Page 19 - Hydrocarbon Exploration and Production Second Edition

6 Decommissioning

1.6. Decommissioning

The economic lifetime of a project normally terminates once its net cash flow
turns permanently negative, at which moment the field is decommissioned. Since
towards the end of field life the capital spending and asset depreciation are generally
negligible, economic decommissioning can be defined as the point at which gross
income no longer covers operating costs (and royalties). It is of course still
technically possible to continue producing the field, but at a financial loss.
Most companies have at least two ways in which to defer the decommissioning
of a field or installation

(a) reduce the operating costs, or
(b) increase hydrocarbon throughput

In some cases, where production is subject to high taxation, tax concessions may
be negotiated, but generally host Governments will expect all other means to have
been investigated first.
Maintenance and operating costs represent the major expenditure late in field life.
These costs will be closely related to the number of staff required to run a facility and
the amount of hardware they operate to keep production going. The specifications
for product quality and plant up-time can also have a significant impact on running
costs.
As decommissioning approaches, enhanced recovery, for example chemical flooding
processes are often considered as a means of recovering a proportion of the
hydrocarbons that remain after primary production. The economic viability of such
techniques is very sensitive to the oil price, and whilst some are used in onshore
developments they can less often be justified offshore.
When production from the reservoir can no longer sustain running costs but the
technical operating life of the facility has not expired, opportunities may be available
to develop nearby reserves through the existing infrastructure. This has become
increasingly common where the infrastructure already installed is being exploited to
develop much smaller fields than would otherwise be possible. These fields are not
necessarily owned by the company which operates the host facilities, in which case a
service charge (tariff ) will be negotiated for the use of third party facilities.
Ultimately, all economically recoverable reserves will be depleted and the field
will be decommissioned. Much thought is now going into decommissioning
planning to devise procedures which will minimise the environmental effects
without incurring excessive cost. Steel platforms may be cut off to an agreed depth
below sea level or toppled over in deep waters, whereas concrete structures may be
refloated, towed away and sunk in the deep ocean. Pipelines may be flushed and left
in place. In shallow tropical waters opportunities may exist to use decommissioned
platforms and jackets as artificial reefs in a designated offshore area.
Management of decommissioning costs is an issue that most companies have to
face at some time. 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