DE CONSTRUCTION / DE COMMISSIONING

What do we mean by De Construction / De Commissioning

The decommissioning challenge involves the removal of structures from some of the world’s most inhospitable environments. The physical process of taking offshore and onshore fixed installations out of service safely and securely is a sensitive, complex, and technically formidable undertaking.

 The legislation governing these decommissioning activities presents its own unique set of challenges; the legal obligations required of Operators, engineers and project managers are demanding and detailed, but unavoidable.

 Maintaining complete compliance and operational best practice is fundamental to the success of the entire decommissioning process. Those responsible for decommissioning need to partner with experts who have the strategic strength and proven competence to deliver it all.

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De Commissioning Drivers 

Commodity prices  

Commodity prices are extremely important to E&P operators and are a key determinant for their future investment plans.

A forecasted long-term decline in prices will be factored in by E&P operators who can ignore short term fluctuations in the market but will have to factor in the prolonged decline or suppression in pricing.

This is especially true for small E&Ps which have purchased stakes in many of the older Asian Pacific, Australia fields, and need a strong cash flows to keep producing.

Field Maturity

A field may be able to produce cheaply, but there will always come a point where field production will diminish to a level where it simply is not economical to maintain production.

Coupled with oil price considerations, the economic viability of a field can heavily fluctuate, with periods of prolonged low oil prices impacting E&P operator cash flows, and bringing field abandonment into the frame.

Operations and Maintenance

The asset base in the region is mature, with increasing O&M requirements.

Stringent regulation demands regular maintenance. This also applies to assets which have been abandoned. Regular maintenance coupled with high labor costs makes this a substantial expense for E&P operators.

O&M costs feature heavily when reviewing a fields life. If O&M costs consistently exceed revenues, assets will likely be abandoned.

While MMO spend is not expected to recover to pre-downturn levels, the growing requirements for MMO and current oil price outlook will continue to compound cost pressures on E&P operators. As such, offshore MMO will be a key contributing factor into the decision to decommissioning an asset.

Onshore / Offshore Field Hubs

Due to the proximity to shore, and size of some smaller fields, several fields simply do not offer the economics required to support processing or storage facility investment.

The solution is to utilize tiebacks from the smaller fields to a ‘hub field’ which already hosts an offshore asset, thus improving the smaller fields commerciality.

Hubs can be installed specifically for a group of projects that would be uncommercial on their own, although existing assets are typically used where production has declined significantly enough to allow room for new production.  This can effectively serve to extend the life of existing assets, prolonging the decision to decommission.

Summary 

The biggest issue that operators have is the yearly expenditure to keep the facility operable. Just keeping the lights on, on some of these facilities could  be in the region of 10-20 million a year, is it economical looking at the scenarios of oil price vs. decommissioning costs v. OPEX costs.”