Decommissioning forecast for foating structures.
Side track drilling and tiebacks will impact decommissioning timing.
Start-up Plateau Sidetrack wells
ST1 reserves ST2 reserves ST3 reserves
38 Offshore January 2018 • www.offshore-mag.com
ENGINEERING, CONSTRUCTION, & INSTALLATION
For platforms, the EL-yr delay is five years
in the base case and 10 years in the slow/low
case. For floaters, the EL-yr delay is two years
across all scenarios.
Using the model framework and assumptions specific to each scenario, the expected
decommissioning times for the 2016 inventory
of deepwater structures are depicted for the
low and high cases for fixed platforms, compli-
ant towers and floater structures.
For fixed platforms, oil and gas structures
are shown separately since there is a mix of
producers, while all floaters (except Independence Hub) are oil structures.
The base case scenario falls between the
low and high case cumulative curves. Future
decommissioning activity is expected to range
between the base and low case scenarios.
According to the model results, over the
next five years between 12 and 25 deepwater
structures are expected to be decommissioned,
and over the next decade, between 25 and 36
structures are expected to be decommissioned.
Using the base case model parameters, the
royalty rate was reduced by half and eliminated
and the model results recomputed. Similarly,
economic limits were reduced by half and half
again and the model results recalculated.
In both cases, there was no noticeable differ-
ence in the estimated decommissioning times
except in a handful of structures, and for those
structures affected there was only a difference
of one or two years in the expected timing. This
is not unexpected, since royalty rates and eco-
nomic limits are generally secondary factors
in economic modeling and do not have a major
impact on cash flows and revenue streams rela-
tive to operating cost and commodity prices.
Whereas royalty relief may induce capital
spending and incentivize operators to invest
in new facilities, the ability of royalty relief to
maintain marginal operations is less likely to
be successful because of its incremental im-
pact relative to other more significant factors.
Changing the commodity price or the parameter τ will shift the cumulative curves left
or right in the obvious way.
Factors excluded from model
There are many factors that often delay de-
commissioning. Operators pursue side track
drilling and tieback opportunities to maximize
the value of their assets and to ‘keep the pipes
full,’ and when opportunities become scarce
or do not satisfy the economic-risk criteria re-
quired, may actively market their infrastructure
for third-party processing or seek to divest.
Side track drilling can occur anytime and if
successful will extend the life of the structure
beyond the forecast model time.
Tiebacks may also occur at any time, on or off
peak production, depending on the location of
the asset, regional prospectivity, and many other
factors. When additional production opportunities are no longer available, or are too risky
relative to the potential rewards, the facility
may be re-purposed as a compressor or pump
station for pipelines crossing the structure.
Production data is accurate and decline models are standard and the models are expected to
yield results consistent with the (conservative)
capital spending constraint. The decommissioning model is therefore reliable with respect
to the given assumptions, but given the large
number of unobservable factors involved in
asset reviews, it is not surprising that numerical
models are limited in their ability to predict the
exact outcome of such evaluations.
If model parameters are not well known,
they can be treated as a free parameter when
constructing the forecast, but it is generally
preferable to minimize the number of these assumptions and to use historic data if applicable.
For example, the economic limit of produc-
tion is a model parameter that may be based
on historic data of similar structures in the
region (first choice), an estimate of the structures direct operating cost (second choice),
or simply a number that seems reasonable to
the user (third choice free parameter).
Wells long on their decline curve are more
likely to yield an accurate forecast relative to
younger wells, and consequently, mature res-
ervoirs are more likely to yield an accurate pro-
duction forecast relative to younger reservoirs.
In terms of the decommissioning forecast,
there will always be uncertainty regarding the
potential for tiebacks and alternative uses. •