7 Steve Kirby Sasok

Well Decommissioning CostWell Decommissioning Cost Estimation

Steve KirbySasok Ltd

DEA(e) Q210 Meeting, 3rd & 4th June 2010, Hamburg

ObjectivesObjectives

Oil & G k d l i ll Oil & Gas UK Workgroup 5 are developing a well decommissioning cost estimation tool.

Why? To provide a simple, auditable and common p p

approach. To assist withTo assist with

accounting liability asset transferasset transfer securitisations

CaveatsCaveats

Not a tool for AFE level estimates it can be made more detailed as COP approachespp

It is aimed at field level assessmentsl f i l ll i not a tool for single well review

It only concerns well decommissioning costsy g it does not consider additional post COP costs

it does not consider well decommissioning it does not consider well decommissioning phasing

UK LegislationUK Legislation

P t l A t 1998 ( d d b th E Bill Petroleum Act 1998 (amended by the Energy Bill2002)

the obligation for decommissioning offshore the obligation for decommissioning offshore infrastructure is on the owners.

includes protection against default on p gdecommissioning.

Companies have to formally assess their d l b l (decommissioning liabilities (asset retirement obligations) as part of normal accounting processA d t i d i i i Accuracy needs to increase as decommissioning date approaches.

Accounting StandardsAccounting Standards

Th t FAS 143 (US) FRS 12 (UK) The most common are FAS 143 (US), FRS 12 (UK) and IAS 37.

Likely costs should be based on Likely costs should be based on: current costs of performing the proposed

abandonment ORabandonment , OR justifiable future costs of performing the proposed

abandonment. The cost estimate may include development of a

completely new technology. if it is supported by sufficient objective evidence.

Cost estimates are projected to the date of COP

Cost of Well AbandonmentCost of Well Abandonment

The cost of well abandonment depends on a number of factors: Abandonment Complexity of the well

Location of well (platform subsea land) Location of well (platform, subsea, land) Duration of operations Rig rate / Spread rate

GuidelinesGuidelines

hi id li ll i f ll This guideline proposes allocation of wells according to two factors: Abandonment complexity

Abandonment ComplexityTYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4

No work required Simple well:

Rigless Complex well:

Rigless Simple well:

Rig-based Complex well:

Rig-based

P&A Phases

well P&A operations occur in several phases

P&A PhasesPhase Description

1 Reservoi r abandonment 2 Intermediate hole section2 Intermediate hole section3 Surface casing/conductor/wellhead

Abandonment ComplexityMatrix

TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work requ ired

Simple well; Rigless

Comp lex well Rig less

Simple well Rig-b ased

Complex well Rig-based

Well Complexity

Platform Well(e g. wireline

and pumping) (eg. tubing

integrity issues, CT, HW U)

(eg. pu ll tubing required)

(eg. poor access, poor cement,

pullin g casings, cement repairs)

1 R i b d t

Platform Well

1 Reservoir abandonme nt

2 Int ermediate hole section

3 Surface casing/conductor/wellheadPh

a

s

e

W ll C l iTYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4

No work requ ired

Simple well; Rigless

Comp lex well Rig less

Simple well Rig-b ased

Complex well Rig-based

Subsea Well

Well Complexity

(eg. LWIV, wire line and

pumping, riserless)

(eg. HD-W IV, WL/pu mping /CT,

riser)

(eg. pu ll tubing required)

(eg. poor access, poor cement,

pullin g casings, cement repairs)

1 Reservoir abandonme nt1 Reservoir abandonme nt2 Int ermediate hole section3 Surface casing/conductor/wellhead

P

h

a

s

e

Example WellsExample Wells

A l tf ll t b b d d th i ith A platform well, to be abandoned across the reservoir with CT , then intermediate P&A using a rig & no conductor to be removed, would be categorised as TYPE PL 2/3/0

TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work r equ ired

Sim ple well ; R ig les s

Com plex wel l R ig less

S im ple wel l R ig-bas ed

Com plex wel l R ig-bas ed

1 Res ervoi r abandonm ent

Well Complexity

Platfo rm Well

1 Res ervoi r abandonm ent x2 Interm edia te hole s ection x3 S ur face cas ing/conduc tor/wellhead xP

h

a

s

e

A platform well already abandoned across the reservoir to A platform well, already abandoned across the reservoir, to have intermediate and surface P&A using rigless W/L & pumping services would be assigned as TYPE PL 0/1/1

TYPE 0 TYPE 1 TYPE 2 TYPE 3 TYPE 4No work r equi red

Sim ple well ; R ig les s

Com plex wel l R ig less

S im ple wel l R ig-bas ed

Com plex wel l R ig-bas ed

Well Complexity

Platfo rm Well

1 Res ervoi r abandonm ent x2 Interm ediate hole s ection x3 S ur face cas ing/conduc tor/wellhead xP

h

a

s

e

Well Abandonment Complexity Categorisation

Si l P Simple Process Does the well contain downhole gauges?

Does the well contain have ESP completion? Does the well contain have ESP completion? Is the well a multi-lateral? Any anomalies in construction? Any anomalies in construction? Any anomalies in operation?

High level reviewHigh level review more detailed as COP approaches

Make broad & documented assumptionsMake broad & documented assumptions more detailed as COP approaches

Duration of OperationsDuration of Operations

Benchmarking internal and external data sources RushmoreReviews well abandonment database

NPT / WOW NPT / WOW benchmarking estimates of NPT and WOW. establish degree of skew and determine P10, P50,

P90 and Mean.

inclusion / exclusion and assumptions to be stated

Phase Durations (example)Phase Durations (example)

Platform Well (Days)Type 1 Simple

Type 2 Complex

Type 3 Simple

Type 4 ComplexPlatform Well (Days) Simple

RiglessComplex Rigless

Simple Rig

Complex Rig

e

1 Reservoir Abandonment 3 5 3 7

P

h

a

s

e

2 Intermediate Hole Section 3 6 5 9

3 Surface casing/conductor/ wellhead 2 2 4 8

Time build up and assumptions to be stated

Time build up and assumptions to be stated

Skew DistributionSkew DistributionOverall Time Distribution

0100.00 300.00 500.00 700.00 900.00 1100.00 1300.00

Hours

0.1

0.2

0.3Time

P10

0.4

0.5

0.6

P

e

r

c

e

n

t

i

l

e P50

P90

Mean

0.7

0.8

0.9

1

The P50 value will be ~ 80% of the Mean or single duration. The P10 value will be ~60% of the Mean or single duration.

1

The P90 value will be ~150% of the Mean or single duration.

Equipment SpreadEquipment Spread

Site/Installation t

Type 1 Simple Rigless

Type 2 Complex Type 3 Simple Rig

Type 4 Complex Rigtype Simple Rigless

pRigless Simple Rig Complex Rig

Platform fixed rig Wireline, Pump spreadCT or HWU

spread Modular Rig

spreadModular Rig

spread

Site/Installation type (nominal currency per day)


Type 2 Complex Rigless

Type 3 Simple Rig

Type 4 Complex Rig

Platform fixed rig 25 000 35 000 55 000 55 000

Platform fixed rig 25,000 35,000 55,000 55,000

Equipment Spread can be used to directly determine Rig Rate / Spread Rate

Cost build up and assumptions to be stated

Equipment SpreadEquipment Spread

Site/Installation type



Type 3 Simple Rig

Type 4 Complex Rig

O h l ti Wireline Pump CT or HWU Ri /h i t Ri /h i tOnshore location Wireline, Pump spreadCT or HWU

spread Rig/hoist Rig/hoist

Platform modular rig

Wireline, Pump spread

CT or HWU spread

Modular Rig spread

Modular Rig spread

Pl tf fi d i Wireline, Pump CT or HWU Platform Rig Platform RigPlatform fixed rig Wireline, Pump spreadCT or HWU

spreadPlatform Rig

spreadPlatform Rig

spread

Platform jack-up Wireline, Pump spreadCT or HWU

spread Jack-up spread Jack-up spread

Subsea LWIV Spread HD LWIV Semi spread Semi spreadp p p

Subsea - deep water Semi/drillship spreadSemi/drillship

spreadSemi/drillship

spreadSemi/dril lship

spread

Equipment Spread can be used to directly determine Rig Rate / Spread Rate

Spread Rate (example)Spread Rate (example) Equipment Spread can be used to directly determine Equipment Spread can be used to directly determine

Rig Rate / Spread Rate

Site/Installation type (nominal currency per day)



Type 3 Simple Rig

Type 4 Complex Rig

Onshore location 5,000 10,000 35,000 35,000 Platform modular rig 25,000 35,000 55,000 55,000Platform fixed rig 25,000 35,000 55,000 55,000 Platform jack-up 70,000 90,000 110,000 110,000 Subsea 140,000 170,000 220,000 220,000


Subsea - Deep water 300,000 300,000 300,000 300,000


Well CostWell Cost

A l tf ll t b b d d th i ith CT A platform well, to be abandoned across the reservoir with CT then intermediate P&A using a rig & no conductor to be removed, would be categorised as TYPE PL 2/3/0

Platform Well (Days) Type 1 Simple Rigless


Type 3 Simple

Rig

Type 4 Complex

Rig

1 Reservoir Abandonment 3 5 3 7

P

h

a

s

e

2 Intermediate Hole Section 3 6 5 9

3 Surface casing/conductor/ wellhead 2 2 4 8

Site/Installation type

(nominal currency per day) Type 1

Simple Rigless Type 2

Complex Rigless Type 3

Simple Rig Type 4

Complex Rig

Platform fixed rig 25,000 35,000 55,000 55,000

Abandonment cost =

g

5 days x 35,000 + 5 days x 55,000 = 450,000

Additional Project CostsAdditional Project Costs

Need to recognise project costs / overheads

mobilisation / demobilisationproject engineering project engineering

rig refurbishment

Cost build up and assumptions to be stated Cost build up and assumptions to be stated

Discount EffectDiscount Effect

ll Well cost = 450,000 Discount @ 4% pa for 10 years = 299,174

Well cost = 550,000 Discount @ 4% pa for 10 years = 365,657Discount @ 4% pa for 10 years 365,657

Delta is 66,483F 22 ll j h d l i 1 5 illi For a 22 well project the delta is ~1.5 million

Overall project cost 300 million (Miller project) Project delta 0.5%

SummarySummary

Cl if ll b d t l it Classify wells on abandonment complexity criteria and assumptions to be stated

D t i ti i Determine timings inclusions / exclusions assumptions to be stated

d Determine spread rate equipment spread can be used to directly determine

d tspread rate cost build up and assumptions to be stated

Determine project cost Determine project cost recognise mobilisation / refurbishment costs

QuestionsQuestions

Is it workable? What are the holes in the proposal?What are the holes in the proposal? What could we do better?

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7 Steve Kirby Sasok