GOM decom market reveiw and update mark kaiser, lsu

Mark J Kaiser

Center for Energy Studies – LSU

2nd Annual Decommissioning & Abandonment Summit

Houston, TX

March 29-30, 2010

Outline Capital Perspectives

Risk Metrics, Matrices & Maps

2009 Activity Levels

Activity Forecast (Status Quo)

Idle Wells & Structures

“Idle Iron” Draft NTL No. T245g

Regulatory Impact of “Idle Iron”

© The material in this presentation is copyright protected and may contain preliminary research results. All rights reserved. No part of this presentation may be reproduced, quoted, or transcribed in any form or by any means, electronic or mechanical, including photocopying and recording, without the prior written permission of the author.

Worldwide, offshore spending in 2009 is estimated at $260 billion.

Domestic E&P spending in 2010 is estimated at $190 billion.

SECTOR PERCENTAGE

Drilling 40-50%

Production 40-45%Seismic 3-5%

Subsea Hardware 3-5%

Platforms 3-5%Decommissioning 3-4% [$1-3 B]

In 2009,

530 MMbbl @ $60/bbl + 2.25 Tcf @ $3.8/Mcf = $41 billion

Typically, ranges between $4-6 billion per year

0

10

20

30

40

50

60

70

0

2

4

6

8

10

12

14

16

2001 2002 2003 2004 2005 2006 2007 2008 2009

Gro

ss R

ev

en

ue

($

bil

lio

n)

Min

era

l R

ev

en

ue

($

bil

lio

n)

Year

Royalty Bonus Rent Gross Revenue

Shallow water is defined as water depth < 500 ft. Deepwater revenue is not considered.

Shallow water is defined as water depth < 500 ft. Deepwater abandonment cost are not considered.

Decommissioning risk is defined in terms of value of proved reserves or production relative to expected total

decommissioning liability.

Decommissioning Risk Metrics

R X RE venue oved serves

E DecommissioningLiability

R X Roduction venueYearT


R X Roduction venueYear T k T


1 1

2 2

3 3

( )(Re Pr Re )

( )

( )Pr Re

( )

( )Pr Re ( , )

( )

GOM Decommissioning Risk Matrix R₁(GOM)= R₁[P,S], WD < 500 ft

Oil Price ($/bbl)

AVG AVG + 1*SD AVG + 2*SD

60 2.7 1.6 1.0

80 3.7 2.2 1.6

100 4.7 2.8 2.0

Chevron Decommissioning Risk Matrix R₁(Chevron)= R₁[P,S], WD < 500 ft

Oil Price ($/bbl)

AVG AVG + 1*SD AVG + 2*SD

40 2.5 1.5 1.0

60 3.9 2.3 1.6

80 5.4 3.1 2.2

100 6.8 4.0 2.8

120 8.2 4.8 3.4

0.01

0.1

1

10

100

1000

1 101 201 301

Ris

k M

etr

ic 1

Companies

$40/bbl $60/bbl $80/bbl $100/bbl $120/bbl

GOM Decommissioning Risk Profile R₁(P), S = AVG

{R₁ x R₂} Risk Map

{R₁ x R₂} Risk Map – Top 10

Chevron

Apache

W&T Offshore Inc

Exxon Mobil

Mariner Energy Resources

Energy Resource Technology GOM

Unocal

Stone Energy Offshore

McMoRan

Energy Partners

0.125

0.25

0.5

1

2

1 2 4 8 16

200

9 R

ev

en

ue

/Lia

bil

ity

Value of Proved Reserves/Liability

When does a structure stop making money and become unprofitable?

Economic Limit: Net Revenue = Cost

Structure Oil ($1000) Gas ($1000)

Caisson $374-393 $502-850

Platform $631-1,000 $800-1,100

Structure Oil (BOEPD) Gas (MCFEPD)[BOEPD]

Caisson 34-43 436-687 [72-113]

Platform 57-106 652-947[108-157]

Economic Limits

When a structure approaches these limits, it is getting close to being non-commercial. MMS defines an offshore structure as “marginal” at 90 BOEPD (540 MCFEPD)

2009 Summary (Shallow; Deep)

592 Permanent Abandonments (547;38 )

568 Temporary Abandonments (527;41 )

158 Structure Removals (53,15,89;1)

E(CAPEX,2009) ~ $1.1-3.5 billion

E(CAPEX, 2008) ~ $818 million – 2.6 B

Wells Drilled

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0

200

400

600

800

1,000

1,200

1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

Cu

mu

lati

ve

Nu

mb

er

of

We

lls

An

nu

al

Nu

mb

er

of

We

lls

Year

Development Exploration

Wells Abandoned

0

5,000

10,000

15,000

20,000

25,000

0

200

400

600

800

1,000

1,200

1,400

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

Cu

mu

lati

ve

Nu

mb

er

of

We

lls

An

nu

al

Nu

mb

er

of

We

lls

Year

Permanent Abandonment Temporary Abandonment

Total Well Inventory (includes never-producing wells)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1947 1957 1967 1977 1987 1997 2007

Nu

mb

er

of

We

lls

Year

Total Inventory Wells Drilled Permanent Abandonment

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

Nu

mb

er

of

Str

uct

ure

s

Year

Total Inventory Installation Removal

Total Structure Inventory (includes auxiliary structures)

2009 Company Activity

Wells (PA, TA) E(Cost), $ million

Chevron: 31, 59

Apache: 52, 37

Stone : 59,7

GOM Shelf: 16, 33

W&T Offshore: 38, 10

Subtotal: 33%,26%

Chevron: 87-281

Apache: 77-252

W&T: 59-180

Stone: 52-179

ERT: 49-155

Subtotal: 29%

Structures

W&T Offshore: 16

Chevron: 9.6

Devon: 7

Maritech: 8.1

ERT: 7.2

Subtotal: 30%

0 1,000 2,000 3,000 4,000 5,000 6,000

Eni Petroleum

Hunt Petroleum (AEC)

Stone Energy

Beryl Oil and Gas

Merit Management Partners I

Anglo-Suisse Offshore

Pisces Energy

El Paso E&P

Nippon Oil Exploration

Nexen Petroleum Offshore

Maritech Resources

Energy XXI GOM

GOM Shelf

SPN Resources

Devon Energy

Energy Partners

McMoRan

Unocal


Mariner Energy Resources


Exxon Mobil

W & T Offshore

Chevron

Apache

Decommissioning Liability ($ million)

AVG AVG+2*SD

Assumes no significant regulatory changes or major hurricane destruction in the next 5 years

Well PA Forecast -Status Quo

0

100

200

300

400

500

600

700

800

1948 1958 1968 1978 1988 1998 2008 2018

Nu

mb

er

of

We

lls

Year

AVG AVG+2*SD AVG-2*SD 2009

Structure Removal: CAIS & WP Status Quo

0

20

40

60

80

100

120

140

1973 1983 1993 2003 2013

Nu

mb

er

of

Str

uct

ure

s

Year


Structure Removal: Fixed Platforms Status Quo

0

20

40

60

80

100

120

1975 1980 1985 1990 1995 2000 2005 2010 2015

Nu

mb

er

of

Str

uct

ure

s

Year


Well classes: (1) Producing, (2) Idle, (3) Never-producing

Idle wells: Idle (1-4) years, Idle (5+) years

0

2

4

6

8

10

12

1 6 11 16 21 26 31 36 41 46

Av

g.

# o

f p

rod

uci

ng

we

lls

Year

Oil (0-0.5 MMBOE) Oil (0.5-1 MMBOE)

Oil(1-2 MMBOE) Oil(2-4 MMBOE)

Oil(4-8 MMBOE) Oil(>8 MMBOE)

0

3

6

9

12

15

1 6 11 16 21 26 31 36 41 46

Cu

mu

lati

ve

P&

A W

ell

s

Year

Oil (0-0.5 MMBOE) Oil (0.5-1 MMBOE)

Oil(1-2 MMBOE) Oil(2-4 MMBOE)

Oil(4-8 MMBOE) Oil(>8 MMBOE)

Average Oil Structure Well Profiles

Years Since Last Production

0 = producing well; 1 = 1 year since last production; 2 = 2 years since last production, etc.

Well Status (Water Depth < 500 ft)

0

2,000

4,000

6,000

8,000

10,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Nu

mb

er

of

We

lls

Year

Producing Wells Idle Wells (1-4 Years) Idle Wells (5+ Years) Well Never Produced

Well Status (Water Depth < 500 ft)

0

10

20

30

40

50

60

70

80

1990 1993 1996 1999 2002 2005 2008

Pe

rce

nta

ge

Year

Producing Wells Producing Wells and Idle Wells (1-4 Years) Idle Wells (5+ Years)

Well Status (Water Depth > 500 ft)

0

200

400

600

800

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

Nu

mb

er

of

We

lls

Year

Producing Wells Idle Wells (1-4 Years) Idle Wells (5+ Years)

Well Status (Water Depth > 500 ft)

0

20

40

60

80

100

1990 1993 1996 1999 2002 2005 2008

Pe

rce

nta

ge

Year

Producing Wells Producing Wells and Idle Wells (1-4 Years) Idle Wells (5+ Years)

Idle (5+ yr) Well Ownership (#)

0 200 400 600 800 1,000 1,200

Eni Petroleum

Dynamic Offshore Resources NS


Nippon Oil Exploration

Anglo-Suisse Offshore

Devon Energy

Maritech Resources

McMoRan


Energy Partners

Unocal

W & T Offshore

Chevron

Number of Idle Wells (5+)

Water Depth < 500 ft Water Depth > 500 ft

Idle (5+ yr) Well Ownership (% Active)

0 10 20 30 40 50 60 70 80 90 100




Mobil Oil E&P Southeast

Energy Resource Technology

Northwestern Mutual

Hunt Oil

Unocal

Noble Energy

Fairways Offshore Exploration

Shell

Energy Partners

Forest Oil

Percentage of Idle Wells (5+)

The purpose of NTL No. T-245g is to ensure that idle infrastructure on active leases is decommissioned in a timely

manner.

Draft version “g”: Dec 7, 2009

Decommissioning Requirements(Status Quo)

Decommissioning Requirements(NTL No. T-245g Draft)

Draft NTL No.T-245g:

“… establish guidelines and pro-active measures to provide a consistent and systematic approach to determine the future utility of idle infrastructure on active leases and to ensure that all wells, structures, and pipelines on terminated leases and pipelines on terminated pipeline rights-of-way are decommissioned within the timeframes established by regulations, conditions of approval, and lease instruments.”

Idle Wells (1):

Idle Wells (2):

Idle Wells (3):

Idle Structures (4):

A 3-yr time horizon appears impossible to achieve;

a 5-yr horizon will be challenging;

a 10-yr horizon is realistic but involves tradeoffs

Wells Impacted (+/- 5%)

Probably Impossible

Challenging

Realistic but

involves maintaining a large inventory of idle wells and structures for a longer period of time

Mark J Kaiser

[email protected]

WD < 500 ft

13,865 active wells

29% producing

51% idle > 4 years

WD > 500 ft

1,162 active wells

58% producing

24% idle > 4 years

NOTE: There are 1,959 wells in WD < 500 ft and 755 wells in WD > 500 ft that have never produced, for a total GOM inventory of 17,741 wells in 2009

WD < 500 ft 3,133 active structures

51% producing

23% idle > 4 years

WD > 500 ft 71 active

structures

85% producing

4% idle > 4 years

NOTE: There are 3,696 structures in WD < 500 ft and 73 structures in WD > 500 ft that have never produced, for a total GOM inventory of 3,769 structures in 2009

Idle Well Exposure - Chevron