No longer useful
Decommissioning forecast showing
input and model parameters.
EL-yr EL-yr + τ
ENGINEERING, CONSTRUCTION, & INSTALLATION
Decline curve, scheduled approaches
adopted for GoM decommissioning forecast
Twelve structures not producing in 2016
Mark J Kaiser
Center for Energy Studies, Louisiana State University
Academy of Chinese Energy Strategy
Models are required to forecast when an oil and gas structure is expected to be decommissioned. When models are de- veloped, good modeling practice dictates that procedures be well-defined and assumptions clear and transparent. In part five of this series, the model framework employed in the deepwater Gulf of Mexico (GoM) decommissioning
assessment is described.
The purpose of modeling is to reflect the dominant operational
and behavioral characteristics of the system, as well as the limits
and constraints of these characteristics. Modeling always involves a
number of assumptions and preferences and the desire to make as-
sumptions transparent arises from the need to understand the results
in the context of the model construct.
Since structures exist in different states with different characteristics
during their lifetime, it is not surprising that different methods are
required to estimate their decommissioning time.
Life cycle states
Deepwater oil and gas structures in the GoM have been installed for
drilling and/or processing operations, but in shallow water may also
serve in support roles as quarters, compression and pumping stations,
flare towers, etc.
Since offshore structures are valuable assets, producing structures may
be re-purposed at the end of their useful life if the structure can function in
another role. Structures re-classified as auxiliar y structures gain a new lease
on life. The various transitions structures may take during their lifetime
is shown schematically, where solid lines denote common pathways and
dashed and dotted lines progressively less common transitions.
Producing structures are classified as idle when they stop producing
for more than one year. Idle structures may transition back into produc-
tion or into an auxiliar y role, but these reverse pathways are not as com-
mon as for ward paths which ‘push’ structures into decommissioning.
Decommissioning represents the end state of all structures.
For producing structures with net revenue greater than their
economic limit, NR > EL, at the time of evaluation, a decline curve
approach similar to reserves valuation is adopted.
Using producing well inventories and assumed commodity prices,
economic limits, and royalty rates, cash flow analysis is applied to
determine when the structure will no longer be commercial.
The primary assumption is that no new wells will be drilled, and
no unforeseen problems will arise in producing wells that changes
production from the modeled profile. Since side track drilling and tiebacks require capital spending and are speculative, they are excluded
from the model development.
These are strong and conservative assumptions, of course, and
if left unchecked, will yield decommissioning forecasts that predict
early removal, much earlier than observed in practice.
When net revenue falls below the economic limit the structure is
no longer commercial, and this time is called the EL-yr.
The EL-yr is added to a user-defined time period τ representing the
time until decommissioning is performed. The structure is decommissioned in year EL-yr + τ.
EL and τ are input parameters. EL-yr is derived from decline cur ves
and τ represents historic data on the actual time observed after
production ceases when a deepwater structure is decommissioned.
For fixed platforms, the time period τ is selected as three, five, or
10 years. For floaters, the time period τ is two years.
For structures that previously produced but are no longer producing,
a scheduling method is employed by assigning a time horizon to the idle