Careful selection of "previously owned" platforms can reduce facilities costs by more than 40% in offshore field developments.

Offshore oil and gas operators have traditionally used a new-build jacket and deck to produce a shelf hydrocarbon discovery. As more marginal reserves are developed, new-build economics may become problematic. One of the major considerations of the commercial viability of a well during the appraisal process is the cost of the production facilities. The cost of new facilities for marginal discoveries may cause the well to be declared non-commercial. Under these circumstances, many oil and gas producing companies employed previously used offshore facilities.

There are approximately 3,500 Gulf of Mexico shelf platforms whose removal will be required within the next few years. Some of these structures are beyond their useful life, are deemed scrap and will be handled as such. Some of the younger structures, however, will be candidates for reuse after examination and structural analysis.

Abandonment options

The US Minerals Management Service (MMS) requires offshore lease holders to remove inactive structures within a year of the end of productive life. The wells must be abandoned and the production facility decommissioned prior to removal. To fund well plugging and abandonment (P&A) and facilities decommissioning and removal, and to cover any additional abandonment liabilities, the MMS requires either the escrow of funds during the life of the well or the purchase of a bond to be used as security for the cost of P&A and removal.

Field operators have two options at their abandonment point. The property (field with facilities and wells) can be sold to one of several companies specializing in the acquisition of mature oil and gas properties, or it can be permitted by MMS to be removed and the site cleared. If the option is removal, again oil and gas producers have a couple of options to consider after platforms have served their purpose. One consideration for the disposal of facilities is the MMS's "Rigs to Reef Program" whereby qualifying structures may be deposited on the seafloor as an artificial reef. The second alternative is to bring the structure to shore to be disposed of as scrap steel, or placed into inventory and stored for future reuse.

Onshore disposal/recycling

A used offshore platform evaluated prior to decommissioning may be classed as a potentially re-usable structure, or it may be deemed to be scrap. Each particular designation dictates a different approach in the removal and shore-side handling requirements.

Derrick barges are used traditionally to salvage offshore platforms. Most of the time, the platform is removed in the reverse order from that which it was installed. The helideck, quarters or a production module is removed first. Then the deck and finally the jacket is removed from the site. The salvage company secures the platform components to a cargo barge for transport to shore. These components are delivered to a shore facility, where they are removed from the cargo barge.

The safe removal of the components of the offshore platform from the cargo barge requires engineering and careful planning. Whether the shore facility utilizes a crane or self-propelled modular transporters to remove the components from the cargo barge, the work is costly, challenging and schedule-driven. There are also environmental considerations when planning the shore-side handling of the offshore platform components, among them NORM, residual hydrocarbons in production equipment, asbestos and lead paint.

Scrapping. Used platforms categorized as scrap are handled altogether differently. Typically, "scrappers" are disassembled offshore in large chunks and placed on a cargo barge for transport to shore. Less attention is given to the protection of the structure against damage during dismantling and transport as opposed to a structure that is designated for reuse. The offloading of the scrap from the cargo barge is tedious and hazardous, requiring a concerted effort toward safety. Now that scrap prices are very favorable there are many players competing for the commodity. Typically, the contract for the purchase and sale of the scrap is between the derrick barge company and the scrap dealer. Oil and gas producers generally like to avoid the liability associated with the removal of scrap from cargo barges.

Reuse. Recycling of used offshore platforms changes the cost dynamics of developing a field. Compared to current steel prices and fabrication costs for a new platform, a recycled platform can save about 40% of the costs. Add the cost-savings to the lead time-savings of approximately 50% over that of a new platform, and the benefits for employing a recycled platform are difficult to ignore.

Previously used platforms are traded between end-users, investing middlemen and brokers. Some oil and gas companies retain ownership of used platforms and instruct the salvage company to deliver the structures to a fabrication yard for storage until they need them. Often, the oil and gas company will deliver title to the salvage company as a condition of the salvage work. In some instances, the operator, or the offshore salvage company, will sell the platform to a third party; an investor; or a specialist in the handling, storage and refurbishment of used offshore structures.

Reuse considerations

Oil and gas companies evaluate alternatives for facilities to produce a well even before the well has been drilled. After the well is drilled and tested, the facilities requirements are determined based on many factors. Considerations include the well count, reserve life, water depth, product to market considerations, future hosting, rig requirements and whether not the facility will be manned or unmanned.
Oil and gas companies that have experience in the selection and employment of used structures will typically take a quick look at the market for those components that would fit their facilities requirements. Components that appear to match the facilities requirement such as a jacket, piles or a deck, are carefully evaluated to determine their remaining useful life through engineering review and various non-destructive testing. The economic drivers in the decision process include the location of the component, refurbishment costs, timing, structure paint requirements and lead paint issues. The cost and timing for using previously used components is compared to the cost and timing to have new components fabricated.

Rigorous analysis required. Engineering analysis of a used offshore structure as to suitability of service is required on all projects utilizing previously used components. The as-built drawings are verified and, if not available, section drawings are prepared on the candidate structure. A useful life analysis and fatigue testing are conducted next to qualify a candidate structure. Having completed the foregoing engineering analysis, the structure is either passed or rejected.

Candidate structures planned for re-deployment offshore must be approved by MMS. This application process is completed by the project engineer. Typically, the MMS approval is received within a relatively short time.

After proving the used structure suitable for the intended service, and with MMS approval, the design and engineering of modifications and the refurbishment are conducted. The project engineer usually prepares a specifications package for the refurbishment and installation of the structure. A properly refurbished offshore platform has all of the characteristics of a new-build structure, and it is difficult for one to determine that it has been reused.

Reuse market. Although the market for previously used offshore production platforms is fragmented, it is defined well enough for the players involved to realize special value through participation. Platform sellers must perform a valuable service assembling, storing, handling and maintaining good, merchantable inventory. Buyers of used offshore platforms are looking for lower cost and faster turnaround delivery on suitable structures in order to produce and deliver their products to the market as fast as possible and at the highest return possible to their investors. When the two interests meet, a recycled platform is often the best field development option.

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