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Archive for the ‘decommissioning’ Category

Another chapter in the Santa Ynez Unit saga

Posted in California, decommissioning, Offshore Energy - General, tagged , , on November 8, 2022| Leave a Comment »

HOUSTON, Nov 6 (Reuters) – Exxon Mobil Corp will take up to a $2 billion loss on the highly leveraged sale of a troubled California offshore oil and gas field that have been idled since a 2015 pipeline spill.

Sable Offshore, a blank check company founded by industry veteran James Flores, will borrow 97% of the $643 million purchase price from Exxon under a five-year loan. Blank check companies raise money to acquire operating businesses. If Flores fails to restart production at the Santa Ynez field by the start of 2026, Exxon could take back the entire operation, Sable disclosed in a filing.Flores will seek permits to restart Santa Ynez and expects to pump about 28,100 barrels of oil and gas per day beginning in 2024, according to a Sable investor presentation. The field has 112 wells and the potential for at least another 100 wells, its presentation showed.

Jim Flores is well known in the offshore industry dating back to his days as CEO of Flores & Rucks, a Gulf of Mexico exploration and production company, in the 1990’s.

And Exxon is no doubt still on the hook for decommissioning these massive platforms.

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BSEE’s decommissioning notice has been posted

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, Regulation, tagged , , , on November 8, 2022| Leave a Comment »

BSEE’s temporary abandonment/decommissioning solicitation has been posted. Some details:

  • 14 wells to be decommissioned
  • 1 well to be checked to confirm temporary abandonment
  • Well depths: 2359′ to 11934′
  • Water depths: 70′ to 477′
  • 11 gas wells, 3 oil wells
  • Well completion dates: 2006-2008
  • Last production: 2010-2013 (Presumably, the short productive life of these wells either contributed to or was because of the lessees’ bankruptcies.)
  • $25,000😀 minimum to $100,000,000 maximum contract guarantee

If I was an offshore contractor, I wouldn’t touch this work without:

  1. Ironclad liability protection after the work is completed and inspected. A contractor should not inherit the perpetual liability that the lessees knowingly and willfully accepted when they purchased the leases and conducted operations; nor is the contractor responsible for the failure of industry and government to establish a financial assurance framework that protects the taxpayer from such liabilities.
  2. Protection against likely cost overruns related to the uncertain downhole condition of the wells.

Previous posts on this matter:

Taxpayer funded decommissioning – troubling precedent for the US offshore program

NOT a shining moment for the offshore industry

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NOT a shining moment for the offshore industry

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, tagged , , , on October 21, 2022| Leave a Comment »

Where is the leadership? Offshore decommissioning costs should never fall on the taxpayer. See the attached notice (excerpt below) and a previous post on this topic.

BSEE intends to execute a multi-award IDIQ Quantity Contract inclusive of a Base Year and Four (4) Option Years; however, the government reserves the right to award the IDIQ contract to a single firm. Time & Material, Labor Hour, and/or firm-fixed price task orders will be awarded for Decommissioning Services necessary to take nine (9) orphaned facilities, located in the OCS of the Gulf of Mexico, to the point of Temporary Abandonment (TA). The estimated decommissioning cost for temporary abandonment is $10,000,000 to $20,000,000.

idiq_ta_decom_pre-solicitation_notice_final_10_12_22_1Download

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Programmatic EIS for Pacific OCS platform decommissioning presents 4 alternatives, none of which are workable

Posted in California, decommissioning, Offshore Energy - General, Regulation, rigs-to-reefs, tagged , , , , on October 20, 2022| Leave a Comment »

The 23 platforms in Federal waters offshore California are from 33 to 55 years old. Most are no longer producing and 8 are on terminated leases. Some of the platforms are massive structures in water depths up to 1200′ (list of platforms and map below).

BOEM’s draft programmatic EIS evaluates 4 decommissioning alternatives, none of which appear to be workable for a combination of economic, environmental, and legal reasons:

  • Alternative 1 involves the complete removal of platforms and pipelines. This alternative is cost prohibitive and environmentally unfavorable.
  • Alternatives 2 and 3 evaluate prudent and environmentally responsible partial removal options. Unfortunately, partial removal and reefing are not feasible under the California Resources Legacy Act (AB 2503). This legislation holds the donating company perpetually liable for any damages associated with the reef structure. While not assuming any liability, the State nonetheless collects 80% of the savings (reefing vs. complete removal). As a result, it’s no surprise that no company has applied to participate in the State’s program.
  • Alternative 4 calls for leaving platforms and pipelines in place after emptying tanks and flushing pipelines. This “no action” baseline alternative violates the lease agreement and 30 CFR 250.1725, and would only be permissible if an alternate use was approved for the platforms per 30 CFR Part 585.
  • The EIS, with minimal discussion and no supporting data, rules out alternate uses at any of the 23 platforms. This exclusion would seem to be premature given the win-win-win opportunities for industry, government (Federal, State, and local), and academia. These include deferred decommissioning liabilities, a wide range of research opportunities, security and defense applications, weather observation and climate studies, maritime communications support, education programs, marine seismicity studies, and hydrokinetic energy projects. With proper maintenance, platforms can continue to provide social benefits long after all wells are plugged and production equipment is removed. However, once removed, replacement costs would be prohibitive.
  • Lastly, the EIS avoids the thorny financial responsibility issues that will complicate decommissioning decisions. Note the questions raised in the “troubling case of platforms Hogan and Houchin.”
  • Those wishing to comment on the draft EIS should follow the posted instructions.

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The Talos-EnVen merger is a pretty big deal

Posted in decommissioning, energy, Gulf of Mexico, Offshore Energy - General, tagged , , , , , on September 26, 2022| Leave a Comment »

Sept 22 (Reuters) – Talos Energy Inc (TALO.N) said on Thursday it will buy EnVen Energy Corp, a private producer in the deepwater U.S. Gulf of Mexico, in a $1.1 billion deal including debt.

As the data below demonstrate, this is a significant merger from a regional perspective. In 2021, the combined company would have been the sixth largest GoM producer of both oil and gas. The two companies are operating 105 platforms, and their 8 deepwater (>1000′) platforms are 14% of the GoM total. Their compliance records, while not at Honor Roll levels, are better than the GoM average based on INCs/inspection. Some major decommissioning projects loom (see the second table below), and the extent to which the merged company is financially prepared for these obligations is unknown. Particularly noteworthy is the Cognac platform, which was the world’s first platform installed in >1000′ of water.

EnVenTalos
2021 Oil (MMbbls)9.617.5
GoM oil rank137
2022 Gas (Bcf)12.634.8
GoM gas rank169
2021/2022 well starts88
platforms: total1491
platforms >1000′44
BSEE inspections37176
2022 INCs (W, CSI, FSI)12/4/138/23/10
INCs/inspection0.460.40
INC=incident of noncompliance; W=warning; CSI=component shut-in; FSI=facility shut-in

Decommissioning obligations of note:

Platformownertypewater
depth (ft)		installed
Amberjack Talosfixed11001991
VK 989Talosfixed12901994
Ram PowellTalosTLP32161997
GC 18Talosfixed7501986
CognacEnVenfixed10231978
LobsterEnVenfixed7751994
BrutusEnVenTLP29002001
PrinceEnVenTLP15002001
Cognac platform

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RIP Gerald Rhodes, Engineer and Regulatory Scholar

Posted in decommissioning, Gulf of Mexico, Offshore Energy - General, Uncategorized, tagged , , , , on September 5, 2022| Leave a Comment »

An important figure in the history of the US offshore program passed away last week. Gerry Rhodes was a petroleum engineer with an attorney’s gift for understanding laws and regulations. Among other leadership roles in the offshore regulatory program, Gerry was Chief of the Minerals Management Service’s Branch of Rules, Orders, and Standards in the 1990’s.

Gerry was among the first in the Federal government to fully understand the financial responsibility risks associated with the decommissioning of offshore facilities and the urgent need to update requirements for the plugging of wells and removal of platforms. The enormity of this challenge is described in the 1991 Forbes article pasted below. Despite sharp divisions within the offshore industry and the resulting political pressure, Gerry succeeded in finalizing regulations (including this 1995 rule) that are the basis for the current financial responsibility programs in BOEM and BSEE. Without Gerry’s resolve, subsequent financial assurance challenges and government outlays would have been far greater.

RIP Gerry. You were a true gentleman, a dedicated father and grandfather, and a diligent and highly accomplished colleague.

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Very good article on California decommissioning

Posted in California, decommissioning, Offshore Energy - General, tagged , , on August 16, 2022| Leave a Comment »

beneath Platform Gilda, Santa Barbara Channel

This Montecito Journal article explains the ecological importance of California offshore platforms and summarizes the challenging regulatory issues associated with their decommissioning.

According to a paper published in 2014 by marine ecologist Dr. Jeremy Claisse of Cal Poly Pomona, the oil and gas platforms off the coast of California are the most productive marine habitats per unit area in the world. “Even the least productive platform was more productive than Chesapeake Bay or a coral reef in Moorea,” said Dr. Love. (Milt Love, UCSB biologist)

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Still waiting for…

Posted in accidents, CCS, decommissioning, Offshore Energy - General, pipelines, Regulation, tagged , , , , , , , , , , on August 11, 2022| Leave a Comment »

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Decommissioning update (not directed at any BOE reader😀)

Posted in decommissioning, Offshore Energy - General, Uncategorized, tagged , , on July 8, 2022| Leave a Comment »

Like offshore platforms, BOE readers are useful long after “retirement”😁

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California decommissioning – the band plays on

Posted in California, decommissioning, energy policy, rigs-to-reefs, tagged , , , , , , , , , on May 31, 2022| Leave a Comment »

Offshore California, the best that most facility operators and their predecessors (to the extent they continue to hold decommissioning liabilities) can hope for is a graceful exit with manageable financial losses. (The situation is a bit different for Exxon’s Santa Ynez Unit, which has been shut-in since 2015 while the company seeks to resolve oil transportation issues resulting from an onshore pipeline rupture. Here is the latest episode of that amazing saga.)

California’s Federal offshore, where 9 mobile drilling units (MODUs) were operating concurrently in the early 1980s, hasn’t seen a MODU in over 30 years. However, 23 production platforms, some of which are massive structures, remain (see the presentation below). At this point, these platforms are expensive monuments given that their combined production (per EIA) is only 7000 BOPD.

Regardless of their production status, the California offshore platforms continue to be ecologically significant. Dr. Jerry Schubel is among the many marine scientists who understand the importance of the life that has grown on and around these structures. The scientific community also sees other research, educational, and recreational uses for these platforms as per our Rigs-to-Reefs +++ page. 

In the absence of workable State reefing/reuse legislation, not much is going to happen. Questionable Federal decisions on the management of decommissioning funds are another impediment to timely action. (See “The troubling case of Platforms Hogan and Houchin.”)

To their credit, State and Federal agencies, trade organizations, and interested third parties continue to discuss the issues and consider alternatives. A recent workshop was helpful in that regard. Attached is the excellent presentation by Bob Byrd and John Smith, who have been at the vanguard in addressing California decommissioning issues. Embedded below is the YouTube video of the presentations from their session. These are excellent updates for those who have an interest in decommissioning issues.

byrd-smith-2022-occ-decommissioning-overview-1Download

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