Triangle cuts down decommissioning cost for Cliff Head
Australia-based Triangle Energy has reduced the estimated cost of decommissioning of the Cliff Head field-related infrastructure by nearly $8 million following a decision to use a hydraulic workover unit instead of a jack-up rig.
Triangle is the operator of the Cliff Head oilfield located off Australia with 78.75 per cent and Pilot Energy is a partner with a 21.25 per cent interest and together they form the Cliff Head Joint Venture (CHJV).
Triangle informed earlier this week that the JV had completed an updated decommissioning estimate for Cliff Head related infrastructure, which was prepared by Elemental Group, an independent third-party expert. In the latest estimate, the decommissioning cost has been reduced to AU$28.7 million (CHJV 100 per cent) from AU$39.5 million. This estimate is based on the same parameters as the previous studies.
As explained by Triangle, the decrease of approximately AU$10.8 million (about $8 million) is mainly due to the use of the hydraulic workover unit in plugging and abandoning the wells (HWU) versus a more costly traditional jack-up rig.
In the last two years, the CHJV has secured this HWU technology and conducted contracted works on Cliff Head Alpha wells. The HWU is now an integral component in Cliff Head Alpha well workover operations and has proven to be operationally safe and cost-effective in the last three workovers that the CHJV has completed, the company said.
With the availability of the 40 per cent Petroleum Resource Rent Tax (PRRT) benefit for closing-down expenditures (which includes decommissioning, abandonment, and rehabilitation expenditures), the theoretical net decommissioning cost to the CHJV is approximately AU$17.2 million (CHJV 100 per cent, before income tax) assuming all other conditions of the PRRT regulation are met at the time of decommissioning.
Robert Towner, Triangle Energy (Global) Ltd Managing Director, said: “This is pleasing news to the Cliff Head Joint Venture as it gives us an updated, and therefore a more accurate estimation of the Cliff Head decommissioning cost. Consequently, this has significantly reduced the provision recorded in the financials of the CHJV partners in their favour.
“This new estimate is a positive result for the CHJV. At present, the focus of the CHJV is to expand production and extend field life with the drilling of the Cliff Head Mark II opportunities. The Western Development and SE Nose appraisal/development wells could extend Cliff Head field life to the late 2020s based on the announced Contingent Resources. The Mentelle exploration well could extend Cliff Head field life beyond 2030 on a successful outcome. These three wells can be drilled from Cliff Head Alpha platform and tied-in for near term production.”
In recent Cliff Head-related news, the field JV in October entered into an agreement with BP, which will buy all the crude oil produced from the field.