The Economics of Late-Life Field Production in the North Sea

Abstract

Abstract The major North Sea oilfields, discovered during the 1970's, will be well into their decline within the next ten years. During this period operators will be faced with a number of decisions concerning workover, infill drilling, artificial lift, EOR and, ultimately, abandonment. This paper places a number of factors against an economic background and highlights problems that may be encountered in justification of various actions proposed to recover additional reserves. The work also addresses the problems of field abandonment. Results show that, in the U.K. sector, the form of the PRT allowances, together with the scale of abandonment cost to both government and operator, will encourage the delay of abandonment for as long as possible. This, together with the awareness that net income over the final years will be dedicated solely to abandonment, must strongly colour companies approach to the last years of production Introduction The next decade will see the majority of North Sea oilfields moving into the decline phase of their production, with the prospect of field abandonment becoming a reality for many. In this environment, the economic view changes significantly from that taken when field development was considered or during the early part of its life. We present here a number of part of its life. We present here a number of factors that must be considered in the field later life and the economic impact of decisions associated with these factors. The paper considers only the U.K. sector of the North Sea. 1. FACTORS AFFECTING LATE LIFE ECONOMICS The main aim in the late life of a field is the same as at other times - namely to obtain maximum economic production. Nevertheless the end must come, and the cost of abandonment and the value of remaining reserves become critical factors. Economic analysis of late life field is dominated by four problems:The need to improve performance by accelerated production or by increased recovery.The need to keep operating cost to a minimum.The effect of varying oil prices.The need to consider abandonment costs. 1.1 Improving Field Life Field performance can be improved in a number of ways - by well workover, infill drilling, enhanced oil recovery or improvement in facilities. All options require an increase in capital and operating costs in order to give an additional income or acceleration in income. In addition there is a need to consider completing satellite fields that can utilise production facilities of existing fields before they cease production. Contributions by satellites can often production. Contributions by satellites can often extend the life and recovery from declining fields. Such satellite development is, of course, a variation of the benefits brought by infill drilling or workover - namely that they either accelerate production or increase recovery. Therefore in economic terms they present similar questions. P. 159