Malaysia's iconic Petronas Towers are named for its major oil producer (Image credit: George Clerk)

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Full-cycle production costs for oil-weighted companies involved in the Asia Pacific are typically about 25-30% lower than the global average, according to online data service Evaluate Energy.

In the Gulf of Mexico, where production costs are higher, 4,595 rigs were taken offline in 2014 and oil prices at $40-per-barrel are now putting pressure on margins in lower-cost regions.

Producers in the Asia Pacific will need to improve their decommissioning and abandonment (D&A) knowledge sooner rather than later.

Signs are there

Experts have been predicting a regional spike in decommissioning for several years. Brian Twomey, Managing Director of Reverse Engineering Systems, noted as long ago as 2010 that a significant percentage of the more than 1,700 offshore installations in Asian and Australian waters had exceeded or were close to exceeding their intended life spans.

There are signs of growth in the Asian decommissioning sector, industry experts told DecomWorld. According to one official from Malaysia’s state-owned oil producer Petronas, who spoke on condition of anonymity, “there is a deep-water subsea, and two early processing facilities earmarked for [decommissioning]”.

Shashank Shekher, senior technical advisor at Indian-focused producer Niko Resources, said his company was preparing two decommissioning projects, one of them with an offshore component. According to Shekher, who previously worked at state-controlled Oil and Natural Gas Corporation, India has thousands of onshore and offshore wells that need to be abandoned.

Shift in thinking

Ensuring that operators adopt best-practice in a region with little experience in end-of-life cycle management poses its own challenges, said Jerry Gilmore, President of Texas-based decommissioning project consultancy TSB Offshore.

“I think the lack of decommissioning experience within the consulting and contracting community in the region is a concern to the operators and contractors alike. This is a function of the fact that little of this type of work has been carried out there to date,” he said.

Operators, contractors and consultants will need an in-depth understanding of national and regional standards, as well as knowledge of the latest policy updates.

“One of the major challenges in the region is not having standard abandonment regulatory requirements in place,” noted Gilmore.

Stuart Webster, Petroleum Technologist in the Western Australian state government’s Department of Mines & Petroleum, which recently introduced objective-based legislation for subsea decommissioning, said a major challenge had been encouraging smaller companies to incorporate D&A into the very start of a project’s life.

“It has historically been a case where some of the smaller companies get the immediate job done and don’t consider the future so much… They need to be aware of it when they start their planning,” he said.

Regulation to provide guidance

With budgets already squeezed, offshore operators in the Asia Pacific region will be looking for the most cost-effective way to manage the end of a project’s life cycle – with cost-reduction during the abandonment process front and centre.

Shekher said that in some cases, “due to a lack of life-cycle planning and foresight, operators have faced D&A costs that can exceed the cost of drilling the well.”

Adding to the challenge is a lack of support infrastructure and services specifically designed for decommissioning and abandonment, he said.

“In India, we definitely feel that we lack the specialized services. You need the lifting units to pull out the casings, the cementing units to fill the well,” he said.

“But do you need that heavy equipment which is required for drilling? My opinion is no, we do not need that. We should have a custom-built unit for abandonment, because a conventional cementing unit is designed for placing the cement, maybe a 2000-meter cement column behind a casing, if the well is 2000m deep.

“But we don’t require that size of cementing unit for an abandonment job; what we need is a simple placement of a simple plug, maybe 60m or 100m long, so why do we have to use such heavy equipment and pay the heavy costs which are not required?”

Putting in place some “straightforward regulation” would be helpful for regulators, Shekher added.

“The regulations must encourage a win-win system. Operators should not [be] allowed to do a wishy-washy job and escape from their responsibilities,” he said.

“But at the same time, there could be things that can be done which help the operators meet the requirements of the abandonment. As long as they care about regulations and the environment, the policies should not be too heavy, but they should not be too lenient also.”
 

By Lionel Mok