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Once an oil or gas well has reached its economic limit, at which its most efficient production rate is insufficient to cover operating expenses, the well’s operator is typically tasked with safely and efficiently abandoning the well. While well abandonment has traditionally been viewed as a “necessary evil” - a nonrevenue operation to be done quickly and with minimal expense - changes in technology and the regulatory climate have caused operators to make some significant shifts in their attitude concerning these operations.
Abstract This paper covers the End-of-Field Life management and abandonment planning for four subsea fields. Scope includes end-to-end planning from confirming cessation of production with the Regulator, to Abandonment Planning, actual Implementation and Execution. PETRONAS Procedures and Guidelines for Upstream Activities (PPGUA), Company internal guidelines and Industry Practices are available for End-of-Field Life management, Abandonment Planning and Execution. These guidelines were used pragmatically in addressing both technical and non-technical challenges on these four fields, including but not limited to PSC Obligations and Regulatory Compliance, Selection of Abandonment Concept, Execution Strategy, etc. The lack of experience in subsea field abandonment provided a unique opportunity for collaboration among industry players, constructive challenges, and the acceptability of new ideas including ways of working, processes and implementation of rules/guidelines. There are six subsea wells in these four fields, in different water depths, some of which are in a cluster while others are not. The scope and timeline for each was evaluated on individual basis to draw alignment with its field and PSC-specific requirements; some are thereafter bundled together into a campaign to gain efficiency and savings via a broader synergy approach. Two broad scopes were considered: Wells Plug and Abandonment (P&A), and Subsea facilities decommissioning and abandonment. All wells P&A are aligned to industry practice and PPGUA. Field in shallower water was planned for full decommissioning and abandonment with subsea tree removed and recovered; a new diverless flushing tool (developed in collaboration with subsea vendor) was used to clean the pipeline that will be left in-situ. For field in deeper water (more than 100 meters), comparative assessment was carried out and the results support "leave in-situ" concept. Fit-for-purpose Marine Biology assessment was carried out by a local university to support this concept. The plan is to have this abandonment concept presented to the relevant Government Agencies for final approval.
Offshore oil and gas production platforms must undergo (possibly) expensive abandonment operations at the end of field life. In Cook Inlet Alaska, lessees are required, at abandonment, to dismantle and remove materials, machinery, equipment, etc. and return the leased lands in good order and condition as required under the oil and gas leases. Failure to complete abandonment responsibilities allows a claim for damages, as well as causing a default of the lease. In the worst-case scenario, default forces the landowner to step in and assume the responsibility of abandonment operations. To mitigate this risk, the landowner requires of the lessee financial guarantees such as bonds or independent escrow accounts funded to cover the cost of abandonment. At the Middle Ground Shoal Field in Alaska the landowner (State of Alaska) considers the value of the oil and gas reserves as collateral. This reduces other mitigation mechanisms that may be required of smaller independent producers when taking an assignment of the leases and facilities from giant, multinational, integrated oil firms. Accepting underlying proven reserves as collateral lowers the overhead costs to lessees, and frees investment dollars for incremental field development and exploration.
Of the 16 current platforms in Cook Inlet, 14 were installed and began operations prior to 1969.1 Large, multinational oil and gas firms owned and operated these platforms and they were initially constructed for a twenty to twenty-five year life. The firms were so financially large, and the economic life of the reservoirs (with subsequent discoveries) extended so far in the future, that abandonment obligation was implicitly guaranteed through self-insurance.
Cook Inlet Production has declined from 83 million barrels per year (b/y) in 1970 to just 11 million b/y in 1999. One large, multinational has previously offered all its Cook Inlet infrastructure up for sale and another has sold its two platforms to a much smaller independent. A third has sold its oil production to an independent producer while retaining its gas production interest.
This ongoing change in the industry structure in Cook Inlet presents special risks to local stakeholders. Landowners asked themselves the question, would the new entrants have the financial strength to meet abandonment obligations (that are now much nearer in the future and with fewer reserves left in the ground) as required by the lease terms?
Unlike a regulator, a landowner (royalty owner) is motivated in large part by profit (or royalties from production). Ninety-nine percent of oil and gas production in the state is from state lands and the State of Alaska is both a landowner and lessor. Therefore the State and oil and gas producers are aligned on many fronts. Both want production to be large and sustained. Both want costs to be minimized to encourage a long, productive field life: the producer to earn profits from their investment and labor, and the owner to collect royalties from the oil and gas reserves of the land. However, each has special concerns related to the different demands on their profitability.
Well-meaning, but often vague, demands representing honest concerns of stakeholders raise the nominal costs to producers. There is no economic incentive for the landowner to accept every stakeholder demand (as a government landowner is often pressured) at any cost to the producer. The economic incentive directs the landowner to restrict the mitigation of risk to only what is incurred (or believed to incur). This strict principle serves as a natural deterrent to unnecessary costs.
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