Offshore Decommissioning Cost Estimation in the Gulf of Mexico

Decommissioning offshore structures represents the end of the production life cycle, when wells are plugged and abandoned, infrastructure is removed, and the site is remediated and cleared of debris. Decommissioning operations are generally routine, involving standard, low-technology methods, over distinct stages and relatively short time horizons. Offshore operations are more uncertain and costly than onshore, however, due to the hostile ocean environment. Cost estimation is an important aspect of the business since engineers, project managers, and financial accountants frequently perform cost estimates in support of evaluating decommissioning alternatives, divestiture opportunities, and liability assessment. The purpose of this paper is to provide an overview of the factors that impact the primary stages of decommissioning and to describe a general methodology to estimate cost functions. A description of the regulatory requirements is presented along with the empirical construction of cost functionals for shallow-water developments in the Gulf of Mexico.