Norwegian Engineering and construction groups Aker Solutions and AF Gruppen have signed a Letter of Intent (LOI) to merge the two firms’ existing offshore decommissioning operations.
They've agreed to merge the offshore decommissioning operations into a 50/50 owned company "with the goal of creating a leading global player for environmentally friendly recycling of offshore assets." The joint company will have an order backlog of approximately NOK 2.5 billion (~$290 million).
"By establishing a pure, focused player dedicated to unleashing global decom potential, the parties will make a significant contribution towards a sustainable, green transition of the offshore sector," Aker Solutions said.
The transaction is expected to be completed during the second half of 2021 and is subject to due diligence and regulatory approvals by the Norwegian Competition Authorities (NCA).
Commenting on the agreement, Kjetel Digre, chief executive officer of Aker Solutions said: "By combining Aker Solutions’ offshore, engineering and project execution capabilities with AF Gruppen’s decommissioning and construction capabilities, we aim to increase customer efficiency throughout the decommissioning process and maximize the total recycling potential.
"The company will be uniquely positioned to offer integrated end-to-end services from well plug and abandonment to planning, removal, dismantling and recycling at its own environmental base. Sustainability and circular economy ambitions will be key focus areas for the new entity, and we see increased activity in the market for decommissioning and recycling moving forward."
Unique recycling player
Amund Tøftum, CEO of AF Gruppen said: "Our ambition is to establish a unique recycling player, positioned to offer a total decommissioning solution for the global offshore recycling market. The two parties have complementary strengths and capabilities, with potential to build a global offshore recycling powerhouse. Furthermore, the new entity will deliver on the green, circular ambitions outlined in the UN’s sustainable development goals," said
According to Aker Solutions, the recycling of steel from decommissioned oil platforms represents a significant contribution to reducing greenhouse gas emissions compared with ordinary steel production.
"Goal 12 in the UN’s sustainable development goals (SDG) is to ensure sustainable consumption and production patterns. It is stated that urgent action is needed to decrease our reliance on raw materials and increase recycling and "circular economy" approaches to reduce environmental pressure and impact. These goals will be met by viewing old structures as material banks of dynamic and valuable resources, rather than fixed and final objects," Aker Solutions said.
According to the companies, the business concept is based on solving a significant societal challenge by removing and recycling decommissioned oil platforms.
"The unit aims to recycle as much of the materials from the decommissioned offshore platforms as possible. In recent years, AF Offshore Decom has achieved a source separation rate of 94 percent for the structures for recycling, where the main component is metal.
"Reusing steel results in 70 percent less CO2 emissions than ore-based production, which corresponds to an emission reduction of 1 kg CO2 per kilo of recycled steel. In 2020, AF Offshore Decom demolished and facilitated the recycling of approximately 22,000 metric tons of steel, corresponding to a reduction of alternative CO2 emissions of 22,000 metric tons," the company said.
Further, Aker Solutions said that the offshore decommissioning market has a vast untapped potential globally, with approximately 10,000 operational platforms.
"The North Sea alone holds a significant potential with expectancy of more than 900,000 metric tons of top deck to be removed during the period from 2020 to 2029. This applies to the British, Norwegian, Danish and Dutch sectors. Based on today’s current annual decommissioning spend, it implies that it will take operators approximately 100 years to deplete liabilities for current assets. Thus, a further ramp up of pace is necessary, leading to a positive contribution to the demand for this type of services," Aker Solutions said.