Abstract
Due to offshore oil and gas field maturity and recent news coverage, decommissioning and restoration costs have received increasing management attention in recent years. This paper discusses the issues impacting decommissioning timing and analyses the economics of a hypothetical offshore development over 30 years to compare the economic impact of various decommissioning strategies – accelerated or deferred. Full-cycle and late-life pre-tax net present values (NPVs) are compared to illustrate the differing impact of decommissioning costs on the original project developer compared with the view of a late-life asset specialist. The analysis shows that it is advantageous (where possible) to integrate decommissioning into ongoing operations, rather than to defer this activity to the end of field life. However, the economics of this decision are often obscured by analysis at a discount rate above 10% which tends to reduce the impact of long-term costs.
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