Knowing when to decommission or modernise
There are a large number of ageing oil and gas facilities around the world, which pose the problem of whether they should be decommissioned or modernised.
Here in the UK there are still around 10-20 billion barrels of oil equivalent (BOE) that could be extracted offshore, according to industry regulator Oil & Gas Authority (OGA).
We are seeing oil refineries under ever greater threat. Before the advent of COVID, industry observers were already projecting a significant downturn in the oil refinery sector across Europe, with businesses increasingly needing to rationalise their presence across the continent, particularly given that many of these refineries today are ageing fast.
In August 2021, consultants WoodMac predicted a 9% drop in capacity across Europe in the period between 2022-2023. At the same time, Goldman Sachs predicted refinery rates in 2021-2024 to be 3% lower relative to 2019, which they felt would lead to both permanent closure and greater levels of competition. While some oilfields are now close to being depleted and refineries are getting ever older, a new industrial challenge is emerging – decommissioning the infrastructure. But many facilities can be modernised to extend their useful lives.
Making information visible
So, how can oil and gas companies best decide whether a facility is to be maintained, modernised, or decommissioned?
At the outset, it is important to highlight that upstream and downstream facilities should not, and typically cannot, be divorced from each other. The two are core elements of a single, integrated oil and gas system. If one is impacted, so too is the other.
However, whether we are talking about exploration and production or refining, one of the biggest issues oil companies face is the visibility of information. Having that visibility is especially important in making big decisions around whether to replace, decommission, or overhaul a major facility.
Engineering operations teams need to have quality information at their fingertips to decide whether to spend money on replacing, or overhauling an ageing asset. That information could potentially come from multiple sources. It could come from the asset itself or be based on maintenance activities. Whatever the individual sources, they need to be aggregated in a cohesive way to ensure the combined data can fully support a decision on the future strategy or tactics to be employed.
Types of information
Therefore, what sort of information are we talking about here?
Cost-related information is certainly one key type. Operating expenditure (OPEX) is always a key metric when oil and gas companies are looking at what they should be doing, especially where it relates to capital assets, which can be hugely expensive to manage and maintain but even more expensive to purchase new. For the oil and gas company concerned, looking at how much it costs to operate and maintain the asset is clearly a key decision point. Other aspects of this that are critically important are how often the asset is failing. For example, is it reliable, or do you have to intervene frequently?