InterAct Completes Global Decommissioning Study for UK Oil & Gas Operator

InterAct recently completed a decommissioning liability estimate for the global assets of a large UK-based oil and gas operator. The study encompassed onshore and offshore wells and facilities - both operated and non-operated - on four continents.

The study provided the client with an auditable and defensible evaluation of their well abandonment and facility decommissioning liabilities. Such estimates are also important to operators as it can directly affect their profit and loss statement and can be of value for insurance purposes, asset divestiture, and project and resource planning.

InterAct has developed an approach to estimating decommissioning liabilities; firstly ascertaining the inventory of wells and facilities before applying different cost modelling approaches to the wells and the facilities. The models allow identification of areas with the greatest decommissioning liability exposure and can be used for sensitivity analysis to model the effect of changing variables such as the assumed rig rate.

The liability estimate for the wells is based on a generic model whereby simple analysis of specific well characteristics places each well into a discrete category based on the most cost effective method and equipment suitable for the well’s abandonment. Each category is assigned a time estimate based on a P&A strategy developed from a ‘typical’ well of that type. The cost is derived by multiplying the time estimate by a carefully calculated daily spread rate. The estimate can then be refined to account for factors such as mobilization costs, conductor removal and any known local anomalies.

For the facilities (platforms, pipelines, etc.) which are more far more wide-ranging and variable in specification, such a generic model as used by the wells would not be as judicious. Instead, a standard template was developed to capture the important details which affect the decommissioning cost of each asset. The template uses the inputs to model the decommissioning liability upon the same premise of a cost multiplied by a spread rate. The model also has an ability similar to the wells cost model to perform both sensitivity analysis of the input data and probabilistic modelling.

Now in the 3rd year of a 5 year contract, the study is updated annually to reflect changes to the operator’s commercial interest in the assets such as acquisitions, divestment or construction or decommissioning of assets. It also enables an iterative approach to converge on an increasingly accurate liability estimation through utilization of the latest available data.

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