Evaluation of Costs Related to Water Management

Introduction

Our goal is to eventually be able to provide "Level Zero" cost estimates to Operating Units for different water management options (cleaning and overboard discharge, injection, etc.). The cost estimates should be aimed at "guiding the thoughts" rather than at decision-making at operator level. This is because for decision-making you need "Level 4" cost estimates which are always extremely case-specific and can only be made by the operator himself.

For level-zero cost estimates "guiding the thoughts" we need to distinguish between different types of environments, such as offshore Europe (North Sea), onshore Europe, onshore USA, Gulf of Mexico, Alaska, on-/off-shore Middle East, on-/offshore Far East, etc. Eventually, we need to be able to compare the lifecycle cost (UTC) of different options within each of these "environment types".

General

Below, an overview is given of the types of costs that would typically be required. However, in order to make the picture more complete, it is also important that a track record of field cases is provided to illustrate "best practices" in our areas of interest from a cost / income perspective.

CAPEX

For capex items, typically the following data would be required (supported as much as possible by a cost breakdown, e.g. per metre of well drilled or pipeline laid, etc):

• Equipment costs (purchase, installation, commissioning, costs associated with weight / space on platform, etc.) for equipment such as pumps (depending on pump discharge pressure) hydrocyclones, coolers, three-phase separation vessels (sometimes only two-phase separation is present on the surface facilities), pipelines / trunk lines, control equipment, etc.
• Drilling / completion / hook-up / (non-routine) workover costs per well
• Depreciation regimes (how much annually? different for different types of equipment? etc.)
• Future abandonment costs per type of equipment / well. Can these costs be 'reserved' ('dotated') in advance, does this impact on taxation?
• Are there any 'green' taxation rules that favour (a) certain option(s) above others?

OPEX

• Well services / well maintenance: Gradient surveys, re-perforation, PLT's, fall-off surveys, zonal isolation, CT sand clean-out, stimulation, SCSSSV inspection/testing, wellhead maintenance, corrosion monitoring (calipers), etc.
• (Routine) workovers: Tubing change-out, producer-to-injector conversion, etc.
• Production costs: manpower (operators), power consumption (injection pumps!), gas compression, chemicals, routine measurements (e.g. wellhead sampling), pipeline tariffs, costs related to possible production deferment (which may differ per option), etc.
• 'Locations only'-costs: Land-lease costs, insurance costs, etc.
• Maintenance of surface equipment (corrective maintenance, breakdown maintenance): (Non-) rotating equipment, pipelines, etc.
• Abandonment: Operating costs made after shut-in but prior to abandonment itself
• Indirect Opex and overheads (people in the office, office building operational costs, etc.)
• Taxation: How much Opex can be tax deducted, is this dependent on type of Opex, are any 'green' options encouraged, etc?

Way Ahead

What I typically envisage is that, after approval by Sponsors, a questionnaire (to be prepared) goes out to both Sponsors and Contractors in order to collect cost data as specified above and field cases of 'best practices', the latter preferably in combination with a complete economic analysis. This will enable us to carry out some real 'benchmarking' eventually leading to a report / database that can help us all to plan for real 'best' practices, rather than just 'practices'.

Please let me know what you think of this. Once we have agreed on the contents of this 'economics' activity, I suggest you write a proposal that can be sent out to Sponsors for review, and that we can discuss at the next SC meeting in June.

Regards,
Paul van den Hoek