Page 434 - Hydrocarbon

Decommissioning 421

Operating strategies and product quality should be carefully reassessed to determine
whether less treatment and more down-time can be accommodated and what cost
saving this could make. Many facilities are constructed with high levels of built-in
redundancy to minimise production deferment early in the project life. Living with
periodic shutdowns may prove to be more cost effective in decline. Intermittent
production may also reduce treatment costs by using gravity segregation in the
reservoir to reduce water cuts or gas influx, as mentioned in Section 17.4, Chapter 17.

18.2.2. Increasing hydrocarbon production
As decommissioning approaches and all well intervention opportunities to increase
productivity have been exploited, enhanced recovery processes may be considered as a
means of recovering a proportion of the remaining hydrocarbons. However, such
techniques are generally very sensitive to the oil price, and whilst some are common
in onshore developments they can rarely be justified offshore.
When production from the reservoir can no longer sustain running costs but the
operating life of the facility has not expired, opportunities may be available to develop
nearby reserves through the existing infrastructure. This is becoming increasingly
common as a method of developing much smaller fields than would otherwise be
possible.
Companies which own process facilities and evacuation routes, but no longer
have the hydrocarbons to fill them, can continue to operate them profitably by
renting the extra capacity or by charging tariffs for the use of export routes.

18.3. Decommissioning Funding

Management of the cost of decommissioning is an issue that most companies
have to face at some time. The cost can be very significant, typically 10% of the
cumulative CAPEX for the field. On land sites, wells can often be plugged and
processing facilities dismantled on a phased basis, thus avoiding high spending levels
just as hydrocarbons run out. Offshore decommissioning costs can be very significant
and less easily spread as platforms cannot be removed in a piecemeal fashion. How
provision is made for such costs depends partly on the size of the company involved
and the prevailing tax rules.
If a company has a number of projects at various stages of development, it has
the option to pay for decommissioning with cash generated from younger fields.
A company with only one project will not have this option and may choose to build
up a decommissioning fund which is invested in the market until required. In both cases
cash has to be made available. However, in the first situation the company is likely
to prefer to use cash generated from the early projects to finance new ventures, on
the assumption that investing in projects generates a better return than the market.
A combination of using cash generated from profitable projects and money drawn
from a decommissioning fund is then likely.