Decommissioning and restoration (D&R) timing: is later always better?
Andrew Duncan A *A Gaffney, Cline & Associates, Singapore.
The APPEA Journal 63 S304-S308 https://doi.org/10.1071/AJ22062
Accepted: 2 March 2023 Published: 11 May 2023
© 2023 The Author(s) (or their employer(s)). Published by CSIRO Publishing on behalf of APPEA.
Abstract
Due to offshore oil and gas field maturity and recent news coverage, decommissioning and restoration costs have received increasing management attention in recent years. This paper discusses the issues impacting decommissioning timing and analyses the economics of a hypothetical offshore development over 30 years to compare the economic impact of various decommissioning strategies – accelerated or deferred. Full-cycle and late-life pre-tax net present values (NPVs) are compared to illustrate the differing impact of decommissioning costs on the original project developer compared with the view of a late-life asset specialist. The analysis shows that it is advantageous (where possible) to integrate decommissioning into ongoing operations, rather than to defer this activity to the end of field life. However, the economics of this decision are often obscured by analysis at a discount rate above 10% which tends to reduce the impact of long-term costs.
Keywords: abandonment, decommissioning and restoration (D&R), decommissioning, economic limit, end of field life, late-life asset management, restoration.
Andrew Duncan is a Principal Advisor, Facilities Engineering with Gaffney, Cline & Associates (GaffneyCline) based in Singapore. He has over 40 years of upstream oil and gas experience in Europe, the Middle East, and Southeast Asia including international operating companies and consultancy. He is an experienced project manager who has held senior leadership roles in Europe and Southeast Asia. He has a technical background in Facilities Engineering and Costing and is a member of the Association of International Energy Negotiators (AIEN), Society of Petroleum Engineers (SPE), Southeast Asia Petroleum Exploration Society (SEAPEX), and chartered member of the Institute of Mechanical Engineers (IMech E). Andrew holds a BSc Civil Engineering, University of Bristol. |
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