Permanent Plug & Abandonment Decision Support Technique: Modelling and Simulation based Analysis for Enhanced Value

Abstract

Several oil and gas producing assets on the NCS (Norwegian Continental Shelf) are entering a phase where the costs of extracting the hydrocarbons from the reservoir exceeds the income generated from production, and thus many operators on the NCS are now facing a huge "plug-wave". As Permanent Plugging and Abandonment (PP&A) is time consuming and expensive, the industry is in need for solutions that can lead to more effective and efficient P&A operations that will reduce the related costs. Another concern that operators of late life oil and gas producing assets are facing, is to decide when to PP&A the asset in order to achieve enhanced value.

This thesis gives an introduction to P&A, and some related challenges and uncertainties that are important for decision makers to understand, and handle, to make decisions that will maximize the probability of a good outcome. Several models has been developed to represent the behaviour of oil price, production rate, operational expenses, and the cost of P&A. These models are put together to a NPV model in order to perform Monte Carlo Simulations to see if there is value in postponing P&A compared to P&A at the time where the first negative cash flow of the oil and gas producing asset is seen. The NPV model is used to run through tree different fictitious simulation cases with several waiting strategies.

The main contribution of this thesis is the framing of the P&A decision context by developing a P&A decision framework and the development of the decision support model. The main conclusion is that enhanced value can be achieved by not P&A right after the first negative cash flow is seen, as several factors like fluctuation in oil price and the time value of money concept of the P&A cost can lead to a larger NPV by postponing.