Economic Limit of Offshore Structures in the Gulf of Mexico—Descriptive Statistics

Abstract

When the operating costs of a structure exceed the gross revenues of production, the structure is no longer considered an asset and is said to have achieved its economic limit. The economic limit of a structure is unique to the field and the economic conditions at the time of operation, and depends upon unobservable characteristics such as the strategic objectives of the operator. The purpose of this article is to estimate the economic limit of offshore structures in the Outer Continental Shelf of the Gulf of Mexico using publicly available data derived from structures that have been removed from service. Production and gross revenue threshold levels are determined through an empirical assessment of over 1,700 structures decommissioned over the past two decades. Descriptive statistics are presented for the economic limit based on structure type, water depth, and a lease categorization that incorporates the defining characteristics of the regulatory requirements.