Offshore Decommissioning Project Predictability Is Attainable

Projects to abandon wells, tear down rigs, and pull subsea equipment and pipelines out of the water are no longer back burner projects for Exploration and Production (E&P) operators. According to published reports, the E&P Industry is expected to spend more than $30 billion on offshore decommissioning projects globally over the next 3 years.

Efficiency in the planning and execution of offshore decommissioning projects has not always been a high priority for E&P operators. Businesses have paid little attention to decommissioning project cost effectiveness. But today, operators are funding more projects to remove large assets from the sea and abandon wells. They are motivated by lower oil prices, environmental pressures, and regional regulations on the longevity of non-operational sites in coastal and deep waters. Meanwhile, the average size and complexity of these projects have grown. Today, operators are now looking for ways to control the cost of a growing business expense.

Independent Project Analysis (IPA), Inc., has been partnering with E&P operators since 2012 to assess offshore decommissioning projects regionally and globally. Overall, IPA has determined that the predictability of these increasingly complex projects, in terms of cost and schedule, is dreadful.  For instance, the standard deviation of cost estimates for platform removal projects located worldwide is ±110 percent. On average, platform removal efforts experience cost overruns of 60 percent. According to IPA’s data, platform removal projects experience schedule duration increases of 40 percent globally. But gaps in estimating are not the only factors behind wide variances in performance. IPA’s global offshore decommissioning projects research has uncovered systematic planning gaps that affect performance. Extreme cost and schedule variability result due to these planning gaps, and consequently lead to poor cost and schedule performance outcomes.

Like capital projects, reliable and unbiased cost metrics are necessary for project teams to build predictable estimates for decommissioning work. But also like capital projects, long-term cost effectiveness improvement depends on business and project leadership’s endorsement of processes to remediate the planning gaps that hamper execution performance. IPA possesses actual project data and insights that can help operators successfully plan and execute offshore decommissioning projects. IPA can assist operators funding offshore decommissioning projects by helping them properly mitigate risk in advance of execution and validate cost and schedule metrics against quantitative metrics. IPA also helps operators identify work process gaps that align with industry Best Practices to drive improvements in cost effectiveness.

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