elsewhere. The average operating cost in the UK North Sea is now 17 pounds ($28.56) per barrel, up from 13.50 in 2012, trade body Oil & Gas UK said.

Not surprisingly, older facilities producing less oil fall down the priority list or get sold off. Royal Dutch Shell (Xetra: R6C1.DE - news) recently put three of its North Sea interests up for sale and more could follow.

"As we go forward we have to look at asset integrity," Simon Henry, Shell (LSE: RDSB.L - news) 's chief financial officer, said at the annual earnings presentation. "Which assets justify ongoing investment and which would others be more prepared to put the resource and the new investment in to sustain the life?"

Smaller producers are more willing to invest because the production volumes are more material to them, but running an elderly platform or field poses challenges.

"Operating a mature field is a different animal - you need to optimise small incremental changes, and move from reactive maintenance work to preventative maintenance work," said Juan Carlos Gay, a partner at consultants Bain & Company.

This is an area where oil services companies believe they can make a big difference. Outsourcing the day-to-day operation of a mature asset to one firm avoids a situation where engineers are turned into managing engineers as they try to co-ordinate the work of different contractors.

It also means the operator's attention is not split across several assets. "Oilfield services companies like Petrofac have a dedicated delivery team which is just focused on that facility," said Thain.

But how to resolve that problem of wrench time, so that engineers spend more time on the manual tasks? AMEC's Johnstone said it is all about advance planning. After all, platforms are miles offshore and can't be resupplied with materials at short notice - especially in bad weather.

"You need to look at the supply chain and make sure that the person who is doing the job has the right tools and materials," he said. "And if they haven't got something they need, is there any fallback work they can do? When you're offshore you can't just pop out to B&Q (a UK home improvements retail chain) for a nut or a bolt."

($1 = 0.5953 British Pounds) (Editing by Veronica Brown and Keiron Henderson)