BSEE decommissioning cost estimates in the deepwater US Gulf of Mexico

ABSTRACT

Since 2016, the Bureau of Safety and Environmental Enforcement (BSEE) has collected decommissioning expenditure data from operators in the deepwater US Gulf of Mexico, defined as water depth greater than 122 m, to estimate the decommissioning liability of leases. BSEE uses both statistical tools and work decomposition methods to estimate the decommissioning cost of all active wells, structures, and pipelines on deepwater leases. The purpose of this paper is to evaluate BSEE cost estimates in the deepwater US Gulf of Mexico across four decommissioning stages and to infer unit cost statistics and cost functions in the region. Fixed platforms in 250–500 m water depth are expected to cost between $10 and $80 million to decommission, spars about $55 million, ship-shape floaters around $30 million, and tension leg platforms and their smaller (mini) versions between $18 and $25 million. The deepwater decommissioning market value is estimated at $24.3 billion circa 2022.

KEYWORDS:

• Cost estimation
• decommissioning
• deepwater platforms
• floating structures

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Algorithms that have not been calibrated with real data have large uncertainty and unknown reliability until proven otherwise. Cost estimates based on work decomposition methods have unknown reliability and uncertainty probably no better than ±40%.

2 For good industry reviews on FPSOs, semis, spars and TLPs, see Duggal and Minnebo (2020), D’Souza et al. (2019), D’Souza et al. (2020), Sablok and Barras (2009), and Leverette and Hodges (2020).

3 Direct Vertical Access wells combine features of both classes but only a dozen or two hybrid wells are used in the Gulf of Mexico (e.g. Mars B, Marco Polo, Perdido) and therefore not a main well class.

4 For example, work decomposition estimates normally assume: (1) Conventional operations; (2) Weather, trouble and work contingencies are often reflected indirectly through multipliers; (3) Regulatory requirements are based on guidelines at the time of the assessment, even though not all deepwater decommissioning requirements have been codified; (4) Partial removal and topping-in-place options are not considered in evaluation.

5 We could derive floater cost models based on this data if we were confident the cost estimates are robust and accurate, but at the present state of development such an exercise is not especially useful or warranted.

6 Specialized wells such as drill stem test and monitoring wells were excluded from analysis because of their unique nature. About 100 of these specialized wells cost on average $10.2 million (DSI, 66 wells) and $17.9 million (DRL, 16 wells), respectively.

7 For wet wells, risers play a similar role to conductor casing but have different engineering characteristics (Bai and Bai 2019). Riser systems frequently show a wide range of differences between projects, even for those in close proximity (Simpson and Lima 2019).

8 In other words, conductor cutting and removal cost are allocated to the PA cost category, even if the activity/cost was included as part of structure removal.

9 Well misclassification issues are not as prevalent in deepwater compared to shallow water (see Kaiser 2022), but they still arise, with wells from one area block sometimes lying on another area block’s cost curve, and TA wells appearing on completed well cost curves.

10 For the deterministic costs reported for fixed platforms in water depth >200 m, compliant towers, and all floaters, work decomposition methods are employed in cost estimation. The cost functions for these assets provide a descriptive means to compare unit cost and should not be interpreted as a proxy for BSEE cost models.

11 One or more wells on the MC20 downed platform have been leaking since the platform was toppled in 2008. In 2020, $42 million was spent to install a device to collect leaking oil at the site. At least a dozen wells still need to be plugged c.2022 and the eventual fate of the downed structure is unknown since much of it is buried under mud and may simply not be amendable to lifting/removal without significant hazards. In 2021 Taylor Energy dissolved itself after forfeiting its $475 million bond for decommissioning.

12 An unconventional approach was used to abandon Morpeth’s gas export steel catenary riser using a multiservice vessel with ROVs and divers rather than the traditional approach using a topside winch package and a heavy lift construction vessel (Orr et al. 2021). By removing activities from the deck of the platform other onboard decommissioning activities could take place without interruption.

13 During the Mesozoic breakup of the supercontinent Pangaea, as North America separated from Europe, a triple junction formed near the present-day North Sea. Two of the arms of the junction formed the Atlantic Ocean, and the failed arm formed the central graben that runs down the North Sea midway between the UK and Norway. The central graben filled in with sedimentary rocks several thousand feet thicker than the rocks in adjacent areas, and many of the North Sea oil fields are found along this northern corridor.

14 Formally, cold stack is defined when hazards from process hydrocarbons are not present and sources of process hydrocarbons are isolated and air/water gapped. Until wells are plugged and the platform has been cold stacked, running cost continue to be incurred. If cold stack starts one year after the asset’s last year of well decommissioning spend, then normally 2–6 years pass from CoP to cold stack (OGA 2021a).