Cost and environmental impact estimation methodology and potential impact factors in offshore oil and gas platform decommissioning: A review

Highlights

• Identified significance of cost and environmental impact estimation of decommissioning.

• Reviewed cost and environmental impact estimation methods of OOGP decommissioning.

• Reviewed OOGP decommissioning factors in six categories.

• Identified the problems of current estimation methods.

• Proposed suggestions to improve estimation accuracy of cost and environmental impact.

Abstract

Platform decommissioning decision making is a major issue as many of the existing offshore oil and gas platforms (OOGPs) require to be decommissioned. The cost and environmental impact are two main criteria for OOGP decommissioning. This paper reviews OOGP decommissioning factors and the current estimation methodologies of decommissioning cost and environmental impact. Six factors are identified: (1) platform types and complexity, (2) decommissioning options, (3) technical approaches, (4) circumstances, (5) regulations, and (6) strategies, followed by a detailed review of the estimation methodologies of cost and environmental impact. Descriptive statistics are common cost estimation, together with standard-based and index-based cost estimations. For environmental impact estimation, qualitative methods like ranking decommissioning options based on expert option, and quantitative methods like emission calculation based on equipment utilization, duty cycles, and emission factors are commonly used. The findings of this paper indicate that current OOGP decommissioning databases are incomplete, leading to inaccurate and subjective decommissioning cost estimation, and incomplete environmental impact estimation. Recommendations include integrating 3D information modeling with cost indexing to estimate cost, and with life cycle assessment to estimate environmental impact. OOGP decommissioning regulations should include strategies and rules for estimation, and formulating a roadmap with a long-term perspective is necessary.

Introduction

Offshore oil and gas platforms (OOGPs) are large structures with functional modules for drilling, extracting, and processing oil and natural gas, and for temporarily storing products before shipping to shore for refining and marketing. Over 7000 offshore oil and gas installations and platforms are located on continental shelves around the world (Parente et al., 2006, USEPA, 2009). The North Sea, Gulf of Mexico (GOM), Western Coast of Australia, and West Coast of the US are the main areas where OOGPs are installed. For example, there are around 4000 structures used for oil and gas production located at the federally regulated Outer Continental Shelf (OCS) of the GOM (Kaiser, 2006; Kaiser and Pulsipher, 2003). Each OOGP usually has a lifetime of 30 to 40 years, and once the income from the hydrocarbons being produced by an OOGP cannot cover the cost of operation, the OOGP becomes a liability instead of an asset and is then considered as a candidate target for decommissioning.

Around the world, some OOGPs have been decommissioned, some are under decommissioning, and others are to be decommissioned. For example, southern California has twenty-seven OOGPs to be decommissioned by 2030 (Henrion et al., 2015). Between 2010 and 2014, the OOGP decommissioning cost in the Gulf of Mexico was around USD $9 billion, regularly exceeding USD $1.5 billion per year. Most of the 470 offshore installations in the North Sea's UK Continental Shelf, including offshore platforms, require decommissioning over the next 30 years as mentioned in the Oil and Gas Economic Report (2013). Malaysia has approximately 300 oil platforms, many of which need to be decommissioned (Zawawi et al., 2012). Since there will be a significant trend in OOGP decommissioning in the coming decades, the market for OOGP decommissioning is huge, and estimating the cost and environmental impact of OOGP decommissioning is meaningful and necessary.

OOGP decommissioning trends, including platform types and regions where platforms are located, were studied by Anthony et al. (2000), and they found that the offshore infrastructures in Australia were developed later compared to the GOM and the North Sea (Chandler et al., 2017). It was also found that each region had its own preferred OOGP decommissioning option. For example, the rig-to-reef (RTR) option is common in the GOM while in the North Sea, a complete removal is the preferred option. Athanassopoulos et al. (1999) also found the same result showing differences of OOGP decommissioning in different regions. Although OOGP decommissioning options may vary by region, the general decommissioning processes are similar, and a well-developed program is required to decommission an OOGP. Additionally, OOGP decommissioning involves hazardous factors in a series of operational activities related to various equipment, facilities, materials, workpieces and organizational measures. As accidents happen, e.g. Piper Alpha accident in the North Sea in 1988 (Paté-Cornell, 1993), the overall risk assessment of general processes, including the possibility analysis of risk, possible injuries after accidents and the severity of their injuries, have been conducted by the stakeholders. According to the OOGP decommissioning plan in CFD1-6 oilfield, the Analytic Hierarchy Process (AHP) was applied to analyze and evaluate the safety status, which reduces the arbitrariness in evaluations and avoids the occurrence of accidents (Tian, 2015). However, due to the complexity and diversity of the safety evaluation of the decommissioning process, the assessment could be a combination of multiple methods (Paté-Cornell, 1990).

OOGP decommissioning projects are usually complicated and high-cost. Therefore, well-developed decommissioning programs are needed. A decommissioning program usually sets out plans for uninstallations, and describes the detailed methodologies to undertake the work (2013). Accurate estimation of cost can provide good case studies for OOGP decommissioning program development. Although research has been conducted to quantify the decommissioning cost of OOGPs throughout the decommissioning processes, the results showed a big discrepancy between the estimated and actual situations. A cost summary of a number of OOGP decommissioning projects in the North Sea is presented in Table 1. The average actual cost is about 76% more than the estimated cost. The cost of the MCP-01 Decommissioning Programme (2008) installation and the Indefatigable (UKL, 2007) decommissioning projects even exceeded the budget by 189% and 153%, respectively.

In addition to cost estimation, estimation of potential environmental impact is also important to OOGP decommissioning program development because inaccuracy would reduce energy efficiency and increase environmental pollution (TOTAL EPNA, 2003), given that OOGP decommissioning projects usually involve significant amounts of fuel. For example, about 40,000 tons of fuel was consumed in the disposal of the Frigg field facilities (TOTAL EPNA, 2003). Anifowose et al. (2016) defined that “Environmental Impact Assessment (EIA) is a proactive methodical process that investigates and predicts the potential direct, indirect and cumulative impacts of proposed project activities on environmental receptors, ideally from project initiation to decommissioning, and offers mitigation strategies.”. According to this definition, decommissioning is an important stage of EIA for oil and gas projects. Furthermore, Environmental Impact Statement (EIS) from an EIA process is used for reporting of potential environmental impacts and mitigation and management plans. According to Anifowose et al. (2016), the EIA process is a prerequisite for project permits and approvals required by authorities in most countries. A detailed EIS is required for project financing by international financial institutions such as the World Bank and European Bank for Reconstruction, as the environmental due diligence of the stakeholders. Moreover, there are discrepancies often found between estimated and actual environmental impacts. According to Frigg decommissioning program, the energy consumption was 43% higher than the predecited (2250 10³GJ vs 1577 10³GJ), and the total energy impact was 39% higher than initially estimated in the decommissioning program (3306 10³GJ vs 2377 10³GJ) (Total E&P Norge AS, 2011), as listed in Table 2 below. To improve the accuracy of estimation, the prediction could be compared and re-evaluated against the actual perforemnce through Environmental Management Plan (EMP), which was proposed by Anifowose et al. (2016) and Perdicoulis et al. (2012).

Due to the information deviation, inaccurate estimation of the OOGP decommissioning cost and environmental impact affect the OOGP decommissioning option selection. Therefore, it is necessary to study the current estimation methodologies of the OOGP decommissioning cost and environmental impact and try to identify their limitations in order to improve them for better control of both cost and environmental impact. This study reviews decommissioning related factors in current estimation methodologies on both OOGP decommissioning cost and environmental impact, identifies the shortcomings of the current estimation methods, and proposes some recommendations for the estimation improvement.

The outline of this paper is as follows. The collected publications are summarized in Section 2. Section 3 reviews the OOGP decommissioning factors. The estimation methodologies of OOGP decommissioning cost and environmental impact are reviewed and described in Section 4 and in Section 5, respectively. Section 6 then identifies the limitations of current estimation methodologies and related recommendations are proposed. Conclusions are included in Section 7.