2009 11 11 byrd a different approach to decom liability
DESCRIPTION
A candid look at cost risk issues in "turn-key" contracting for hurricane damaged and downed structure removal and well P&A. Provides some review of the history of offshore decommissioning and huricane damage in the Gulf of Mexico. Developed and presentated by Robert C. Byrd, Ph.D., P.E.TRANSCRIPT
Taking on Decommissioning Liability: ATaking on Decommissioning Liability: A different approach to project contracting
P d hPresented to the
6th North Sea Decommissioning SummitNovember 2009November 2009
Presented by
Robert C. Byrd, PhD, PE
Presentation OutlinePresentation Outline
• The Gulf of Mexico Some• The Gulf of Mexico – Some Facts & Historyy
• Decommissioning Experience
• The Project
U.S. Gulf of MexicoU.S. Gulf of Mexico
• 42 million Acres42 million Acres
• 33,600 miles of pipelines1 700 il f i li / t 51,700 miles of new pipelines/year past 5 years
• ~ 4,000 producing platforms1,962 Major, 954 manned
• 30% of US Oil Supply – 1.5 MM BOPD
• 21% of US Natural Gas – 10 BFPD
Active Platforms by Water Depth
34803500
2500
3000
Plat
form
s
1500
2000
of A
ctiv
e P
442500
1000
Num
ber o
47 4 25
0
500N
0 to 200 201 to 400 401 to 800 801 to 1000 Above 1000Water Depth (Meters)
Number of Gulf Of Mexico OCS Platform Installed vs Removed (1942-2008)
225
250
150
175
200
f Pla
tfor
ms
100
125
150
Num
ber o
f
25
50
75
0
25
1940 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Year
Installed Removed
Number of Gulf Of Mexico OCS Platform Installed vs Removed (2000-2008)
200
225
150
175
f Pla
tfor
ms
75
100
125
Num
ber o
f
25
50
75
02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year
Installed Removed
NEWS RELEASE:F R l M 14 2009For Release: May 14, 2009
Proserv Energy Awarded Turnkey GoM Project
Client: St Mary Land & Exploration
Location: Gulf of Mexico, Vermillion Area
Scope of Work: Abandonment and removal ofScope of Work: Abandonment and removal of platform, pipelines and wells destroyed during Hurricane Ike.
Contract Type: Fixed Price – Turnkey
Contract Characteristics:
•Proserv offered asset ownership, however the lease had expired. Therefore, the Operator retained ownership.
•Proserv has risk and responsibilities for planning, project management, and all costs,
•Project execution within MMS approved timelines.
•No recourse except for non-disclosed information.
Objective: Give the operator a risk-free alternative forObjective: Give the operator a risk free alternative for removing non-producing assets, freeing up capital and credit.
A C ?Are we Crazy?
The Answer depends on whether or not we know what we’re doing.
Our Experience:Our Experience:•More than 20 years in
the Gulf of Mexico
•Over 400 Decommissioning Projects Completed
•Strive for fit-for-purpose decommissioning solutions
Decommissioning Cost Estimating:Estimating:
How good are we?
Probability Distribution Function (PDF)
Platform Removal Cost ExperienceActual vs. Estimated
X <= 0.48710.0%
X <= 2.10390.0%
0.7
0.8
Actual vs. Estimated
D t Ch t i ti
0.5
0.6Data CharacteristicsMean = 1.23Mode = 0.924Median = 1.12
0.3
0.4 Function=ExtValue(0.92392, 0.52399)
0 1
0.2Note: PDF based on approximately 40 projects involving approximately 120 structures over a10 year period.
0
0.1
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Actual / Estimated Cost
1 4
PDF of Well P&A Cost Experience
Actual vs. EstimatedX <= 0.765
10.0%X <= 2.600
90.0%
1.2
1.4
Data Characteristics
0 8
1Mean: 1.394Mode: 0.998Median: 1.234
0.6
0.8InvGauss(0.89492, 1.86797) Shift=+0.49924
Note: PDF based on approximately 40 projects
0.2
0.4
Note: PDF based on approximately 40 projects involving approximately 200 wells over a10 year period.
0
0.2
0.5 1 1.5 2 2.5 3 3.5
Actual Cost / Estimated Cost
1800
Historical Offshore Platform Decommissioning Cost in the Gulf of Mexico
1400
1600
1000
1200
s To
n
600
800
ost($
)/Gro
ss
Decom Cost
200
400
Co
Polynomial Trend Line
01990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Wh t b t H iWhat about Hurricane Damage?Damage?
W ’ h d l t f tiWe’ve had a lot of practice.
Hurricane Damage SummaryYear Hurricane # Platforms Effected /
#Damaged / #DestroyedPipeline Incidents
1992 Andrew 700 /65 / 22 480
2002 Lily 800 /17 / 2 120
2004 Ivan 150 / 31 / 7 168
2005 Katrina & Rita
3,050 / 52 /115 542
2008 G t & 2 127 /135 /54 92008 Gustav & Ike
2,127 /135 /54 9
What Changes After Hurricane D ?Damage?
Answer: Everything, except the Regulations (maybe?)g ( y )
Typical Hurricane Katrina DamageTypical Hurricane Katrina Damage
Hurricane Katrina Damage (cont.)Hurricane Katrina Damage (cont.)Hurricane Katrina Damage (cont.)Hurricane Katrina Damage (cont.)
2008 Hurricane Ike Damaged Platforms2008 Hurricane Ike Damaged Platforms
2008 Hurricane Ike Damaged Platforms2008 Hurricane Ike Damaged Platforms
Why give a firm price for a Hurricane Damage (Insurance)Hurricane Damage (Insurance)
Project?
Because we can!
Vermilion 281 A– BeforeVermilion 281 A Before
The Platform – AfterThe Platform After
Scope of Work• The 4 wells will be P&A’ed using rig‐less techniques.
• A waiver not to Pig the pipelines was received from A waiver not to Pig the pipelines was received fromthe MMS
• In‐lieu of pigging, the pipeline will be flushed with p gg g, p pseawater only
• The two pipelines will be abandoned in place
• The deck and equipment will be recovered to the surface, sent to shore and recycled.
Well P&A – Ensco 87Well P&A Ensco 87
Scope of Work• Proserv is pursuing donating the jacket to an established artificial reef site with the Louisiana A tifi i l R f P (LARP)Artificial Reef Program (LARP).
• If the reef plan is not pursued or accepted by the LARP then:LARP then: ‐The jacket will be recovered to the surface, sent to shore and recycled.y
‐A 1,320 radius from the center of the platform will be cleared of debris
DeliverableDeliverable
• Completion Reports as required by MMSCompletion Reports as required by MMS‐Pipeline Abandonment
Well APM‐Well APM
‐Platform Removal
Sit Cl d V ifi ti‐Site Clearance and Verification
• Well access and debris removal will be l d h h llcompleted once the trees are on the wells.
Schedule• Planning – May
• Permitting – May / June• Permitting – May / June
• Equipment & Materials – May / June
• Pipeline Abandonment – July
• Debris Removal / Access to wells – August +
• Well P&A – September ‐ November
• Deck / Jacket Removal – November• Deck / Jacket Removal – November
• Site Clearance & Verification ‐ December
CostCost
• TurnkeyTurnkey
• Milestone payments
l i• Exclusions‐Well Control Issues ( ll i )(pollution)
1
Cumulative Distribution Function of Total Project Cost
0.8
1
P90 = 1.08 Contract $
0.6P60 = Contract $
0.4
P50 = 0.98 Contract $
0.2
P10 = 0 92 Contract $
0
P10 = 0.92 Contract $
St. Mary’s Project SummarySt. Mary s Project Summary
• Fairly distributes Risk/RewardFairly distributes Risk/Reward.
• Offers the Operator financial certainty.
C i i i i• Contract is at a competitive price.
• Offers the Contractor an opportunity to improve returns for a job well done.
• A Win – Win Contract.
Conclusions
C t t d O t b fit f• Contractors and Operators benefit from years of experience.
• Gulf of Mexico conditions allow for accurate calculation of cost and risk.
• Labor and resource availability is predicable.
• Regulatory regime efficient and predicable.g y g p
Questions?