Alternative Method of Planning Decommissioning Reduces Costs
This paper reviews the existing planning process for decommissioning projects on the UK Continental Shelf and explores an alternative approach using the facility removal date instead of the cessation of production date.
The complete paper reviews the existing planning process for decommissioning projects on the UK Continental Shelf (UKCS) and explores an alternative approach of planning with reference to facility removal date rather than to cessation of production date. This approach aims to enable a more-effective planning in a high-oil-price and limited supply-chain-capacity environment to achieve cost reduction.
Largely because of the implementation of the Maximizing Economic Recovery (MER) strategy, one prime focus of planning for decommissioning involves moving the cessation of production date as far out as possible to comply with the strategy. What this also means is that cost has been placed as the first priority in decommissioning in the UKCS landscape
However, it must not be forgotten that any project delays or business interruption can also affect the overall cost of decommissioning. Project management can arguably be even more important than engineering innovations considering the complexity of the project. A well-optimized schedule not only can reduce cost, but also can ensure a more-efficient project and minimize business interruption.
A mixed-method study using critical-path-design analysis and semistructured interviews of industrial representatives from the UKCS is used to consider the interdisciplinary nature of decommissioning.
Critical-path-design analysis is a research methodology predominantly associated with engineering. Case studies of decommissioning projects are examined to draft an initial critical path that can best represent a typical UKCS decommissioning project.
The initial critical-path design then is used as an engagement tool for semistructured interviews with industrial representatives. The aim of the interviews is to modify the critical-path design until a robust critical path emerges, and to understand stakeholder effect on decommissioning projects.
A total of 30 industrial representatives were involved in the semistructured interviews. The idea of using facility removal date as a reference point emerged when modifying the critical-path designs according to the interview data.
Evolving Perception of Managing Projects
Almost all interviewees in project manager roles stated that, in the past, a false perception has existed that planning and managing an oil and gas decommissioning project will be identical to planning and managing a normal exploration and production project. The reality is that no profit is to be earned in decommissioning from an operator’s perspective. Therefore, no significant benefit exists in completing decommissioning in a shorter time frame.
In addition, not all aspects of a decommissioning project mature to the same level at any given time. According to interviews in project management roles, the stages in the traditional stage-gate process (define, select, execute, and retire) are indistinct in a decommissioning project.
Some operators also tended to have stuck with their own traditional corporate processes for planning and managing projects rather than changing and modifying them to suit decommissioning. According to some interviewees, some of these corporate processes only are applicable for greenfield projects and thus are not fit-for-purpose to manage decommissioning.
Minimizing Time Wastage
In the UKCS, much legislation is driven by the MER strategy, which places a huge emphasis on total cost reduction, including the operating cost. Minimizing time wastage is critical, because the facility will require additional operating and maintenance costs to be kept at a reasonable condition so that decommissioning work can take place.
As a result, for most decommissioning projects in the UKCS, speed is of paramount importance. Excepting large-scale projects in the northern North Sea, projects have little to no idle time between different decommissioning activities. This increases the risks of schedule delays, which can affect future activities down the chain.
Most well plugging-and-abandonment (P&A) activities now begin before cessation of production, where nonproducing wells are first plugged and abandoned, followed by the critical ones. This results in the blurring of the line between late-life production phase and the decommissioning phase.
Almost all interviewees agreed that knowledge, expertise, and experiences lie with the supply chain. The main reason for this, as explained by one interviewee, is that contractors generally are involved in a variety of different projects with different operators, whereas the operators only are involved with decommissioning their own assets. This means that the supply chain has more experience in decommissioning.
When these semistructured interviews were conducted in late 2018, the oil and gas industry was still recovering from the 2014 oil-price crisis. Even in a relatively low-price environment, an issue of insufficient supply to fulfill the demand for decommissioning work already existed. Considering the increase in decommissioning demand worldwide, many interviewees agreed that a pinch point on heavy-lift assets will be reached in the very near future. According to some interviewees, aged infrastructure will need to be decommissioned regardless of oil price.
Critical-Path Design and Analysis
Based on case studies, and through multiple interviews with industrial representatives, a simplified critical path showing the activities involved in a decommissioning project was produced.
As well P&A activities shift into the late-life production or the ultralate-life production phase, no distinct activities exist that must begin or end with the cessation of production date. However, multiple activities such as decommissioning planning, hydrocarbon cleaning and flushing, and well P&A must be completed before the facility removal date.
Using the removal date involves prioritizing and setting that date by means of continuous engagement and discussion with the supply chain instead of first setting a technical cessation of production date. Other activities then are planned and scheduled around the fixed facility removal date. With that date set, operators then can develop plans early enough to optimize late-life production rates and properly manage the wells toward the facility removal date. Flow charts of both processes can be seen in Figs. 1 and 2.
The benefits of using the facility removal date in decommissioning planning include:
Enhanced influence of supply-chain stakeholders. In interviews with various stakeholders, many stated that they were not engaged early enough before the facility removal date. Almost all interviewees in contractor roles stated that operators are engaging the supply chain too late, resulting in operators missing out on cost-saving opportunities. It is anticipated that using the facility removal date when planning decommissioning will enable more engagement and collaboration between operators and contractors.
Opportunities for aggregation of scope. Fixing the facility removal date will lead to more certainty in scheduling for the supply chain, which means that aggregation of scope will become easier, moreso for a tight market because a limited available execution window exists for operators.
Many attempts are made, both within an operating company and among operators, to aggregate scopes of work by aligning the cessation of production dates of different assets to achieve economies of scale. While a few companies do indeed have success in aligning cessation of production dates of different assets, others stated that, even within the same operating company, it is difficult to align cessation of production dates, and that indeed the effort usually is not feasible. By planning using the facility removal date, aggregation of scope can come naturally, especially with a tight supply chain.
Promotion of supply-chain development. Using the facility removal date would mean a greater certainty in scheduling and in continuous work. This will enable the supply chain to secure investments to develop new technologies and drive innovation. The certainty of jobs also will attract investment to create new supply-chain companies to cope with the increasing demand for decommissioning.
Cost efficiency. An argument against using the facility removal date is that it might result in wells being shut in too early, and thus may cause revenue to be lost that could be gained if the actual cessation of production date remained fluid and could be pushed out even further. However, many interviewees in operator roles stated that a dynamic actual cessation of production date would not be ideal, because the revenue that could be gained from shifting the cessation of production date would not be able to cover the loss caused by an inefficient decommissioning project.
The decommissioning landscape is dynamic and changes at a fast pace. A change in the way decommissioning projects are planned may be required as the decommissioning industry matures.
The authors advocate early engagement with the supply chain, an increased emphasis on academic and theoretical research in decommissioning, and further development of the supply chain market as important steps in transforming the process.
This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 199195, “Decommissioning Cost Reduction by Effective Planning of Decommissioning Projects Using Facility Removal Date as a Reference Point,” by Aaron Tung, Aberdeen-Curtin Alliance, and Claus Otto, SPE, Curtin University, prepared for the 2019 SPE Symposium: Decommissioning and Abandonment. The paper has not been peer reviewed.