The number of aging offshore facilities in the Asia Pacific region is increasing. The decision to extend the service life of an offshore asset is made on the basis of detailed technical analyses combined with detailed economical evaluations. The authors have developed an integrated approach that combines technical assessments with risk-and-reliability analysis to form a value-chain assessment (VCA) that can be used to better evaluate project economics related to a life-extension project.
Introduction
As oil and gas installations exceed their original design lives, they enter life-extension stages. For many of these installations, the economics is still favorable to continue to produce oil and gas from existing reservoirs; the installations can also become important hubs for transportation and the processing of hydrocarbons from new fields and discoveries, typically developed as subsea tiebacks. Operators seek assurance that they can extend the lives of their infrastructures and installations safely and economically.
The decision to extend service life of an asset requires answering a number of critical questions regarding the status of the installation and the equipment, the necessary investments required to verify a sound economy for the extension period, and the assurance of safe and reliable operations. The income from the production in the tail-end phase of a project is typically not huge, and a detailed assessment of the capital investment (CAPEX) required for upgrades; modifications; or replacement of systems, equipment, and controls needs to be performed with care. Similarly, the operational cost (OPEX) must be examined carefully, a task that will require a thorough assessment of the status of the safety barriers and production-critical equipment to determine maintenance requirements and possibly also predict future production interruptions. The objective is to continue to operate economically without compromising performance or safety.
In many countries in the Asia Pacific region, the situation related to aging offshore assets is complicated by the change in operatorship from international to national oil companies. The new owner needs to know not only the current condition and status of the asset, but also the current work processes, responsibilities and track records, and relevant operating history.
When considering the consequences of failure of production-critical equipment in the asset, the operational context will typically have changed from the time the field was put into operation. Considering the reduced production rates, there may be redundancy in some of the units and lack of redundancy in others as water production typically increases with time. Furthermore, there may be reduced pressures in parts of the process facility, but also production enhancement from new production or injection wells that may have been put on stream. These factors will all effect the consequence of failure, and the OPEX as well as the revenue stream.
The relationship between aging assets and major safety incidents has been examined and is well-documented by a number of organizations (please see the complete paper for a discussion of a recent health, safety, and environment study that strongly correlates safety incidents with aging assets). Aging also has a significant impact on failure mechanisms for production-critical equipment, affecting the performance of an asset as well as safety. Some of the main challenges and key issues related to aging include containment-related failures—such as corrosion, fatigue, and cracking—and electrical, control, and instrumentation systems, which can fail with age or become obsolete.
The Approach
The authors have developed an empirical approach founded on risk-based methodology to address the physical condition of the asset better. The technique has had to satisfy the contrasting needs of, on one hand, scale and extent (it must address all the relevant facilities and systems) and, on the other hand, the need to be achievable in a short period of time with a relatively small team of people. The core parts of the approach comprise a systematic process, the elements of which include
- A top-down view of the main equipment systems and structures
- An examination of the current operational context
- Rating of the safety, environmental, production, and replacement-cost consequences
- Rating the likelihood of loss of function and integrity
- Combining severity and probability into a risk ranking from which a priority list of items is obtained
- Summarizing the main drivers in an integrated value-chain model that provides the basis for decision making
The objective of this assessment is, first, to summarize the state of the equipment in a digestible form for the client and, second, to place priorities on equipment that will have to be attended to in the near future. The high-priority items are those jeopardizing the life extension of the facilities. Finally, all these elements can be implemented directly into a VCA that can be used to predict future operational costs and the revenues that can be expected from the asset. The assessment includes two main elements:
- A systematic risk-based integrity assessment
- A quantitative VCA
Risk-Based Integrity Assessment
A systematic risk-based integrity-assessment approach has been developed, with the objective of efficiently establishing the integrity status of the asset and helping to identify and prioritize equipment and systems that will need further attention (i.e., require upgrades or modifications). The methodology involves the following main steps:
- Define context (obtain relevant information).
- Identify risks (identify risks related to safety, environment, production, and cost).
- Analyze risks (assess the consequence and likelihood related to the risks).
- Evaluate risks (evaluate if the risks are acceptable).
- Treat or manage risks (define risk-reducing measures).
The first step in the analysis is to obtain relevant information regarding the asset. This will include an equipment register, preferably organized by a functional hierarchy and then by main equipment type. This information will be required when assessing the status of the safety barriers and the production-critical equipment, and will usually be extracted from the computerized maintenance-management system. A cursory check typically reveals that certain details (i.e., subsea and foundation systems, pipelines, wells, or even the main and secondary structure) have been omitted, and some adjustment to accommodate these is usually necessary.
Relevant information is also obtained through workshops or individual sessions with senior operational personnel. These sessions are important in understanding the operating context of the systems. Through this process, it is common to find that certain units are now redundant and that others are out of use, and, occasionally, there are new units that may not have made it to the maintenance system—all yielding information that will be important when assessing the asset.
An assessment is then made to identify relevant risks related to the integrity of the asset. These risks could be related to safety, environment, production, and cost. Initially, this integrity assessment will be made on the basis of the asset register and information documented. To substantiate this detailed condition assessment further, site visits and interviews with plant operators and various discipline experts or technical authorities will be conducted. At the same time that the condition of the equipment is being evaluated, the main work processes and behavior associated with the main operational disciplines will be examined.
Once the main risks that could effect the safety, environment, production, or costs related to the asset have been identified, the next step is to analyze or assess these risks. Typically, this would be achieved by use of a risk matrix, where the expected consequence and likelihood are rated to the risk as evaluated against some defined criteria.
At this point, all the relevant risks are identified and ranked with an appropriate risk matrix, giving each risk a traffic-light indication for the risk level. Factors categorized as green are low-risk issues and would typically not be a priority to attend to as long as the current maintenance and inspection regimen is maintained. Yellow, or medium risk, would typically also not require immediate attention; however, the maintenance and inspection regimen must be maintained and there may be a need for some adjustments. Red, or high risk, indicates that there is a significant risk for production outage or a safety incident and that immediate attention is required. This could include completing of outstanding work orders, an overhaul or replacement, or modification work, and may include a significant change to work practices.
From the risk-based integrity assessment, a report would be issued that reproduces the tables and matrices of the analysis and summarizes the areas requiring further focus and attention. A review of the safety and operational practices that have been performed separately would be given in this report alongside the equipment-condition assessment.
The next stage of the process is often to re-examine the OPEX and CAPEX budgets to see if these need revision in the light of items identified in the risk-based integrity assessment.
VCA
A VCA can be conducted that combines all the relevant issues and uncertainties regarding CAPEX and OPEX into an integrated model. The VCA can be used to support business-critical investment decisions by assessing the total value, risk, and robustness of the investment.
The VCA approach allows all relevant uncertainties to be included. Thus, it provides a more-accurate description of the total risk. Furthermore, the major risk drivers and their underlying causes and knock-on effects can be analyzed. The methodology is different from the traditional discounted-cash-flow approach, which integrates all risks into the discount rate. Instead, the uncertainties are modeled into cash-flow elements, such as costs, availability, and schedule. This adds to the understanding of the effect of risk drivers and offers a better starting point for managing those risks. Fig. 1 gives a summary of the cost elements contributing to the VCA model.
The first step is to evaluate the available information. Information from the risk-based asset-integrity assessment will be used to assess any upgrades or modifications required, which will have a significant effect on the CAPEX. Upgrades may be required in order to comply with current safety requirements, to avoid extensive repairs and high operational costs caused by degraded equipment or poor-quality equipment, and to prevent future challenges related to lack of available spare parts needed by obsolete equipment.
The second step in the process is to evaluate and predict the future OPEX. This implies assessing and possibly adjusting the inspection and maintenance program for the systems and equipment as well as determining the appropriate spare-part inventory. These investment costs and operational costs should be compared with the income expected from the remaining future production, where the reservoir uncertainty should be taken into account. All this information is incorporated into the VCA, which can be used to assist with decision making related to the life-extension project. Fig. 2 above provides an overview of the VCA model with the main input data.
For a case study of an independent technical-asset-integrity assessment for an offshore facility, please see the complete paper.
This article, written by JPT Technology Editor Chris Carpenter, contains highlights of paper SPE 165882, “Life Extension of Offshore Assets—Balancing Safety and Project Economics,” by H. Brandt and S. Mohd Sarif, Det Norske Veritas, prepared for the 2013 SPE Asia Pacific Oil and Gas Conference and Exhibition, Jakarta, 22–24 October. The paper has not been peer reviewed.