In the spring of 2020, the oil & gas industry is enduring unprecedented strain. Weathering the storm of a global pandemic and reacting to the consequences of a drastic commodity downturn – just as some stability was
beginning to return to the market – is scarcely believable, yet here we are.
During this period, it is worth asking ourselves what obligations are certain, and how can we best address them.
Redundant assets compromise the balance sheet, drain cash for poor return and thus impede the viability of premium assets. An operator with an active and productive decommissioning programme is maintaining an efficient and effective asset turnover cycle, and those that are best at it will come out of this turmoil the strongest.
Well-Safe contends that preparation is key through proper data analysis, incorporation of lessons learnt, planning of investigative work (if required), and consideration of required contingencies.
A recent engineering analysis conducted by Well-Safe showed that engineering studies could demonstrably provoke 10% reduction in project cost. The source of the savings in one example was in challenging the barrier philosophy (removing scope from the work) and introducing a rigless phase to improve efficiency (removing risk and therefore contingencies). Preliminary well engineering costs are a small fraction of the overall project costs: two or three percent? If so, about ten percent of costs being driven out is a five-fold return on investment on engineering services.
DEDICATED DESIGN PHILOSOPHY
Well-Safe has a comprehensive and detailed design philosophy which is an integral part of our business processes. The Well Decommissioning Design Process (WDDP) is a gated process bespoke to well abandonment. It is not a well engineering and well design process that has been adjusted to well abandonment; the process has been built to deliver well abandonment as its first order of business, and because of that, it is more efficient and comprehensive than typical gated processes.
Using the WDDP Well-Safe can deliver studies for all forms of well abandonment – having already engaged on all types of well environments; platform, rigless, jack-up, subsea, land, etc. Although Well-Safe does have its own well abandonment asset, the Well-Safe Guardian semi-submersible, it does not preclude us from providing professional services to all sectors of the well abandonment market: our engineers have experience across all environments.
The WDDP has the following gates: FEED, Select, Define, Execute and Close. Using these gates, Well-Safe can deliver a broad array of engineering output; from very early Asset Retirement Obligation (ARO) estimations, technology cost-benefit analysis, and detailed abandonment programmes.
An ARO review conducted by Well-Safe Solutions for a North-Sea operator managed to produce a saving of over £50million, by using accurate data and lessons learned taken from previous decommissioning work conducted in the field. By taking into consideration updates in technology and applying a better understanding of abandonment techniques, Well-Safe enabled the operator to release substantial financial accruals from their balance sheet.
Well-Safe engineers are in a unique position to generate cost estimates with an unusually high degree of precision – which has real-world benefits financially. When an AFE is overestimated, any capital which is locked in, but ultimately unspent, creates tangible financial inefficiencies – with a Cost of Capital of 10% per year, £5million overestimation for a year-long campaign destroys half a million pounds of operator capital.
Our degree of precision is feasible for two reasons. Firstly, with a great deal of experience, lessons learned, and broad vendor engagement, Well-Safe has a tangible appreciation of available technology, its application and cost, even in these turbulent times. Secondly, we have long term contracts with a broad range of suppliers in place today; with over 70 vendors signed up to Master Service Agreements, and multiyear contracts, Well-Safe is in a strong position to provide cost certainty.
Should Well-Safe be contracted to provide operational support to the project, we can also activate a full procurement exercise employing our active subcontracting relationships where further expertise is available.
Estimating a cost is one thing but delivering the project against this cost is quite another. That is why Well-Safe is very active in designing bespoke performance models. This provides clients with the confidence that promises made will be promises kept. These models are constructed to address the clients’ key requirements: cost assurance, delivery performance, schedule obligations, or any combination as required. We are a solution orientated company, and we believe that solutions are not just designs, technology and processes, but also commercial, contractual, and financial. Open, transparent, and constructive dialogue is key.
Ensuring preliminary planning and engineering studies are correctly executed, enables the industry to better prepare for the inevitable increased activity, with significant cost benefits and efficiency for operators.