Decommissioning Optimization in a Multi-Operator Landscape

Abstract

Abstract The oil and gas industry has brought significant benefits to the economy in the Netherlands. Not only from onshore fields such as Groningen, but also from the Dutch part of the Southern North Sea. Today about 700 offshore wells and 150 platforms still generate some EUR 2-3 billion revenues annually. In the coming decades production volumes and revenues will decrease while decommissioning and its associated costs are imminent. Total offshore decommissioning expenditures (abex) are significant, currently estimated at more than EUR 5 billion. This equals one-third of the total future offshore revenues. EBN, the Dutch State participant in all offshore gas assets is responsible for about 40% of the decommissioning costs. EBN is investigating opportunities to reduce these costs without compromising HSE. Future decommissioning activities in the Dutch offshore are spread across three decades and 11 operators. An optimization model has been developed to simulate the total decommissioning expenditures. The model consists of the complete Dutch offshore production network including wells, facilities, pipeline connections, gas production forecasts, operating expenditures (opex) and abex. Optimization is done on the total pre-tax Net Present Value (NPV). The model optimizes the timing of decommissioning of the offshore platforms and determines whether to produce at an annual loss while postponing decommissioning or to select early retirement. Two types of abex savings are implemented in the model: (A) capture and apply learnings from well abandonments within campaigns and (B) create large contract volumes (economies of scale) through joint decommissioning campaigns. Several strategies may be beneficial, ranging from no or occasional collaboration to full collaboration strategies. This paper discusses the concepts applied and the results of several scenarios: (1) the reference case, (2) optimization within individual operator portfolios, (3) optimization of selected operator pairs, (4) cross operator collaboration, (5) all decommissioning by one decommissioning company. The results indicate that abex reductions could exceed 40% when all decommissioning activities are operated by a single dedicated decommissioning company. The model presented is the first multi-operator offshore network optimization model considering decommissioning in the Netherlands. Input and boundary conditions are based on parameters which have been verified with a number of Dutch E&P operators.