Economic Limit of Offshore Structures in the Gulf of Mexico—Regression Modeling

Abstract

When the net cash flow of a structure turns negative, it is no longer economic to produce. The operator will subsequently shut down operations and abandon the structure in accord with the regulatory framework that governs decommissioning. The purpose of this article is to predict the economic limit of offshore structures in the Gulf of Mexico using regression-based modeling techniques. Functional relations are derived for the economic limit based on an empirical assessment of over 1,300 structures decommissioned in the Gulf over the past two decades. Operational, physical, technical, and regulatory parameters are used to develop the economic limit functionals.

Keywords:

• decommissioning
• economic limit
• empirical modeling
• offshore production
• regression modeling

Notes

Hydrocarbon streams include oil, gas, and condensate.

Most GOM crude oil is light and moderately sweet, although considerable variation exists; several deepwater fields (e.g., Mars) are sour.

The distance to shore in the Gulf of Mexico usually increases with increasing water depth. Water depth of 100, 300, and 600 ft. is generally considered to reside 50, 100, and 125 miles from shore, but there are some exceptions; e.g., Mississippi Canyon developments 20 miles offshore Louisiana are located in about 1,000 ft of water.

^a The regression model variables are as follows: ST = structure type; SF = structure function; AGE = age of structure at time of removal; WD = water depth; DEC = decline rate; Q∗ = peak production; Q∗/RES = design ratio; RES = total production; NW = number of wells.

^b t-statistics are presented in parentheses.

^a The regression model variables are as follows: ST = structure type; SF = structure function; AGE = age of structure at time of removal; WD = water depth; DEC = decline rate; Q∗ = peak production; Q∗/RES = design ratio; RES = total production; NW = number of wells.

^b t-statistics are presented in parentheses.

^a The regression model variables are as follows: ST = structure type; SF = structure function; AGE = age of structure at time of removal; WD = water depth; DEC = decline rate; Q∗ = peak production; Q∗/RES = design ratio; RES = total production; NW = number of wells.

^b t-statistics are presented in parentheses.

^a The regression model variables are as follows: ST = structure type; SF = structure function; AGE = age of structure at time of removal; WD = water depth; DEC = decline rate; Q∗ = peak production; Q∗/RES = design ratio; RES = total production; NW = number of wells.

^b t-statistics are presented in parentheses.