Abstracts: 2006

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.

Modeling the Cost of Shut-In Production and the Value of Information in the Gulf of Mexico.
Weather delay is a common risk in offshore energy production, and in the Gulf of Mexico, the occurrence of tropical storms and hurricanes regularly force operators to shut-down production, cease drilling and construction activities, and evacuate personnel. In physical terms, shutting-in a well will usually not cause a loss of the hydrocarbon resource, but in financial terms, the impact of deferred production can have a significant economic effect. Improved ocean observation systems in the Gulf of Mexico are expected to enhance the reliability and accuracy of hurricane forecasting, lowering the probabilities of false positives, and positively impacting the economic and human life consequences. Improved information reduces risk, and to the extent that operators are risk averse, enhanced information increases welfare. The purpose of this paper is to provide a methodological framework to estimate the cost of shut-in production due to extreme weather, and to provide a first-order lower-bound estimate of the market value of improved weather forecasting. Shut-in production is modeled using various recovery scenarios and valued in terms of the cash flow analysis over the life of the asset. A description of the valuation model and the nature of production recovery is outlined and illustrated through stylized examples.

Basin Analysis and Petroleum System Characterization and Modeling, Interior Salt Basins, Central and Eastern Gulf of Mexico.
The principal research effort for Phase 1 (Concept Development) of the project has been data compilation; determination of the tectonic, depositional, burial, and thermal maturation historiesof the North Louisiana Salt Basin; basin modeling (geohistory, thermal maturation, hydrocarbon expulsion); petroleum system identification; comparative basin evaluation; and resource assessment. Existing information on the North Louisiana Salt Basin has been evaluated, an electronic database has been developed, and regional cross sections have been prepared. Structure, isopach and formation lithology maps have been constructed, and burial history, thermal maturation history, and hydrocarbon expulsion profiles have been prepared. Seismic data, cross sections, subsurface maps and burial history, thermal maturation history, and hydrocarbon expulsion profiles have been used in evaluating the tectonic, depositional, burial and thermal maturation histories of the basin. Oil and gas reservoirs have been found to be associated with salt-supported anticlinal and domal features (salt pillows, turtle structures and piercement domes); with normal faulting associated with the northern basin margin and listric down-to-the-basin faults (state-line fault complex) and faulted salt features; and with combination structural and stratigraphic features (Sabine and Monroe Uplifts) and monoclinal features with lithologic variations. Petroleum reservoirs include Upper Jurassic and Cretaceous fluvial-deltaic sandstone facies; shoreline, marine bar and shallow shelf sandstone facies; and carbonate shoal, shelf and reef facies. Cretaceous unconformities significantly contribute to the hydrocarbon trapping mechanism capacity in the North Louisiana Salt Basin. The chief petroleum source rock in this basin is Upper Jurassic Smackover lime mudstone beds. The generation of hydrocarbons from Smackover lime mudstone was initiated during the Early Cretaceous and continued into the Tertiary. Hydrocarbon expulsion commenced during the Early Cretaceous and continued into the Tertiary with peak expulsion occurring during the Early to Late Cretaceous. The geohistory of the North Louisiana Salt Basin is comparable to the Mississippi Interior Salt Basin with the major difference being the elevated heat flow the strata in the North Louisiana Salt Basin experienced in the Cretaceous due primarily to reactivation of upward movement, igneous activity, and erosion associated with the Monroe and Sabine Uplifts. Potential undiscovered reservoirs in the North Louisiana Salt Basin are Triassic Eagle Mills sandstone and deeply buried Upper Jurassic sandstone and limestone. Potential underdeveloped reservoirs include Lower Cretaceous sandstone and limestone and Upper Cretaceous sandstone.

Accounting for Socioeconomic Change from Offshore Oil and Gas: Cumulative Effects on Louisiana's Coastal Parishes, 1969-2000.
The objective is to see if the growth of offshore oil and gas development that took place between 1969 and 2000 resulted in cumulative economic effects that differentiate the economic experience and circumstances of residents in Louisiana's coastal parishes from the residents of Louisiana's non-coastal parishes. A comparison of the average rate of growth in per capita personal income in coastal and non-coastal parishes revealed remarkably little difference over the entire study period, or for any of the sub-periods considered separately. Comparing the components of the growth, however, shows this equality is misleading during the initial two phases of "energy boom" and "price collapse," because the contributors to growth were different. Onshore production in coastal parishes peaked early in the 1970s and then fell rapidly. Offshore production was largely a stabilizing force which became relatively and absolutely much more important in the last half of the period. But during this latter period there are no discernable differences between the two groups of parishes and the implication is, that in a broad regional context, the effects of offshore development were temporary and transitory rather than cumulative or permanent. Demographic indicators in the parishes are consistent with this conclusion.