Decommissioning and Abandonment-2016

Is there a value proposition for decommissioning?

Our industry is governed by rules that require cleanup and closure of oil and gas facilities after they cease to produce. Unlike a capital project, decommissioning is not something that you can choose to do or not to do. The choices for a decommissioning project are really when and how, with a resulting “how much?” The “when” typically defaults to “not now,” representing a belief that deferral results in the lowest cost outcome. Is “not now” really the value proposition for decommissioning?

I assert that the value proposition for decommissioning is really one of value retention through proactive late-life planning. Perhaps a suitable time frame to invoke a value metric is when the remaining hydrocarbon value equals the estimated decommissioning costs. Good planning decisions would then balance capturing the remaining hydrocarbons with delivering a cost-effective decommissioning project. The goal then becomes maintaining this value equilibrium; far too often, it is only the remaining hydrocarbons or a deferral that receives attention. Governance for late-life asset and project planning decisions could then be tested against maintaining this value equilibrium. For example, the foresight to select a cessation-of-production date to capture a downcycle decommissioning market could capture value that would have been lost in a blind drive to deferral. Like a capital project, there are a number of early planning decommissioning activities that can be deployed to maintain that value equilibrium. Let us consider this value metric and approach for future decommissioning projects.

This Month's Technical Papers

Risk-Based Abandonment-Prioritization Strategy for Inactive Subsea Wells

A New Recommended Practice for Fit-for-Purpose Well Abandonment

Concurrent Decommissioning Method Enables Safer, Lower-Cost Process

Recommended Additional Reading

SPE 180040 Plug-and-Abandonment Solution for Oilfield Decommissioning in the North Sea by P. Aguilar, Schlumberger, et al.

OTC 27152 Integrated Decommissioning—Increasing Efficiency by William R. Price, Oceaneering International, et al.

OTC 27128 Practical Applications of Structural-Analysis Support to Decommissioning by Ahmed M.A. Abdelaah, Atkins Energy, et al.

Win Thornton, SPE, is vice president of decommissioning, global projects organization, at BP. He has more than 35 years of experience in offshore construction and decommissioning projects working as an operator for BP, Chevron, and Oxy; as a contractor from Brown & Root and WorleyParsons; and as a consultant for Winmar and TST. Thornton holds a BS degree from the Georgia Institute of Technology and an MS degree from the University of Houston. His recent work includes offshore decommissioning and reuse projects in the Gulf of Mexico, West Africa, California, Alaska, Southeast Asia, and South America. Thornton has championed the environmentally sound and cost-effective disposal of obsolete platforms through placement in state-sanctioned “Rigs to Reefs” programs. He is a member of the JPT Editorial Committee and can be reached at win.thornton@mac.com.