Economic Limit of Offshore Structures in the Gulf of Mexico—Descriptive Statistics

Abstract

When the operating costs of a structure exceed the gross revenues of production, the structure is no longer considered an asset and is said to have achieved its economic limit. The economic limit of a structure is unique to the field and the economic conditions at the time of operation, and depends upon unobservable characteristics such as the strategic objectives of the operator. The purpose of this article is to estimate the economic limit of offshore structures in the Outer Continental Shelf of the Gulf of Mexico using publicly available data derived from structures that have been removed from service. Production and gross revenue threshold levels are determined through an empirical assessment of over 1,700 structures decommissioned over the past two decades. Descriptive statistics are presented for the economic limit based on structure type, water depth, and a lease categorization that incorporates the defining characteristics of the regulatory requirements.

Keywords:

• decommissioning
• economic limit
• offshore production
• operational parameters

Notes

^a (t _lp ) and (t _lp ) denote the average production and revenue levels during the last year of a structure's life cycle. IDLE denotes the amount of time that has elapsed between the time the structure was removed and the last year of production. RES denotes the total production from the field, while the peak production to total production ratio, Q∗/RES, is a proxy for the trade-off decisions of development. The number of elements within each category is denoted by n.

^b Ordered pair (x,y) denotes mean x and standard deviation y.

^a (t _lp ) and (t _lp − t) denote the average production levels during the last year of a structure's life and t years before the structure stops producing.

^b (t _lp ) and (t _lp − t) denote the average revenue levels during the last year of a structure's life and t years before the structure stops producing.

^c Includes five structures in the 201–400 ft water depth category.

^a (t _lp ) and (t _lp − t) denote the average production levels during the last year of a structure's life and t years before the structure stops producing.

^b (t _lp ) and (t _lp − t) denote the average revenue levels during the last year of a structure's life and t years before the structure stops producing.

^a (t _lp ) and (t _lp − t) denote the average production levels during the last year of a structure's life and t years before the structure stops producing.

^b (t _lp ) and (t _lp − t) denote the average revenue levels during the last year of a structure's life and t years before the structure stops producing.

^a (t _lp ) and (t _lp − t) denote the average production levels during the last year of a structure's life and t years before the structure stops producing.

^b (t _lp ) and (t _lp − t) denote the average revenue levels during the last year of a structure's life and t years before the structure stops producing.