Strategic decision making for late-life assets
Luis Mendoza A , Ellen Coopersmith A and Adrian Sikorski B *A Decision Frameworks, Houston, TX, USA.
B Decision Frameworks, Adelaide, SA, Australia.
The APPEA Journal 62 S52-S57 https://doi.org/10.1071/AJ21127
Accepted: 29 March 2022 Published: 13 May 2022
© 2022 The Author(s) (or their employer(s)). Published by CSIRO Publishing on behalf of APPEA.
Abstract
Aging assets late in their cumulative production cycle are increasingly common in the upstream oil and gas industry. Capturing the remaining value from these and extending their life to maximise remaining value prior to abandonment comes with a different set of challenges from the early development phase. The aim of the paper is to showcase how oil and gas companies can structure their strategic planning and decision making in relation to aging assets, identify and evaluate a spectrum of life extending operating strategies, and compare them to cessation of production, incorporating key risks, and uncertainties. Using structured decision techniques, insights about alternative late-life strategies can be gained. This information is essential to decision makers facing the common dilemma of ‘extend or end’ for assets where the bulk of the value has already been captured. We will introduce the fundamentals of Decision Quality and use them to evaluate some of the key engineering aspects associated with late-life asset management. We will showcase an example drawn from consulting for clients in Europe. The worked example addresses the following questions: How can I push the cessation of production date into the future? Does deferring abandonment justify running at a loss for a while? Are incremental investments justified given the remaining field life? How do I determine which options to pursue and develop a viable business case? How do I manage the uncertainties that might offer opportunity or catch me out?
Keywords: decision analysis, decision quality, decision tree, late life, range of value, remaining value, strategic planning, strategy, strategy table, structured decision, tornado analysis.
Luis Mendoza joined the Decision Frameworks team in 2013 and is an SDP Lead Practitioner. He has worked a wide variety of engagements with oil and gas companies, manufacturers, and technical government projects. Luis enjoys the gamut of Decision Quality enablement with Decision Frameworks, from training to framing and evaluation to presentation. He specialises in probabilistic model development and strategy evaluation working with technical teams through senior management. He holds a bachelor’s in Industrial Engineering from Texas A&M University and a master’s in Systems Engineering from the University of Texas at Arlington and enjoys participating in industry/professional organisations. |
Ellen Coopersmith is the founder of Decision Frameworks and has been with the company since the very beginning in 1999. She specialises in Decision Analysis consultation, facilitation, training, and implementation. Her passion for decision and risk analysis focuses on skill development, framing, uncertainty analysis, and valuing information. Prior to founding Decision Frameworks, she led one of the oil industry’s most successful implementations of Decision Analysis for Conoco. She holds a degree from the Colorado School of Mines. Ellen is an accomplished technical and managerial facilitator, as well as a published and invited speaker on both the implementation and the technical elements of Decision Analysis. She was the 2017–2018 president of the Society of Decision Professionals (SDP), a published speaker on Decision Analysis, a Professional Engineer and SDP Fellow. |
Adrian Sikorski is an experienced decision practitioner with wide experience in applied decision making, economic analysis, and portfolio management techniques. He consults, facilitates, and trains using his experience in decision analysis, project economics, strategy development, development planning, portfolio management, and commercialisation. With his degree in Engineering from Colorado School of Mines, Adrian worked as an engineer and commercial professional in the international upstream oil and gas business for 14 years before focusing to decision professional applications in 2016. His experience ranges across the entire upstream: exploration, appraisal, production, and processing in multiple geologic and geographic settings, through to downstream LNG, and wholesale gas markets. Adrian holds a Master of Petroleum Business Management from the University of Adelaide. He is a member of the Society of Decision Professionals, Society of Petroleum Engineers, the Association for the Advancement of Cost Engineering, and the Petroleum Exploration Society of Australia. |
References
Coopersmith EM, Burkholder K, Mendoza L (2014) Early Production Systems – When Do They Make Good Sense for Your Project? Paper presented at the Offshore Technology Conference, Houston, Texas, May 2014.| Crossref |
Cunha JC, Bickel JE, Mendoza L, Walker J, Coopersmith E, Craig AM (2021) A Tool for Improving Decision Quality on Upstream Consortia. Paper presented at the Abu Dhabi International Petroleum Exhibition & Conference, Abu Dhabi, UAE, November 2021.
| Crossref |.
SPE and SDP (2016) Technical Report: Guidance for Decision Quality for Multicompany Upstream Projects. SPE-181246-TR, February 2016. Society of Petroleum Engineers and Society of Decision Professionals. Available at https://spe.widen.net/s/mqfd8m7mxx/spe-181246-tr
