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decommissioning cost estimation
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Well Decommissioning CostWell Decommissioning Cost Estimation
Steve KirbySasok Ltd
DEA(e) Q210 Meeting, 3rd & 4th June 2010, Hamburg
ObjectivesObjectives
Oil & G k d l i ll Oil & Gas UK Workgroup 5 are developing a well decommissioning cost estimation tool.
Why? To provide a simple, auditable and common p p
approach. To assist withTo assist with
accounting liability asset transferasset transfer securitisations
CaveatsCaveats
Not a tool for AFE level estimates it can be made more detailed as COP approachespp
It is aimed at field level assessmentsl f i l ll i not a tool for single well review
It only concerns well decommissioning costsy g it does not consider additional post COP costs
it does not consider well decommissioning it does not consider well decommissioning phasing
UK LegislationUK Legislation
P t l A t 1998 ( d d b th E Bill Petroleum Act 1998 (amended by the Energy Bill2002)
the obligation for decommissioning offshore the obligation for decommissioning offshore infrastructure is on the owners.
includes protection against default on p gdecommissioning.
Companies have to formally assess their d l b l (decommissioning liabilities (asset retirement obligations) as part of normal accounting processA d t i d i i i Accuracy needs to increase as decommissioning date approaches.
Accounting StandardsAccounting Standards
Th t FAS 143 (US) FRS 12 (UK) The most common are FAS 143 (US), FRS 12 (UK) and IAS 37.
Likely costs should be based on Likely costs should be based on: current costs of performing the proposed
abandonment ORabandonment , OR justifiable future costs of performing the proposed
abandonment. The cost estimate may include development of a
completely new technology. if it is supported by sufficient objective evidence.
Cost estimates are projected to the date of COP
Cost of Well AbandonmentCost of Well Abandonment
The cost of well abandonment depends on a number of factors: Abandonment Complexity of the well
Location of well (platform subsea land) Location of well (platform, subsea, land) Duration of operations Rig rate / Spread rate
GuidelinesGuidelines
hi id li ll i f ll This guideline proposes allocation of wells according to two factors: Abandonment complexity
Abandonment ComplexityTYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4
No work required Simple well:
Rigless Complex well:
Rigless Simple well:
Rig-based Complex well:
Rig-based
P&A Phases
well P&A operations occur in several phases
P&A PhasesPhase Description
1 Reservoi r abandonment 2 Intermediate hole section2 Intermediate hole section3 Surface casing/conductor/wellhead
Abandonment ComplexityMatrix
TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work requ ired
Simple well; Rigless
Comp lex well Rig less
Simple well Rig-b ased
Complex well Rig-based
Well Complexity
Platform Well(e g. wireline
and pumping) (eg. tubing
integrity issues, CT, HW U)
(eg. pu ll tubing required)
(eg. poor access, poor cement,
pullin g casings, cement repairs)
1 R i b d t
Platform Well
1 Reservoir abandonme nt
2 Int ermediate hole section
3 Surface casing/conductor/wellheadPh
a
s
e
W ll C l iTYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4
No work requ ired
Simple well; Rigless
Comp lex well Rig less
Simple well Rig-b ased
Complex well Rig-based
Subsea Well
Well Complexity
(eg. LWIV, wire line and
pumping, riserless)
(eg. HD-W IV, WL/pu mping /CT,
riser)
(eg. pu ll tubing required)
(eg. poor access, poor cement,
pullin g casings, cement repairs)
1 Reservoir abandonme nt1 Reservoir abandonme nt2 Int ermediate hole section3 Surface casing/conductor/wellhead
P
h
a
s
e
Example WellsExample Wells
A l tf ll t b b d d th i ith A platform well, to be abandoned across the reservoir with CT , then intermediate P&A using a rig & no conductor to be removed, would be categorised as TYPE PL 2/3/0
TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work r equ ired
Sim ple well ; R ig les s
Com plex wel l R ig less
S im ple wel l R ig-bas ed
Com plex wel l R ig-bas ed
1 Res ervoi r abandonm ent
Well Complexity
Platfo rm Well
1 Res ervoi r abandonm ent x2 Interm edia te hole s ection x3 S ur face cas ing/conduc tor/wellhead xP
h
a
s
e
A platform well already abandoned across the reservoir to A platform well, already abandoned across the reservoir, to have intermediate and surface P&A using rigless W/L & pumping services would be assigned as TYPE PL 0/1/1
TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work r equi red
Sim ple well ; R ig les s
Com plex wel l R ig less
S im ple wel l R ig-bas ed
Com plex wel l R ig-bas ed
Well Complexity
Platfo rm Well
1 Res ervoi r abandonm ent x2 Interm ediate hole s ection x3 S ur face cas ing/conduc tor/wellhead xP
h
a
s
e
Well Abandonment Complexity Categorisation
Si l P Simple Process Does the well contain downhole gauges?
Does the well contain have ESP completion? Does the well contain have ESP completion? Is the well a multi-lateral? Any anomalies in construction? Any anomalies in construction? Any anomalies in operation?
High level reviewHigh level review more detailed as COP approaches
Make broad & documented assumptionsMake broad & documented assumptions more detailed as COP approaches
Duration of OperationsDuration of Operations
Benchmarking internal and external data sources RushmoreReviews well abandonment database
NPT / WOW NPT / WOW benchmarking estimates of NPT and WOW. establish degree of skew and determine P10, P50,
P90 and Mean.
inclusion / exclusion and assumptions to be stated
Phase Durations (example)Phase Durations (example)
Platform Well (Days)Type 1 Simple
Type 2 Complex
Type 3 Simple
Type 4 ComplexPlatform Well (Days) Simple
RiglessComplex Rigless
Simple Rig
Complex Rig
e
1 Reservoir Abandonment 3 5 3 7
P
h
a
s
e
2 Intermediate Hole Section 3 6 5 9
3 Surface casing/conductor/ wellhead 2 2 4 8
Time build up and assumptions to be stated
Time build up and assumptions to be stated
Skew DistributionSkew DistributionOverall Time Distribution
0100.00 300.00 500.00 700.00 900.00 1100.00 1300.00
Hours
0.1
0.2
0.3Time
P10
0.4
0.5
0.6
P
e
r
c
e
n
t
i
l
e P50
P90
Mean
0.7
0.8
0.9
1
The P50 value will be ~ 80% of the Mean or single duration. The P10 value will be ~60% of the Mean or single duration.
1
The P90 value will be ~150% of the Mean or single duration.
Equipment SpreadEquipment Spread
Site/Installation t
Type 1 Simple Rigless
Type 2 Complex Type 3 Simple Rig
Type 4 Complex Rigtype Simple Rigless
pRigless Simple Rig Complex Rig
Platform fixed rig Wireline, Pump spreadCT or HWU
spread Modular Rig
spreadModular Rig
spread
Site/Installation type (nominal currency per day)
Type 1 Simple Rigless
Type 2 Complex Rigless
Type 3 Simple Rig
Type 4 Complex Rig
Platform fixed rig 25 000 35 000 55 000 55 000
Platform fixed rig 25,000 35,000 55,000 55,000
Equipment Spread can be used to directly determine Rig Rate / Spread Rate
Cost build up and assumptions to be stated
Equipment SpreadEquipment Spread
Site/Installation type
Type 1 Simple Rigless
Type 2 Complex Rigless
Type 3 Simple Rig
Type 4 Complex Rig
O h l ti Wireline Pump CT or HWU Ri /h i t Ri /h i tOnshore location Wireline, Pump spreadCT or HWU
spread Rig/hoist Rig/hoist
Platform modular rig
Wireline, Pump spread
CT or HWU spread
Modular Rig spread
Modular Rig spread
Pl tf fi d i Wireline, Pump CT or HWU Platform Rig Platform RigPlatform fixed rig Wireline, Pump spreadCT or HWU
spreadPlatform Rig
spreadPlatform Rig
spread
Platform jack-up Wireline, Pump spreadCT or HWU
spread Jack-up spread Jack-up spread
Subsea LWIV Spread HD LWIV Semi spread Semi spreadp p p
Subsea - deep water Semi/drillship spreadSemi/drillship
spreadSemi/drillship
spreadSemi/dril lship
spread
Equipment Spread can be used to directly determine Rig Rate / Spread Rate
Spread Rate (example)Spread Rate (example) Equipment Spread can be used to directly determine Equipment Spread can be used to directly determine
Rig Rate / Spread Rate
Site/Installation type (nominal currency per day)
Type 1 Simple Rigless
Type 2 Complex Rigless
Type 3 Simple Rig
Type 4 Complex Rig
Onshore location 5,000 10,000 35,000 35,000 Platform modular rig 25,000 35,000 55,000 55,000Platform fixed rig 25,000 35,000 55,000 55,000 Platform jack-up 70,000 90,000 110,000 110,000 Subsea 140,000 170,000 220,000 220,000
Cost build up and assumptions to be stated
Subsea - Deep water 300,000 300,000 300,000 300,000
Cost build up and assumptions to be stated
Well CostWell Cost
A l tf ll t b b d d th i ith CT A platform well, to be abandoned across the reservoir with CT then intermediate P&A using a rig & no conductor to be removed, would be categorised as TYPE PL 2/3/0
Platform Well (Days) Type 1 Simple Rigless
Type 2 Complex Rigless
Type 3 Simple
Rig
Type 4 Complex
Rig
1 Reservoir Abandonment 3 5 3 7
P
h
a
s
e
2 Intermediate Hole Section 3 6 5 9
3 Surface casing/conductor/ wellhead 2 2 4 8
Site/Installation type
(nominal currency per day) Type 1
Simple Rigless Type 2
Complex Rigless Type 3
Simple Rig Type 4
Complex Rig
Platform fixed rig 25,000 35,000 55,000 55,000
Abandonment cost =
g
5 days x 35,000 + 5 days x 55,000 = 450,000
Additional Project CostsAdditional Project Costs
Need to recognise project costs / overheads
mobilisation / demobilisationproject engineering project engineering
rig refurbishment
Cost build up and assumptions to be stated Cost build up and assumptions to be stated
Discount EffectDiscount Effect
ll Well cost = 450,000 Discount @ 4% pa for 10 years = 299,174
Well cost = 550,000 Discount @ 4% pa for 10 years = 365,657Discount @ 4% pa for 10 years 365,657
Delta is 66,483F 22 ll j h d l i 1 5 illi For a 22 well project the delta is ~1.5 million
Overall project cost 300 million (Miller project) Project delta 0.5%
SummarySummary
Cl if ll b d t l it Classify wells on abandonment complexity criteria and assumptions to be stated
D t i ti i Determine timings inclusions / exclusions assumptions to be stated
d Determine spread rate equipment spread can be used to directly determine
d tspread rate cost build up and assumptions to be stated
Determine project cost Determine project cost recognise mobilisation / refurbishment costs
QuestionsQuestions
Is it workable? What are the holes in the proposal?What are the holes in the proposal? What could we do better?