Steve Kirby on reducing oil and gas decommissioning costs
Following his piece on estimating oil and gas decommissioning costs in April, Steve Kirby looks at ways to reduce them.
Tackling the cost of well abandonment
In the current low-price environment, oil companies will look at options to improve their balance sheets. One option is to reduce their current liabilities by decommissioning sub-economic fields. By one estimate, there will be 40 cessation of production announcements in the UK North Sea in 2021.
The expected spend on abandoning 1,200 wells, as part of the decommissioning of offshore fields in the UK sector of the North Sea, is expected to be around £7.7bln over the next 10 years. In the Norwegian sector, 284 wells will be abandoned in this period. It is worth examining what options are available to try to minimise cost.
UK legislation requires all well activities to consider the whole lifecycle of a well. The key to simple well abandonment lies in not only the original design of the well but also its subsequent modifications. The installation of downhole gauges, with associated cables, will complicate the plugging of the well, increasing time and cost. Historically, the whole life cost benefit of such equipment has rarely been considered. One major North Sea operator did consider that engineers should include an outline abandonment plan as an adjunct to every well design or modification programme as a test of this issue.
Successful well abandonment projects require significant research and preplanning. For major platform decommissioning, the wells expertise needs to be brought into the project team at least two or even three years before the project begins.
Good well records are fundamental. Unfortunately, this was rarely a major consideration, either – all too often, it is easier to discover how much was spent on supply vessels rather than the actual height of cement in the annulus of the production casing. Similarly, during the planning phase, the wells team must physically investigate the wells to confirm access into the well and to the producing formation. Often, scale build-up in the production tubing may not affect production but will restrict access.
The late life strategy adopted by the operator is very important. There is a temptation to reduce costs in this phase, especially on routine maintenance. In a recent field decommissioning project, on average, just under one-third of the time on each well was spent re-entering the well and establishing barriers for this reason. The option to continue production from the field while carrying out the well abandonment should be carefully considered, as restricted access to the production system for fluid disposal may cause a lot of downtime and cost for the abandonment team.
The planning of any well abandonment needs to be thorough and must include consideration of all issues that may cause a problem – contingency planning is as essential as primary planning. The approach to well abandonment is fundamentally different to that for drilling a well. In drilling, the objective is to go from point A on the surface to point B in the reservoir. If there are significant problems, the drillers always have the ultimate option to plug the well bore and then side-track, or even respud the well to achieve the objective. This is not an option in well abandonment. A key lesson is to stop when coming to the end of preplanned contingencies – the well should be made safe and activity moved to other wells while options are reviewed and new plans made.
The approach to the abandonment project needs to be carefully considered. An appropriate contracting strategy for the project can lead to important cost benefits.
In drilling, services are mobilised and demobilised as required. This significant cost can be mitigated by adopting a phased programme – such as plugging all reservoirs, then all well bores – so the required equipment and personnel for each phase is only mobilised once. This also requires renegotiation of contracts away from the drilling model since equipment and personnel utilisation will be greater.
Similarly, in drilling, the staff provide a specialist service. If applied to well abandonment, this would lead to a major pressure on accommodation. A solution is to contract multiskilled crews able to operate a range of services. This reduces personnel requirements and produces staff with a much broader skill set.
On the issue of personnel, it is important to maintain continuity to build learning, knowledge and team ethos. It is common to contract services on the explicit understanding that personnel will be dedicated to the project and not available to work on other locations. This approach is popular, giving a good routine and stability for the immediate future.
There is not going to be a silver bullet that will dramatically reduce the cost of well decommissioning – if anything, the current cost estimates are optimistic. However, a number of recent projects have demonstrated that efficient and effective planning and management of the process can control costs.
Decommissioning will be a significant business in the future and, with low activity levels, perhaps now is a good time for oil companies and service specialists to use ‘excess’ staff to plan for this work, rather than losing expertise through lay-offs.
This process in itself will not reduce well abandonment costs but will greatly assist in managing expectations.
Steve Kirby recently retired after a 35-year career in the oil industry, principally in drilling engineering. Steve first became involved in well decommissioning in 1994. Working for BP, he managed a number of programmes plugging suspended subsea exploration wells from well intervention vessels (LWIV) and was Well Engineer on the abandonment of the Donan field – a ‘world first’, using an LWIV. He was Well Engineer for the North West Hutton decommissioning project. After BP, Steve worked as a Consulting Engineer on abandonment projects and provided input for several Decommissioning Cost Provision Deeds. Steve worked as Wells Advisor with Oil & Gas UK, contributing to its range of published guidelines.