Decommissioning Cost Estimation Study

This research began with a review of the technical literature available on decommissioning with the objective to evaluate key factors in determining total costs to plug wells and to estimate well plugging and abandonment total cost by using the best options of research methodology. Because decommissioning activity tends to pick up pace near the end stage of a given project when income from the oil field has dropped and the ageing infrastructure at times has low or no economic value, early cost estimation is vital to guarantee a success of a project. Moreover, wells plugging and abandonment that is one of the main stages of decommissioning operation is forecasted to contribute to the largest component (43%) of decommissioning expenditure for over the next ten years. Thus, it is crucial to have a further study on how this well plugging and abandonment cost can inflate and affect the overall decommissioning cost estimate. This is done by two methods of cost estimation. The first method is called “bottom-up” approaches where well plugging and abandonment activities are broken down into distinct and identifiable units and the cost of each unit are estimated by conducting a survey and added together to obtain the overall cost estimate for well plugging and abandonment. This research is then furthered by using the second method of cost estimation called “top-down” approaches where a regression analysis is carried out by using available historical data of decommissioning projects. By having some picture of the major cost for decommissioning, the platform owner can have more accurate cost estimation and locate their budget accordingly, many years before the end life of an offshore platform in order to eliminate surprises for themselves, governmental bodies, the public and shareholders.