Decommissioning projects are rare in this region (South East Asia), thus opportunities for benefitting from firsthand experience are quite limited. According to The Offshore O&G Decommissioning Market 2013-2023, similarly throughout the North Sea, the Norwegian sector has limited experience with Decommissioning1. As the Asia operators were focused on developing technologies to unlock and produce new reserves, they are still in an infancy stage when it comes to decommissioning. Perhaps timing is the key to the development of decommissioning activities and knowledge in Asia. The timing of "Peak Oil" where numbers of ceased Production Sharing Contracts (PSC) are increasing and at the same time the operators are chasing extraction technologies to increase the ultimate recovery factors of oil and gas. The time is near where it is uneconomical for the Asian operators to continue to produce oil and gas and hence decommissioning of facilities is the only the next step. Bearing in mind that decommissioning of oil and gas fields is regulated by international law, the need for improving this capability is there. Evidently, it takes a big nudge from external stakeholders to shape the decommissioning industry, very similar to how energy demand shaped the oil price today. United Nations Convention on the Law of the Sea (UNCLOS) Article 60(3), states that "Any installations or structures which are abandoned or disused shall be removed to ensure safety of navigation, taking into account any generally accepted standards established in this regard by the competent international organisation. Such removal shall also have due regard to fishing, the protection of the marine environment and the rights and duties of other States. Appropriate publicity shall be given to the depth, position and dimensions of any installations or structures not entirely removed." This paper aims to demonstrate how a reputable global upstream operator builds its capabilities from scratch through a collaboration of selected in-house experts, working together to establish in-house decommissioning capabilities in three (3) key domains; [1] Technical know-how; [2] Cost estimating models, and; [3] Standardization of Project Management System
This study intends to propose parameter adjustment for economic evaluation in considering abandonment expenditures (ABEX) during front end loading (FEL) of discovered petroleum resources. In maturing a petroleum field development, abandonment and decommissioning of wells and facilities requires consideration during FEL. FEL, long adopted by prominent E&P players worldwide is used to support capital investment decision-making where value i.e. expected monetary wealth is measured and evaluated by Discounted Cash Flow (DCF) analysis. However, the DCF approach is outdated and flawed where it does not capture fluctuation well. This study reviews ABEX of sub-commercial contingent resources or shelved projects and economic evaluation method used in the author's organization and their parameters, identifying relevant and applicable adjustments that could be made associated to ABEX. Combining the revised ABEX with a modified economic model, a proposed set of categorical adjustments to is produced. The results show that the ABEX of the previously sub-commercial projects yield a more competitive number with revised semi-detailed estimates and different escalation and inflation approaches. Additionally, a standardized assumption for abandonment year before cessation of production is recommended to provide a more realistic evaluation of when ABEX is actually required to incur. These, in turn, improves the Net Present Value (NPV) of the projects tested as well as their viability and rank towards being sanctioned for development.
This study intends to propose parameter adjustment for economic evaluation in considering abandonment expenditures (ABEX) during front end loading (FEL) of discovered petroleum resources. In maturing a petroleum field development, abandonment and decommissioning of wells and facilities requires consideration during FEL. FEL, long adopted by prominent E&P players worldwide is used to support capital investment decision-making where value i.e. expected monetary wealth is measured and evaluated by Discounted Cash Flow (DCF) analysis. However, the DCF approach is outdated and flawed where it does not capture fluctuation well. This study reviews ABEX of sub-commercial contingent resources or shelved projects and economic evaluation method used in the author’s organization and their parameters, identifying relevant and applicable adjustments that could be made associated to ABEX. Combining the revised ABEX with a modified economic model, a proposed set of categorical adjustments to is produced. The results show that the ABEX of the previously sub-commercial projects yield a more competitive number with revised semi-detailed estimates and different escalation and inflation approaches. Additionally, a standardized assumption for abandonment year before cessation of production is recommended to provide a more realistic evaluation of when ABEX is actually required to incur. These, in turn, improves the Net Present Value (NPV) of the projects tested as well as their viability and rank towards being sanctioned for development.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.