Risk and Reward: Decommissioning and Footprint Reduction

Abstract

President's column From 2007–2010, I was president of Chevron’s Environmental Management Company. We were responsible for managing end-of-life activities and environmental liabilities for the entire corporation. We removed platforms and pipelines in the Gulf of Mexico, remediated old industrial sites (including refineries, chemical plants, and service stations), and managed Chevron’s Superfund liabilities. Chevron spent several hundred million dollars a year on these activities, all with zero return, which made for uncomfortable discussions when it was time to present my budget. “Decommissioning yields no return on investment or revenue and carries significant environmental and regulatory liabilities. The effective decommissioning of offshore platforms, subsea wells and related assets is one of the most important challenges facing the oil and gas industry today and in the future. Decommissioning decisions can no longer be avoided by the operators and the industry as a whole.”—IHS Markit Offshore Decommissioning Study Report Decommissioning and abandonment. That was a Technology Focus topic in the January JPT, and I loved the featured quote: “Unlike a capital project, decommissioning is not something that you can choose to do or not to do.” Like death and taxes, decommissioning eventually comes for every project. The question is: Are we operationally and financially prepared for the inevitable? The offshore decommissioning problem is huge and gets bigger every year as more platforms reach the end of their productive life. North Sea decommissioning is leading the way as fields developed in the 1970s and 1980s reach their end of life. Created 7 years ago, Decom North Sea (www.decomnorthsea.com) is an industry association that specifically addresses the decommissioning issues in the North Sea and works cooperatively among operators, regulators, and decommissioning contractors. The North Sea regulators, especially UK and Norway, recognize the growing liability. Decommissioning Gulf of Mexico facilities got much more urgent following hurricanes Katrina and Rita in 2005; they swept right through the heart of the aging continental shelf fields of offshore Louisiana. Katrina and Rita destroyed more than 100 offshore platforms, many of which were “idle iron,” not in service pending decommissioning. Following those massive storms, US and state regulators stepped up monitoring of shut-in platforms and began pushing operators to decommission and remove idle iron before the next major hurricane.