Offshore Platform Decommissioning – Tales from the Gulf of Mexico a report by Robert C Byrd Senior Vice President, Consulting, Proserv Offshore
The environment for offshore platform decommissioning in the Gulf of Mexico has changed significantly since hurricanes Katrina and Rita in 2005. That devastating storm season showed the vulnerability of the industry to the period of increased hurricane intensity that we have apparently entered. Hurricanes Gustav and Ike in 2008 added an exclamation point to the issue of decommissioning the older and less productive assets. It is unlikely that the Gulf of Mexico decommissioning environment will ever return to its pre-2005 condition for a variety of reasons. This article discusses the impact of the hurricanes on decommissioning procedures and costs. It then looks at what the future challenges may be in the Gulf of Mexico.
A Brief History of Decommissioning Costs As with any form of construction, Gulf of Mexico decommissioning costs have always fluctuated with the conditions in the market place. Proserv Offshore (formerly Twachtman Snyder & Byrd) has decommissioning cost records going back to the early 1990s based on the removal of several hundred offshore platforms. It is very difficult to generalise about decommissioning costs. Every project is different and in any given year the mix of platform types can vary widely.
Figure 1 shows the trend for ‘gross’ decommissioning cost per ton in the Gulf of Mexico for the period from 1990 through to the end of 2008 season. Gross cost is defined as the total cost of decommissioning projects in a given season – excluding well plugging and abandonment and pipelines – divided by the total tonnage of
The past few years have set the stage for a critical review of general decommissioning policy by the MMS, with particular attention being paid to the expanding deepwater developments in the Gulf of Mexico.
material removed. Hurricane-damaged structures are also excluded. As noted, the mix of project types varies widely from year to year and no effort to normalise the results has been made. It is also worth noting that the number of structures removed in a given year also varies widely in this cost database, from as few as five to as many as 39, with an average of approximately 20 per year. We make no claim that this is a particularly scientific or reliable tracking of decommissioning cost. Nevertheless, the trend is interesting to observe and probably reflects the cost of decommissioning services reasonably well.
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Figure 1: A History of Gross Decommissioning Costs in the Gulf of Mexico
1,000 1,200 1,400 1,600 1,800 2,000
200 400 600 800
0
1990 1992 1994 1996 1998 2000 Year
Decommissioning cost
2002 2004 2006 2008 Polynomial trend line
In these data, the industry saw average annual inflation of about 7% over the 18-year period, with significant downward adjustments in cost in 1998–2000 and again in 2003–2005, followed by a sharp upturn in cost after the hurricanes of 2005. It remains to be seen whether or not the current costs will hold or if there will be another downward adjustment.
Recent Trends in the Gulf of Mexico
Since 2002, offshore platform removals have exceeded installations, with the exception of 2006. Figure 2 shows removal versus installation trends in the Gulf of Mexico since 2000. The Gulf has seen an average of 112 installations per year versus 132 removals during that period. This trend of more removals than installations will undoubtedly continue on the outer continental shelf.
The data in Figure 2 do not include platforms damaged in the 2004, 2005 and 2008 hurricanes. Proserv Offshore believes that this explains why the trend for removals has decreased since 2004. Much of the focus in the Gulf of Mexico has been on hurricane debris removal since 2005. Figure 3 shows the number of platforms that have been damaged or destroyed during hurricanes since 2004. This has had a strong impact on the normal decommissioning services market. The pressure of increased cost reflected in Figure 1 has no doubt affected the numbers of platforms that have been removed in planned decommissioning since 2004.
Forced Innovation
One very positive aspect of hurricane damage in the Gulf has been the technical innovation that it has forced. The 115 platforms destroyed in the 2005 hurricane season presented the industry with an unprecedented challenge, since these platforms literally disappeared from sight in many cases. Months were spent
© TOUCH BRIEFINGS 2010
Engineering & Construction
Cost (US$)/gross ton
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