Global engineering company Aker Solutions has signed a letter of intent (LOI) with AF Gruppen, a leading contracting and industrial group, to merge the two companies’ existing offshore decommissioning operations into a 50/50 owned company.
With the signing of the letter, the companies plan to create a leading global player for environmentally friendly recycling of offshore assets. By joining and focusing their assets, the companies hope to unleash the decommissioning potential across the globe and make a significant contribution towards a sustainable and green transition of the offshore sector.
Kjetel Digre, CEO of Aker Solutions commented, "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 maximise 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.”
Amund Tøftum, CEO of AF Gruppen, added, "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.”
The two companies represent unmatched and complementary engineering and construction capabilities, offshore and onshore. Jointly, the two units brings extensive capabilities in running large-scale offshore projects, lifecycle and value chain competence and a broad global portfolio of customers and projects. The joint company will have an order backlog of approximately NOK2.5bn.
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).
Achieving a circular economy
Goal 12 in the UN’s sustainable development goals (SDG) is to ensure sustainable consumption and production patterns, in an urgent need to end our reliance on raw materials and achieve a circular economy. These goals will be met by viewing old structures as material banks of dynamic and valuable resources, rather than fixed and final objects. The recycling of steel from decommissioned oil platforms represents a significant contribution to reducing greenhouse gas emissions compared with ordinary steel production in this way and will help to achieve this goal of the UN.
The unit aims to recycle as much of the materials from the decommissioned offshore platforms as possible. Reusing steel results in 70% less CO2 emissions than ore-based production, which corresponds to an emission reduction of 1kg CO2 per kilo of recycled steel. In 2020, AF Offshore Decom, a specialised contractor within AF Gruppen, 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 decommissioning market
The offshore decommissioning market has a vast untapped global potential, with approximately 10,000 operational platforms. In the North Sea alone there is more than 900,000 metric tons of top deck expected to be removed during the period from 2020 to 2029. 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.