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Well Abandonment and Decommissioning – Current Issues
Figure 3: Platform Decommissioning
Regulatory compliance has been a driving force in encouraging major
and independent operators in the US to pursue decommissioning
projects on a continual basis; however, regulatory pressure in itself is
not always sufficient to ensure that decommissioning plans are
executed within the prescribed time period. It is anticipated that
regulatory pressures in the US could increase further to help achieve
one of the goals of the Obama administration’s American Recovery and
Reinvestment Plan, which is “to save or create over three million jobs
while investing in priorities like healthcare, energy, and education that
will jumpstart economic growth”.
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This goal could be accomplished in
part by the US Government directing its regulatory agencies such as the
MMS, the agency that is responsible for decommissioning activities in
the US Outer Continental Shelf (OCS), to apply pressure on operators
to adhere to abandonment and decommissioning schedules prescribed
by law. This action would act to sustain, if not create, jobs in the
industry’s service sector. However, it should be recognised that any
regulatory pressure applied by the US Government would have little
increase to the cost of plugging and decommissioning wells, pipelines effect outside of that country, especially on the world’s national oil
and platform structures that have been knocked to the ocean floor. The companies (NOCs), which may have fewer restrictions and may even be
cost of abandoning and decommissioning a downer platform is encouraged by their governments to reduce spending on non-
estimated to range between five and 50 times the cost of a production activities if oil and gas commodity prices decline to a point
conventional abandonment.
3
The second cost increase that affects all at which government income is significantly reduced.
operators is the cost of insurance. It was estimated by Dr Robert
Hartwig of the Insurance Information Institute that Hurricanes Katrina Well plugging and infrastructure decommissioning have been moving to
and Rita caused over US$11.6 billion in total losses to the offshore the forefront of concern in many oil- and gas-producing countries, despite
energy industry, and cost energy insurers at least US$5 billion in claim rising costs. Some countries such as the US, Norway, The Netherlands and
payments.
8
The cost of damage caused by Hurricanes Gustav and Ike the UK have been decommissioning ageing infrastructure for years under
has yet to be fully determined. As a consequence of the high cost of rigid environmental and legal guidelines. Other countries with fewer years
hurricane damage claims, insurance companies underwriting well and of oil and gas production, such as Thailand, have begun drafting
platform assets have either significantly raised underwriting premiums decommissioning regulations in this decade.
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All operators seem to
or have abandoned underwriting oil and gas assets altogether. Lease recognise the potential environmental impact and rising costs associated
operators are now faced with paying much higher insurance premiums, with delaying decommissioning obligations, but they must also balance
assuming greater risk by paying higher insurance deductibles – these liabilities against expected earnings and profit objectives.
sometimes in the US$100 million range – or assuming all risk by self-
insuring at least a portion of their producing and non-producing assets. Mitigating Decommissioning Costs
All of these options serve to increase the operator’s liabilities on their Knowledge of current decommissioning issues is important to understand
balance sheet. This increased liability requires prudent managers to the willingness of oil and gas producers to increase, decrease or sustain
plan and execute well abandonment and decommissioning abandonment and decommissioning programmes, as all of the key issues
programmes on a continuous basis in order to mitigate the potential drive up the cost to the lease operators responsible for decommissioning
for catastrophic loss to their company and to continue the process end-of-life assets. Therefore, decommissioning service providers would be
independently of other influencing factors. remiss if they failed to offer cost-saving options to lease operators (their
customers) that would reduce, instead of increase, the cost of
Regulatory Impact decommissioning. TETRA Technologies, Inc., for example, offers a
Although wells that have been severely damaged by natural disasters multitude of options to help reduce the cost of well abandonments, one
have not yet caused any major environmental damage in the hard- of which includes providing a rigless well abandonment solution that not
hit GOM region, the potential for significant damage to the only eliminates the cost of a rig or hydraulic workover unit, but usually also
environment from any oil and/or gas well and its associated reduces the time required to complete the well plugging process. Project
infrastructure does exist. Under US law, regulators could classify all engineering and project management are other available service options
non-producing wells as an environmental hazard and force lease that serve to relieve operators’ personnel resources of the detailed work
operators to immediately plug them if the potential for commercial required for researching well histories, developing current and proposed
production cannot be demonstrated. The United States Code of well schematics, engineering and developing detailed plugging
Federal Regulations (§250.1710) requires that all wells on a lease be procedures, preparing pre-work and post-work regulatory documents and
permanently plugged within one year after the lease terminates, and assisting with or performing the management and oversight of the entire
another code (§250.1711) requires the Minerals Management decommissioning process. Once the wells are plugged, the next stages
Services (MMS) to order the permanent plugging of a well if that of decommissioning – including casing sectioning, diving services for
well poses a hazard to safety or the environment, or is not useful for pipeline flushing and terminating, structural engineering for safe platform
lease operations and is not capable of oil, gas or sulphur production structure removal, heavy lift vessels to complete the removal (see Figure 3)
in paying quantities.
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and the arranging of trawl services to ensure full site clearance – can all
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EXPLORATION & PRODUCTION – VOLUME 7 ISSUE 1
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