Deepwater decommissioning requires deep pockets - new report

Deepwater decommissioning requires deep pockets – new report

May 04, 2024 ExxonMobil, News, Oil & Gas

Representation of the subsea umbilicals, risers, and flowlines (SURF) used for oil production

– leading deepwater producers to fork out US$27B in 10 years

Kaieteur News – Decommissioning deepwater projects is a highly complex process that requires deep pockets.

Wood Mackenzie in a new report pointed to the challenges associated with decommissioning deepwater projects compared with shallow water facilities.

Decommissioning refers to the plugging of wells and cleanup of the seafloor following oil production activities.

According to Wood Mackenzie, a global provider of data and analytics for the energy transition, deepwater projects have high operating costs even after production ends, and decommissioning requires cutting-edge equipment to access wells, lift subsea equipment and safely remove enormous floating platforms for dismantling or re-use.

Presently, ExxonMobil is operating Guyana’s Stabroek Block, approximately 200 kilometers offshore in water depths of about 1200 meters or more than 4200 feet.

With Exxon and its Co-Venturers already clenching licenses for six deepwater projects, with a string of new discoveries locally, Guyana was highlighted in the report among the giant discoveries of the last decade.

The country must however be wary that it will require deep pockets for meeting its decommissioning obligations.

In fact, Wood Mackenzie pointed out, “Among the highest-cost upstream abandonment plays, leading deepwater countries and operators face up to US$27 billion of decommissioning expenditure (decommex) in the next 10 years.”

Neighbouring Brazil, the US Gulf of Mexico and Angola that holds mature deepwater projects account for 80% of forecast decommex over the next decade, according to the report.

It explained that while decommissioning any offshore project requires significant spend, deepwater brings further challenges compared to shallow-water facilities.

Oil-rich Guyana must also be mindful that a tight deepwater rig market is also ratcheting up decommissioning costs, with rates having doubled over the last five years.

Guyana has already commenced the payment of decommissioning fees, even though the ExxonMobil’s subsidiary and operator of the Stabroek Block, EMGL may abandon the subsea equipment on the seafloor.

ExxonMobil Guyana’s Projects Manager, Anthony Jackson during a public scoping session in February last year for the sixth project- Whiptail- explained that these costs must be deducted even though decommissioning is not a fixed plan.

He outlined, “It’s two things we are paying for, first no matter what, if we do have to decommission the FPSO [Floating Production Storage and Offloading vessel] that is a cost and that is independent of the SURF [subsea umbilicals, risers, and flowlines].”

Jackson said that even if the equipment will be abandoned on the seafloor, at the very least, ExxonMobil must detach the risers which are the equipment that goes from the seabed floor to the surface of the FPSOs. After that is removed, he said the lines will be purged to ensure there is no water, oil or gas left there.

Additionally, he said that the wells must be capped thereby plugging to abandon it, after it has reached its production timeline. It must be sealed to ensure there is no release of hydrocarbons to the environment.

decommissioning, FPSO, pockets, SURF, Wood Mackenzie

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