Life Cycle and Production Unit Cost Analysis Techniques for System Configuration Selection in the Norwegian Offshore Oil and Gas Industry

Abstract

AbstractThe constituent elements, hierarchical relationship, and design, construction, commissioning, startup, production and decommissioning life cycle of oil and gas production systems (e.g., offshore drilling/production platforms, onshore petroleum processing facility, offshore gas production platforms) in the Norwegian offshore petroleum/gas industry are described.Economic and financial considerations (currency conversion, escalation/inflation rates, rate of return) which affect life‐cycle and production unit cost analyses are summarized. Risk and uncertainty in the analyses are discussed.The structure and estimation of life cycle costs for complex petroleum/gas production facilities is discussed. A model is presented for calculating unit costs for production‐facility output, e.g., $/bbl, $/sm3; definitions of terms are given in an appendix. The use of life‐cycle and production unit cost estimates to select a preferred system configuration is discussed.A numerical example is provided to illustrate the production unit cost estimation procedure. Cost information for the example is based on an actual Norwegian offshore oil/gas production system.