Various factors affect severance selection

Table 1 lists oil and gas structures according to configuration type, water depth, and number of slots available. The available slots indicate an upper boundary on the number of conductors, while the number of slots used corresponds roughly to the number of wells on the structure, but the relationship is inexact because a conductor may contain more than one well and wells may also be along structure legs, which are not counted as slots.

Most structures removed to date have been simple ones, such as caissons and well protectors in shallow waters, and for every major structure decommissioned, about two nonmajor structures have been removed.

Since 1947, more than 2,200 structures have been removed from the gulf, and over the past decade about 125 structures/year have been removed (Table 2).

The number and type of structures removed varies considerably from year-to-year, but the range of 68-177 continues to serve as a good indicator of future activity.¹

Regulatory requirements

When the cost to operate a structure (maintenance, operating personnel, transportation, fuel, etc.) outstrips the income from production, the structure becomes a liability and a candidate for decommissioning.

Different governmental bodies regulate the decommissioning activity in the gulf. State agencies regulate structures in state waters, while the MMS is responsible for structures in federal waters.

The Code of Federal Regulations, 30 CFR 250.1703, specifies the general requirements for decommissioning.² The regulations require the permanent plugging of all wells, removal of all platforms and other facilities, and clearing of all seafloor obstructions created by the operations. The operating company has 1 year after the lease or pipeline right-of-way terminates to accomplish this, unless it obtains special approval to maintain the structure for other activities.

To remove a platform from OCS waters, a company has to submit a structure removal application and a site clearance plan to MMS. If the cutting is with explosives, the work requires an Endangered Species Act Section 7 consultation.

Regulations require the severing and removal of piles, conductors, and caissons to at least 15 ft below the mud line. The manner of cutting is based on factors such as:

• Operator preference.
• Contractor experience and expertise.
• Type of elements to be cut.
• Operations schedule.
• Equipment availability.
• Preparation involved.
• Expected cost.
• Potential cost of failure.
• Structure disposition.
• Feasibility, reliability, safety, and environmental impact considerations.

References 3-10 describe in more detail the stages involved and the technical requirements of decommissioning.

Decommissioning network

Operators, contractors, and severance subcontractors in the gulf form a complex and fragmented network. Contractors primarily involved with gulf decommissioning activities include Berry Bros. General Contractors Inc., Bisso Marine Co., Cal Dive International Inc., Diamond Offshore Drilling Inc., Global Industries Ltd., Horizon Offshore Inc., Laredo Shipping Co., Manson Construction Co., Offshore Specialty Fabricator Inc., Superior Energy Services Inc., and Tetra Technologies Inc.

Structure characteristics such as deck and jacket weight, deck and jacket size, and equipment weight determine which contractors have an available spread for decommissioning. A contractor usually can provide a low bid based on its ability to organize and sequence a number of different offshore activities to achieve economies of scale.

Contractors may perform sand cutting and diver services in-house but will subcontract to a specialist such activity as abrasive water jet, diamond wire, explosive, and mechanical cutting.

Numerous contractors in the gulf provide diver and mechanical cutting services as part of the general requirements to prepare the wells, topsides, deck, jacket, and pipeline for removal. But only a handful of service companies provide specialized services for cutting conductors and piling.

Specialty service

Decommissioning operations are generally routine, involving standard, low-technology methods for deconstruction. Cutting is a specialty service, and so most offshore contractors hire a subcontractor to supply materials and labor rather than maintain their own cutting crews. Subcontractors operate at lower cost and more efficiently than a contractor carrying out cutting as a noncore activity and can develop an expertise and research base that contractors usually are unwilling to pursue.

Cutting services operate within the constraints of a limited and seasonal demand pattern. About 80% of structure removals occur during June-December (Table 3).

The short cutting season and limited demand has significant financial implications because cash flow primary is received only during half of the year. Contractors with diversified services have a more level cash flow and may be more competitive because they need to recover fewer fixed costs during the cutting season.

Abrasive, diamond-wire subcontractors

The market for nonexplosive services has limited upside potential and competes directly with explosive cutting technology.

Table 4 shows the abrasive and diamond-wire subcontractors offering services in the gulf. In recent years, the gulf has seen an influx of North Sea abrasive water-jet (AWJ) contractors further increasing the competitive business environment.

Seven AWJ subcontractors claim to offer services in the gulf, but only two subcontractors are currently active: Circle Technical Services Ltd. and Hydrodynamic Cutting Services (recently acquired by UWG and renamed Well Cut). Oil States MCS Ltd. was active in the gulf through 2000 but has since curtailed activities.

Circle Technical Services and Well Cut currently have four AWJ spreads available in the gulf. Two contractors, CUT Group and Oil States MCS, offer diamond-wire cutting services in the gulf.

Mechanical cutting subcontractors

AWJ and diamond-wire cutting services essentially are complete and self-contained, while several suppliers provide the equipment and services for mechanical cutting on a piecemeal basis.

For mechanical cutting, a contractor typically rents the equipment (cutter and pumps) from a tool supplier and then transports the equipment and personnel to the site. This piecemeal approach is generally less efficient and increases costs but may be preferred in some circumstances. Mechanical cutters are usually limited to cutting conductors.

Explosive subcontractors

The gulf has three primary explosive-severance contractors: DEMEX, Halliburton Jet Research Center, and Explosives International Ltd.

DEMEX is the largest and most experienced explosive contractor, offering structure removal services, trenching, salvage, and industrial operations.

Cutting technologies

Severing offshore structures is an intensive operation. Cutting is required above and below the waterline and mud line on braces, trimming, production string, pipelines, flowlines, risers, umbilicals, shackles, manifolds, templates, guideposts, chains, deck equipment, and modules.

Elements driven into the seafloor require more significant cutting. These elements include conductors, piling, skirt piling, and stubs that are cut and removed at least 15 ft below the mud line.

Common cutting methods include abrasive and sand cutters, diver torch, explosive charges, and mechanical cutters. For severing operations above the waterline, the potential for an explosion usually dictates the cutting technique. Decommissioning uses cold cut methods in areas with an explosion potential and hot cuts elsewhere.

Cutting in the air zone involves conventional methods similar to those used in dismantling onshore industrial facilities.

Cutting below the waterline is more specialized. In water deeper than 200 ft, divers can cut simple elements such as braces and pipelines. Cutting with a diver's torch is often preferred for shallow-water structures such as caissons.

Waters deeper than 200 ft require the use of remotely operated vehicles with abrasive cutters, diamond wire, or explosive charges.

Pile, conductor severing

Pile and conductor severing is the most critical and typically the most expensive severing operation because improper cuts potentially could cause a dangerous situation during the lift. The most dangerous situation arises when an incomplete cut "lets go" after the crane vessel applies significant pulling force.

The physical characteristics of the piles and conductors determine the technical feasibility of severing options and potential removal problems.

Conductors are cut and pulled, if possible, early in the decommissioning process to avoid delay when the decommissioning barge is on site. Conductors are configured in various diameters and wall thickness and are characterized by the number of inner casing strings, the location of the strings relative to the conductor (eccentric vs. concentric), and the amount of grout within the annuli.

Conductors are usually severed with mechanical cutters during the well plug and abandonment (P&A) operation or with explosive charges when a decommissioning barge spread is on site.

Abrasive cutters and explosive techniques are effective for severing jacket legs and piles. In principle, piles could be cut with mechanical cutters, but in practice, piles are usually only open when a barge is on site. With a barge on site, mechanical cutting is neither cost effective nor efficient.

Severing piles involves deploying explosives down the piling and below the mud line or deploying abrasive cutters internally or mounted externally with divers and a track. Obstructions within the pile, such as hangers, require additional removal work or the use of an external cut.

If one structural element requires explosives, then the preference is to use explosives on all elements.

A few decommissioning projects in the gulf have used abrasive water jet and explosive cutting crews in a contingency role. But because back-up crews significantly increase costs, this redundancy is not a standard practice.

Water-jet technology is preferred for internal cutting because it does not require divers to set up the system or jetting operations to access the required mud line depth.

In a typical operation, the first step is to cut the deck from the structure. Next piles are cut and pulled either before or at the same time as the jacket is removed. The piling and jacket are removed together if the piling is grouted to the jacket legs.

Deck removal allows the piles to be accessed internally with abrasive tools or explosive charges. Typically, conductors previously not cut during the P&A of wells will be severed with explosives because explosives can be applied quickly and are reliable.

Severance selection

Cost, safety, failure risk, and technical feasibility are primary factors that decommissioning projects need to consider while selecting a severing technique.

Although there is no way to identify all the important characteristics of severance selection, in practice, it is only necessary to consider factors that adequately represent the process.

Factors that drive the cost and risk associated with a specific severance technique include the location and nature of the site, sensitivity of the marine habitat, structural characteristics, preplanning completeness, schedule of operations, salvage-reuse decisions, marine equipment availability, operator and contractor experience and preference, the number of jobs on a contractor scheduled, weather during the operation, and market conditions.

Direct cost

Derrick barge costs are at least an order of magnitude greater than costs for a cutting spread. As long as the cutting technique does not increase the risk or duration of the operation, therefore, the cutting techniques will not drive decommissioning activities.

The direct cost of a cutting spread is at most $10,000/day for abrasive cutting and $5,000/day for explosive cutting. This compares to a derrick barge spread cost of $100,000-$250,000/ day. The cost to sever piles and conductors in most cases is about 1-3% of the total cost to decommission a structure.11

Failure cost

If the cutting operation is unsuccessful on the first attempt, then either the contractor or operator will assume the cost of the failure and the additional cost to recut. Contractor work rates typically depend on the critical-path activities of the crane vessel, which are those activities that lengthen the on site time of the barge.

Normally, a contractor charges an hourly rate for personnel and equipment for extra work that alters the critical path. If the extra work does not interfere with the critical path, the contractor charges the operator a different, substantially smaller, hourly composite rate. The cost of a failed cut thus depends on the timing of the cut relative to barge operations; e.g., failure to cut a conductor prior to barge arrival is not nearly as significant as a failure after a barge is on site.

The cost of failure is a primary decision factor for selecting a cutting method and timing of the work. The failure cost varies directly with its proximity to the critical path, and because of this, most companies schedule as much work as possible prior to the arrival of the crane vessel.

Circumstances

Circumstances that affect the selection of a severing technology include:

• Structures in a known turtle, marine mammal, or other sensitive habitats.
• Structures in an artificial reef planning area.
• Jacket scheduled for re-use.

These circumstances arise in about 10-20% of the decommission work and typically require nonexplosive methods. Structures scheduled for re-use require clean cuts to avoid the diver cost-risk associated with trimming flared piles and the possible damage to a jacket that explosives can cause.

Structures in an artificial reef planning area may be toppled-in-place or partially abandoned (topped). Toppling involves severing the piles and conductors and then pushing the jacket over to form the reef.

In a partial abandonment, the jacket needs to be cut 85 ft below the waterline. The top jacket portion is then placed on its side near the bottom of the jacket. This option eliminates the need to cut the anchor piles and conductors but does require nonexplosive methods to make the mid-water cuts.

Operator preference

A project management team overseeing decommissioning activities, and in consultation with the operator, prepares bid packages and specifies the work requirements. The operator may have special concerns or preferences that dictate the methods to be employed.

For example, between Nov. 13, 2000, and Aug. 1, 2002, some operators (such as ExxonMobil Corp., Shell Exploration & Production Co., and El Paso Corp.) specifically requested that contractors employ nonexplosive methods for cutting because federal regulations concerning the incidental death of bottlenose and spotted dolphins expired and the National Marine Fisheries Service (NMFS) could not issue Letters of Authorization for structure removal activities.^{12 13}

As a result, this potentially exposed the operators to penalties and, under some circumstances, criminal liability if an underwater detonation killed a dolphin.

Some operators have a long-term interest to be more sensitive to the environment, while other operators, especially operators who have never decommissioned a structure, want their first removal to use a standard cutting method to avoid complications. Operators that have removed only one or two structures frequently opt to use explosives.

Cutting conductors, piles

The P&A of wells may also include severing the conductors, unless the platform configuration, equipment availability, or scheduling prevents this.

Conductors can be cut and pulled well in advance of the crane vessel. This cutting will typically involve a small spread, thus saving derrick-barge time, but also costing additional money for the cutting crew and support vessels. If the operation is not economic, a company will postpone the cutting until the derrick-barge spread arrives.

If the platform has a crane for deploying the tool, cutting can be done with mechanical casing cutters or AWJ cutters.

Cutting piles is usually simpler than cutting conductors, and in such case, the job may use AWJ cutting with a derrick-barge spread.

Conductors have various diameters and wall thicknesses, and typically contain multiple casing strings that are eccentric and grouted, often with voids. Grouted annuli usually are easier to cut than annuli with voids because voids generally dissipate the energy and focus of the abrasive and explosive cutting mechanisms.

The preferred method to cut conductors is mechanical or with explosive charges. Piles can be effectively cut with an abrasive water jet and explosive charges.

Because piles cannot be examined before the topsides are removed, most jobs prefer bulk explosives for the piles because explosives can be sized for unexpected field conditions and give a clear indication of a complete cut.

Structure age

An old structure that has had several operators is less likely to have accurate records and drawings available. Without accurate information, the cutting crew is less able to plan for potential problems.

Old structures also are less likely to be re-used, and therefore, the decommissioning is more likely to involve explosives.

Reliability

No cutting technique is 100% reliable, and therefore the operator's or contractor's experience with the technology and its perception of reliability is as important as actual reliability statistics. Explosive contractors maintain the best cutting data for the gulf, so that the reliability of explosive severance serves as the baseline for all cutting methods.

Based on 500 piles and 300 wells severed 2000-02, the percentage of elements severed by DEMEX on a first shot basis was as follows:

• 97% for 20-30-in. OD piles.
• 92% for 36-42-in. OD piles.
• 86% for > 48-in. OD piles.
• 100% for 10-20-in. OD conductors.
• 95% for 24-26-in. OD conductors.
• 84% for 30-36-in. OD conductors.

Industry consensus is that explosives are the most predictable, flexible, and reliable severance technique currently available.^{6 10}

Configuration type

Nonexplosive methods usually have less financial and operational risk on shallow-water simple structures than for complex deepwater structures. Mechanical and sand cutters are effective for severing shallow-water caissons. Divers are also effective in cutting small well-protector jackets and large caissons.

As a structure's complexity, size, and water depth increases, the reliability of many nonexplosive methods tends to decrease while the cost and risk increase.

On large platforms, especially platforms with wells, the use of explosives is often preferred. Explosives cut quickly and reliably in many applications, and crew exposure time is minimal. As pile sizes increase beyond about 48 in., however, explosive charge weights tend to exceed 50 lb, which is the limit allowed without special permits. In these cases, AWJ cutters become attractive for pile cutting.

Skirt-piled platforms generally are not good candidates for mechanical or diver cuts. Typically, severing of skirt-piled platforms is done with explosives or AWJ methods. Divers or ROVs stab the charges or tools, which are detonated or operated from the surface.

Probabilities

Nonexplosive methods are most likely to be used in shallow water, and as water depth increases, explosives become the method of choice across all configuration types (Table 5). The percentages in Table 3 need to be interpreted relative to the size of the set.

For categories with a small number of entries, the percentage values, by themselves, may not be representative. This is particularly a problem for well protectors in the 61-200 m water depth category in which only a few structures have so far been removed.

The manner in which decommissioning data are reported also needs to be interpreted carefully because a removal with explosives suggests that all piles and conductors were severed with explosives, while in fact, the job may have involved several different severance techniques throughout the structure.

If more than 5 lb of explosive are used to cut any tubular element, MMS classifies the job as a removal with explosives. These data therefore need to be interpreted as the number of structures on which explosives were used at least once during decommissioning.

Table 6 shows the percentage of structures removed with explosive techniques. The use of nonexplosive methods is most common in the 0-10 year category when the structure has the greatest chance for re-use. As age and water depth of structures increase, explosive removals have a greater frequency of application.

Operator practice

From 1986 to 2002, 127 companies removed 1,626 structures in the gulf. Before 1986, a few hundred structures were removed, but the government did not formally document the use of explosives for decommissioning.

Of the 127 companies, 12 removed about half of these structures, while of the top 36 companies, each removed at least 11 structures, accounting for 80% of all abandonments (Table 7). The bottom 91 companies each removed 10 or less structures.

Chevron Corp. (now ChevronTexaco Inc.) has removed the most structures in the gulf. When combined with Texaco Inc.'s structures, it accounts for about 20% of all removals.

Company practice in the application of explosives is diverse and centered on a mean explosive removal rate of 63% (top 12) and 57% (middle 24). The percentages are an aggregate statistic and not an especially good indicator to compare the use of explosives across companies because the characteristics of the structures are not considered.

Companies that have removed 10 structures or fewer are more likely to use only explosive technology. More than onethird of the bottom 91 operators used explosives exclusively, compared to only one company out of the top 36 operators.

The top 36 operators use explosives for removal on average 58% of the time compared with a 51% application rate for the bottom 91 companies. The primary statistical difference between the two groups is that the standard deviation for the bottom 91 companies is about equal to its mean and twice as large as the top 36. In other words, there is a wide degree of variability in the application of explosives among the major players, but among the bottom 91 firms, the variability is even greater.

References

1. Kaiser, M.J., et al., "Explosive removal of offshore structures in the Gulf of Mexico," Coastal and Ocean Management, Vol. 45, No. 8, 2002, pp. 459-83.

2. Federal Regulations, 30 CFR Parts 250, 256, Oil and Gas and Sulphur Operations in the Outer Continental Shelf—Decommissioning Activities; Final Rule, Vol. 67, No. 96, May 17, 2002, pp. 35,398-412.

3. Byrd, R.C., and Velazquez, E.R., "State of the art of removing large platforms located in deep water," Paper No. OTC 12972, Offshore Technology Conference, Houston, Apr. 30-May 3, 2001.

4. Hakam, A., and Thornton, W., "Case history: Decommissioning, reefing, and re-use of Gulf of Mexico platform complex," Paper No. OTC 12021, Offshore Technology Conference, Houston, May 1-4, 2000.

5. Proceedings: Public Workshop, Decommissioning and Removal of Oil and Gas Facilities Offshore California: Recent Experiences and Future Deepwater Challenges, OCS Study MMS 1998-2003, Manago, F., and B. Williamson (editors), September 1997.

6. Pulsipher, A.G., et al., "Explosives remain preferred method for platform abandonment," OGJ, May 16, 1996, pp. 64-70.

7. Shaw, M., "Garden Banks 388 deepwater decommissioning: Regulatory considerations, issues and challenges," Paper No. OTC 12123, Offshore Technology Conference, Houston, May 1-4, 2000

8. Thornton, W., and Wiseman, J., "Current trends and future technologies for the decommissioning of offshore platforms," Paper No. OTC 12020, Offshore Technology Conference, Houston, May 1-4, 2000.

9. State of the Art of Removing Large Platforms Located in Deep Water, OCS Study MMS 2002-04, Twachtman Synder & Byrd Inc., November 2000.

10. Alternatives for inspecting outer continental shelf operations, National Research Council, Marine Board, Committee on Alternatives for Inspection of Outer Continental Shelf Operations, National Academy Press, Washington, DC, 1990.

11. Kaiser, M.J., et al., "Study estimates Gulf of Mexico decommissioning costs," OGJ, Oct. 3, 2003, pp. 39-47.

12. Guegel, A., "Cutting to the chase in Gulf," Upstream News, Dec. 7, 2001, p. 25.

13. Guegel, A. "Sea life in firing line," Upstream News, Aug. 30, 2001, p. 12.

The authors

Mark J. Kaiser (mkaiser@ lsu.edu) is an associate professor–research at the Center for Energy Studies at Louisiana State University, Baton Rouge. His primary research interests are related to policy issues, modeling, and econometric studies in the energy industry. Prior to joining LSU in 2001, he held appointments at Auburn University, the American University of Armenia, and Wichita State University. Kaiser holds a PhD in industrial engineering and operations research from Purdue University.

Allan G. Pulsipher is the executive director and Marathon Oil Co. professor at the Center for Energy Studies at Louisiana State University. Prior to joining LSU in 1980, he served as chief economist for the Congressional Monitored Retrievable Storage Review Commission, chief economist at the Tennessee Valley Authority, a program officer with the Ford Foundation's division of resources and the environment, and on the faculties of Southern Illinois University and Texas A&M University. Pulsipher holds a PhD in economics from Tulane University.