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Jakarta Post

Asia-Pacific braces for bloated decommissioning costs

  • Viriya P. Singgih

    The Jakarta Post

Jakarta   /   Fri, February 2, 2018   /   04:52 pm
Asia-Pacific braces for bloated decommissioning costs Pertamina Hulu Energi West Madura Offshore (PHE WMO) workers are transported in a personnel transfer basket from a ship to the company’s oil rig off the coast of Madura Island in East Java, in this undated file photograph. (JP/Wahyoe Boediwardhana)

Asia-Pacific countries may have to prepare more than US$100 billion for decommissioning their offshore oil and gas assets because of unclear government regulations coupled with a general lack of experience, according to a report recently published by global energy think tank Wood Mackenzie.

Decommissioning is the process of retiring offshore oil and gas operations and returning the ocean floor to its original condition.

According to Wood Mackenzie, various stakeholders are largely unprepared for decommissioning their offshore assets in the Asia-Pacific, which has nearly 2,600 platforms and 35,000 wells. Hence, they might have to face a steep learning curve with high initial costs and potential for mistakes.

“With over 380 fields expecting to cease production in the next decade, the magnitude and cost of work can no longer be ignored,” Wood Mackenzie’s Asia upstream analyst Jean-Baptiste Berchoteau said in a report published on Thursday.

“Through learning from global decommissioning projects, the industry can adopt and adapt practices best suited for the Asia-Pacific's own set of challenges.”

In order to minimize decommissioning costs, the report says it will be crucial for regulators, operators and service sector firms to engage in knowledge transfer. Upstream players are also being urged to choose optimal commercial and contracting strategies, adopt innovative technologies and achieve economies of scale.

“On average, well plug and abandon [P&A] activity accounts for half of the decommissioning costs. So, any cost reduction in this category will have a significant impact,” the report states. (bbn)