The Re-development Potential of Offshore Structures Destroyed by Hurricanes


Figure 1: Structures Destroyed by Hurricane Gustav and Hurricane-force Wind Swath


Figure 3: Model Rendition of a Structure Destroyed by a Hurricane Lying Horizontally on the Seafloor


Note the bent conductors at the mudline. Source: Twachtman Synder and Byrd, Inc. (now ProServe). Figure 4: Hurricane-destroyed Platform in the East Cameron Area


Figure 2: Structures Destroyed by Hurricane Ike and Hurricane-force Wind Swath


Source: Minerals Management Service.


Table 1: Inventory of Structures Destroyed by Hurricanes Gustav and Ike by Production and Structure Type


Production Type Caisson Oil


Gas Total


1 1 2


Well Protector Fixed Platform 2 2 4


14 31 45


Total 17 34 51


can be brought online at higher rates of production to help offset the capital expenditure. Assets capable of producing at high rates or those associated with significant levels of remaining reserves are more likely to achieve the economic criteria than assets with low production rates and/or fewer reserves. If the estimated value of future production from a destroyed asset is less than the expected clean-up and re-development cost, the decision will likely be to postpone re-development or to decommission the asset. If the operator chooses not to re-develop, it may seek a buyer for the asset contingent upon the federal government allowing the lease transfer. A rational operator would not spend more than the estimated value of remaining reserves to replace a destroyed structure or repair a damaged structure.


Revenue and Cost Uncertainty


The decision to repair, replace or decommission damaged and destroyed infrastructure is often difficult because of the uncertainty


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involved in estimation. The return on investment that an owner would expect to receive depends on future production rates and hydrocarbon prices, as well as the cost to clean up and re-develop the site. Under normal circumstances, re-development decisions are no different from an initial development decision, but in the case of destroyed or severely damaged assets there are additional complications and uncertainties in terms of the procedures and costs that need to be taken into account.


Impact Statistics


In the final list released by the MMS, 60 structures were reported to have been destroyed by Hurricanes Gustav and Ike. One-third of the structures (20) were idle, meaning that they were not producing for at least one year prior to the time of the hurricane passage. Nine of the 60 structures did not produce hydrocarbons during their lifetime and are classified as auxiliary (see Table 1). Gas structures producing from fixed platforms were the most commonly destroyed structure and about 60% of the inventory was 25 years old or older. A list of the destroyed structures is shown in Table 2 by operator, location (area and block), structure type, production type and water depth.


Structures with no producing wells in 2007 are classified as idle as none of these structures was producing in 2006. The time since last production is called idle age, and for the collection of destroyed idle structures, the


EXPLORATION & PRODUCTION – VOLUME 9 ISSUE 1


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