To extend or end?

Operators in mature basins are facing decisions about whether to invest in life extension projects or bite the decommissioning bullet. Elaine Maslin sets out the detail.

Keeping platforms going. Work on Piper Bravo by Oxifree. Photo from Oxifree.

The decision to decommission a platform, or to keep it running isn’t a clear cut one, especially in today’s uncertain oil price environment.

Yet, not making that decision can make the situation worse, either resulting in a costly deferral period or missed opportunities to tap remaining resources. The issues around such decisions were discussed at EXT:end North Sea Late Life Summit and Exhibition, in Aberdeen, mid-September.

John Warrender has had to assess these options closely. He’s managing director of Addax Petroleum, a role through which he’s been involved in parent company Sinopec’s share in the former Talisman North Sea business (now 50-50 owned by Repsol and Sinopec). Talisman North Sea, now Repsol Sinopec Resources UK, has one of the most complex and largest set of late-life infrastructure in the UK with 10 offshore assets, two floating production facilities, plus an onshore terminal at Flotta, Orkney.

Nearly half the assets have been producing since the 1970s, including Auk, which started up in 1975, Montrose in 1976, and Claymore in 1977. The rest are from the 1980s, including Buchan Alpha, Tartan, Fulmar, and Clyde, with Arbroath and Piper Bravo the newest in the fleet, having started production in 1990 and 1993, respectively.

Warrender says to extend life or end it has been a topic for a number of years. It’s “a balance of lean late-life with decommissioning,” he says. “When I first got involved (at Talisman), low cost operations and deferral for a time was the right approach, but in time that becomes obsolete and it was to Talisman’s cost. It is not binary. Life is a lot more complex than that.”

The task of gathering disparate and independent information needed to make decisions and decide corporate policy, in a changing fiscal (tax) regime, is underestimated, he says.

Part of the problem is around actually making a firm decision over policy – to be a late-life/hub operator, i.e. a business development opportunity, or to go into decommissioning and gain an early mover advantage in this market. If decommissioning becomes the focus, it needs a different operating policy, he says. “In some ways, decommissioning is less complex [as an activity] but it demands more of the organization. It will be done in campaigns, requiring collaboration and integration, and that will be the challenge.”

But, even with late-life operating models, where decommissioning is deferred, companies can fail to make the most of what they have, simply focusing on deferral rather than opportunities, he says. “I’m constantly surprised companies don’t evaluate properly the life extension possibilities, i.e. subsurface resources potential and not just their own but their neighbors,” he says. “In my experience, this is one of the sticking points, annually fluctuating from decommissioning to extend, with too much emphasis on justifying extend than actually quantifying the opportunities.”

It’s not an easy task, however. The shift in how operators have to manage their assets – and change their organization – as they move to cessation of production (COP), and how quickly this can happen, was also highlighted at the event.

Innes Lawtie, now structural technical authority at Statoil, says when he joined the Armada asset team (under BG Group) it was a growth asset, but within 18 months it was looking at a potential COP date. A delegate in the audience, currently working for BG Group (part of Shell), says as Armada moved towards COP, it had been through a period of review around asset integrity, including bringing the function back in-house, specifying the work a contractor now does, instead of contracting the whole function, including decisions, to the contractor.

But, such work can be seen as offering little value. “The biggest battle is getting time to get inspections done,” said the delegate, “as it’s seen as the lowest value discipline within the organization.”

Hugh Borland, lead structural engineer for BP, says that thorough knowledge and understanding of the asset would enable more critical decisions to be made, but that the industry wasn’t good at data management. “We (as an industry) are so poor at it,” he says. Reports are stored on single hard drives, and not available to the enterprise. “A study has been done, someone has thought about it, but there is a huge inefficiency.”