Abandonment Roadmap from Operator's Perspective

Abstract

Abandonment is becoming a major focus as an operator and also by regulators with a single prominent objective – to reduce its overall operation expenditure. From an operator's perspective, striking balance between abandonment expenditures asset integrity, regulator's requirement and funding for growth projects is key to ensure safe & reliable operations, sustained growth and profatibility. Sarawak Oil (SK Oil) is a brownfield operator with a huge number of legacy asset; some reaching more than 40 years of age. These assets are constantly being monitored closely for any integrity issue that might emerge due to assets operating beyond their original design life. There is also major development project currently on going which requires huge investments each year. These projects are vital to sustain the positive cash flow for SK Oil operations. Thus, there is a need to diligently balance between the expenditure for growth projects, routine operations and abandonment activities. In view of the business & operational requirements, a comprehensive abandonment execution outlook, stretching out until the end of field life was developed. The main consideration is the total free cash flow taking into account investments for development projects. The basic formula isOperating Cash Flow minus Capital expenditure where the balance will be used to fund abandonment activities. Another key consideration is the stakeholder management, agreement and consensus have to be met with these partners as well. Thus, the phasing strategy is crucial in determining the prioritization of the candidates which are due for abandonment to ensure minimal cash outflow for a non-cash generating activity. SK Oil has developed an abandonment roadmap which narrows down to the next five (5) years abandonment outlook. This roadmap has been presented to the regulator and has been agreed upon. Thus, this five (5) years abandonment outlook will be a guiding principle to plan for the actual abandonment execution. This paper is intended to highlight the approach in developing an abandonment database and key criteria that has been considered to phase out the abandonment activities. This paper is beneficial to operators that manage a huge high number of assets with mostly aging facilities, which need to be abandoned in order to reduce the operating expenditure in the long run.