Abstract

Offshore oil and gas installations are often costly to fabricate and install, in the same vein, it is obvious to ascertain that the cost of decommissioning will also be expensive. The usual practice is to decommission those platforms after reaching or exceeding their economic lifespan of usually 25 to 30 years without an iota of hope or likelihood of Enhanced Oil Recovery (EOR). The biggest challenge facing oil and gas industry is developing an accurate cost estimate for offshore platform decommissioning. However, experienced decommissioning contractors are extremely limited globally. The burden of decommissioning earlier platforms which did not incorporate the costs of decommissioning in their concession agreements with operators falls squarely on operators. In recent concession contracts, operators are mandated to set aside an annual amount into a special account created specifically to cater for decommissioning at the end of the concession or economic life of the platform. However, a common challenge facing the industry is determining accurate decommissioning costs for offshore platforms. This study attempts to use logarithm transformation of multiple regression approaches to establish a generalized regression cost model for determining the cost of a particular platform. On the whole, the results show a reflection of the cost incurred in decommissioning a Harvest platform which is only 0.39% higher than the actual cost estimate. As such it falls within the pre-determined range of 15%. Consequently, the results could be used to define a Zone of Possible Agreement (ZOPA) for offshore platform decommissioning contractual arrangement before engaging in negotiations with decommissioning contractors in order to improve value for money.

Keywords:

Cost estimate, decommissioning liability, offshore oil and gas installations,

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The authors have no competing interests.

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