Creating a smooth transition from operation to cessation

By Lloyd’s Register

Life before decommissioning

Moving to late-field life is a tough decision to take for any operator, but it can mean more than entering ‘lighthouse mode’ to delay decommissioning liabilities. Radically leaner models of working, coupled with rigorous asset management, will help at a stage that demands a relentless focus on production optimisation, operational efficiency and cost reduction. Getting these factors right are fundamental if the industry is to unlock the remaining potential, safely and profitably.

Production gains of assets at late life are potentially considerable. The Wood Review estimates there are between 12 and 24 billion barrels of oil yet to be recovered from the North Sea. The opportunity to generate significant value is echoed by McKinsey & Company, particularly over the next two decades. The firm puts the case for excellence in this transformative phase, highlighting that few companies as yet have truly positioned themselves to capture this value. If the industry is able to exploit the most optimum ways to increase the level of hydrocarbons that are economically recoverable, it can concentrate on value generating activities. Few would argue that spending capital unnecessarily on decommissioning is better.

Reassessing what is required in late-field life
The need to improve operational efficiency and performance escalates in later life, to a point where every possible advantage matters. Activities that fail to deliver commercially or ensure safety standards are met, have to be eliminated. The challenges are complex during this phase, but the equation is simple: the leaner operations can become, the longer the length of profitable production. Reassessing requirements in late-field life shows where costs can be drastically reduced to remain profitable.

What is important at the beginning of a field’s life changes as it reaches maturity. Initial efforts focus on maximising hydrocarbon recovery through long-term development plans. There are numerous technical tasks to perform. Dedicated technical specialists undertake studies in areas that include seismic interpretation, geological modelling, petrophysical evaluation, reservoir modelling, well modelling, system modelling and production optimisation.

At the end of a field’s life, particularly when approaching CoP, the management of day-to-day production and operations takes precedence. With remaining opportunities available, but perhaps not economically feasible to execute, many of the geoscience and reservoir engineering tasks become less valuable or simply not required.

Outsourcing to lighten the burden
The approach to outsource the full running of late-life assets offers a number of advantages, without detracting from the operator’s responsibilities for the assets approaching CoP. Fields can be optimised until abandonment, with minimum capital expenditure. Operating costs can be reduced significantly, with personnel redeployed to greater use elsewhere. At the same time, data can be gathered that is required for CoP and, in turn, decommissioning. Such an outsourcing approach is relatively novel and a bold strategic step for an operator and their joint venture partners.

Getting the handover right for a smooth transition is critical, ensuring operations are safe while maximising profitability. How is this best achieved? And what competitive edge is possible when pushing the potential of such a model?

Setting the agenda
A late-field outsourcing approach should focus on six core objectives:

  • zero accidents and no harm to the environment
  • a cashflow positive position in the current marketplace
  • a competitive unit operating cost
  • extended field life where possible, deferring CoP and delaying decommissioning liabilities
  • preparing for CoP, while managing late-life assets
  • optimising well and reservoir performance.

Running it down: A period of continuous improvement
For as long as there is life in a field, the goal must be operations excellence (see accompanying diagram). An outsourcing approach should be able to move quickly and efficiently from providing the essential service an operator requires to managing the assets through continual improvement. Superior asset performance and technically excellent subsurface operations pre CoP can start to be realised once the significant risks are identified and mitigated and the operator’s basic requirements, including compliance demands, are being met.

Getting the framework right
Handover of late-field life management should involve five main stages or sets of activities.

  1. Project framing and review
  2. Access to data and systems
  3. Knowledge transfer
  4. Management of meetings
  5. Quality control, peer review and

As a guide to timeframes, full management can be handed over by the operator to a specialist external team within a four-month, fully collaborative transition period.

Rethinking the headcount; redeploying personnel
With fields no longer delivering at peak capacity, outsourcing enables redeployment of subsurface teams, and expensive technical and scientific equipment, to more valuable and strategic assets. Concerns about losing valuable resources – hired directly as the project approaches CoP, but also with an eye to the next opportunity – are also negated.

Subsurface and production management can be successfully achieved with a pre-CoP team comprising a dedicated project manager, reservoir engineer and production and operations engineer. These specialists will be supported by other subsurface discipline experts on an ad hoc basis.

Being productive, while preparing for CoP
While the outsourcing approach represents around a 50% reduction in traditional levels of personnel, a range of activities can be performed by this small resource, including gathering data for the final well and reservoir status. Indeed, amidst a lot of industry uncertainty, one point is clear: late-life asset management should form part of the roadmap to CoP. A specialist team is both focused and in the ideal position to collate all the information required for decommissioning plans and the CoP documents required by the regulatory authorities. This also applies to preparing the CoP Application Document itself.

The key tasks can be transferred, such as reserves’ booking, short and long-term forecasts, revisiting opportunities for final close-out and other forms of reporting, which are unique to each project. Field optimisation may also lead to further operating savings, enabling the pre-CoP team to be reduced, while still delivering the necessary level of specialist services.

For many operators, outsourcing the full running of assets approaching CoP, prioritising both  resources and inspection plans, and eliminating non value adding activities, will become the logical conclusion to one of the greatest priorities late-life asset management presents: adopting a cost- effective operational approach that does not compromise on safety and integrity standards. The advantages are significant with the right models, helping create a smooth transition to cessation of production.

You can download our full cessation of production whitepaper here.

The Industry Contribution is a new section in which the oil and gas industry companies share their project endeavors or analyses. Please contact us at [email protected] for inquiries.