A study for the Bureau of Safety and Environmental  (BSEE). Decommissioning cost update for Pacific OCS Region Facilities

Abstract

From the Executive Summary: “This report describes the engineering assumptions and methodologies that were used in developing the cost estimates for decommissioning POCSR [Pacific OCS Region] oil and gas facilities and presents a summary of the costs for each phase of the decommissioning process. For this study, an assumption is defined as an inference accepted as truth based on over 25 years of decommissioning experience, common industry practice, market evaluation, and specific project information. Assumptions are made to streamline the estimation process allowing focus to be on quality estimation rather than defining unknowns. Volume 2 of the report provides detailed information showing how the costs were estimated.

As of 2014, only seven small structures have been decommissioned. All structures decommissioned were located in California State waters. The most recent decommissioning project occurred in 1996 when Chevron removed Platforms Hope, Heidi, Hilda, and Hazel. The four platforms were located in water depths ranging from 100 to 140 feet with a combined weight of 12,000 tons. In a news release dated April 17, 1996, Chevron reported that the cost of the final phase of dismantling and removing the four platforms was approximately $19 million. This cost did not include the costs to permanently plug and abandon the 134 wells on the platforms. Local media coverage and industry journal articles reported that the total project cost ranged between $35 million and $40 million.

This study reviewed the decommissioning of the POCSR oil and gas facilities and developed benchmark costs for decommissioning the facilities using conventional technology. The report provides a cost assessment based on POCSR operations and current market conditions, including the availability and capability of derrick barges (DB’s) in the region (west coast of U.S.), support vessel services, well plugging and abandonment services, abrasive, mechanical and explosive cutting services, disposal options, and site clearance services. When local/regional decommissioning services were not readily available, these services were estimated based on mobilization and demobilization cost, day-rate cost of the services, spread costs for the operations.

The specific tasks in this study include: reviewing and updating the decommissioning scenarios for OCS platforms, reviewing and updating the engineering cost assumptions and methodologies, and reviewing and updating the costs for each phase of the decommissioning process. This report covers operator compliance with OCS oil and gas regulations (30 CFR 550 and 556) for permanent plugging of wells; removal of well conductors and platform jackets to 15 feet below the mud-line; decommissioning and removal of pipelines and power cables; decommissioning and removal of platform decks and jackets; site clearance; and other lease and permit requirements.

When assessing all major elements and contingencies, viable scenarios were developed where the POCSR decommissioning operations are divided into six projects. The six projects were based on the company operators/ownership, third party agreements and working seasons. Each project is comprised of between 2 and 6 platforms that will be decommissioned together to distribute the high cost of mobilizing/demobilizing DB’s from Asia. The sequence and timing of the projects could change due to economic, technological and other factors. The estimated costs are broken down into the following phases of the decommissioning process: Project Management, Engineering and Planning, Permitting and Regulatory Compliance, Platform Preparation, Well Plugging and Abandonment, Conductor Removal, Pipeline and Power Cable Decommissioning, Mobilization and Demobilization of DB’s, Platform Removal, Materials Disposal, and Site Clearance.”