May 13, 2018

Decommissioning — To end or extend?

Sophie Chapman
3 min
All businesses have to operate in a cost-effective manner, and it’s no different for oil and gas industry companies.

All businesses have to operate in a cost-effective manner, and it’s no different for oil and gas industry companies. Operators are faced with the decision of extending or ending offshore production asset life, and pre-decommissioning planning has emerged as a key challenge for the industry. Mitigating uncertainty, enabling decision making and justification as to whether to end or extend asset life, as well as detailed knowledge of asset conditions, is crucial.

Tracerco, specialists in reactor performance, discuss how a range of diagnostics services can be used to provide this detailed knowledge throughout late life operations, and thereby increasing asset life.

It’s important to conduct regular analysis to see how your current assets are looking — this will allow you to collect data and make an informative decision whether to extend the life of your assets. In cases of initial assessment, technologies that can confirm structural integrity with regard to pipeline corrosion and erosion, flexible riser liner and carcass inspection, midwater arch/buoyancy tank inspection, platform member inspection and grout monitoring is essential. These technologies are vital during extended life campaigns, as regular inspection is required to confirm the viability of the asset.

Cost effective production can be gained through processing — allowing data to be collected through technological detections, diagnostic and measurement capabilities. Reservoir recovery is circa 30% to 40%, and with IOR/EOR technologies as an industry we have experienced a significant impact, where these percentages have been significantly increased. In IOR/EOR applications, chemical tracer technology can be used to manage fluid movement and maxmise hydrocarbon output by establishing water entry points, providing a water cut profile along the wellbore and confirming the water source from the formation or injection water movement when combined with waterflood tracing.

To confirm the impact chemical treatment can have, technology can enable operators to identify high flow permeable channels. In addition, operators can also measure waterflood effectiveness, residual oil saturation, water and oil inflow - which can often be used as an alternative to PLTs where they are deemed too risky, costly, or well design does not permit -  as well as effective water injection and mud invasion. This offers added safety measures during logging while drilling (LWD) using a specially designed monitor for source detection. 

Decommissioning planning must go ahead when event assets are no longer an option for your organisation. The important factor here is to ensure that the route taken mitigates risk and is carried out safely, considering the best interests of the environment as well as complying with local regulations and legislation. 

Using appropriate technology, you can gain a greater knowledge of the asset conditions and if appropriate, make the correct decisions when it comes to disposal. Diagnostic services can give information on the integrity of structures which can justify safe decommissioning. Knowledge of platform member integrity and flowline contents allows operators to assess the weight of structures (as well as ensure they are free from deposits/blockages) before any lifting, ensuing safe dismantling. However, equipment for NORM and LSA scale management, detection, and disposal – can ensure that decommissioning is as safe as possible. These services are also valuable in radioactive source recycling, further enhancing the safety and sustainability of operators’ decommissioning programmes.

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Jun 21, 2021

Magellan, Enterprise and ICE unveil new futures contract

futures
Oil
trading
USA
Dominic Ellis
4 min
The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index

Magellan Midstream Partners, Enterprise Products Partners and Intercontinental Exchange (ICE) are establishing a new futures contract for the physical delivery of crude oil in the Houston area.

The Midland WTI American Gulf Coast contract is being launched in response to market interest for a Houston-based index with greater scale, flow assurance and price transparency. It will use the capabilities and global reach of ICE’s trading platform and is due to be launched by ICE by early 2022, subject to regulatory approval. 

The quality specifications of the new futures contract will be consistent with a West Texas Intermediate crude oil originating from the Permian Basin with common delivery options at either the Magellan East Houston terminal or the Enterprise Crude Houston terminal. In support of this new futures contract, Magellan and Enterprise anticipate discontinuing their existing provisions for delivery services under the current futures contracts deliverable at each terminal once the new contract receives regulatory approval and is finalised. 

“Magellan is pleased to join forces with Enterprise and ICE to offer this leading-edge joint futures contract,” said Aaron Milford, Magellan’s chief operating officer. “The new contract improves the transparency, flexibility and marketability of Midland WTI crude oil for Gulf Coast and export customers while maintaining industry-recognized quality and consistency.”

Harold Hamm, Chairman of the Board of Continental Resources and Founding Member of the American Gulf Coast Select Best Practices Task Force Association said on April 20 last year, when the Cushing, Oklahoma WTI contract traded down to -$38, it was a wake-up call to the oil industry that the storage constraints and landlocked location of the Cushing contract could no longer be ignored.

"I started the American Gulf Coast Select Best Practices Task Force to develop specifications for a new US light sweet crude oil price benchmark in the American Gulf Coast, and to advocate for its implementation and adoption as the main pricing point for the US oil markets," he said.

"We think a futures contract in the most interconnected market center in the country, with a widely accepted quality spec, which settles with guaranteed delivery of crude oil is an important new alternative for the industry. The task force has worked tirelessly to create a marker with transparency and liquidity that is waterborne for this modern era. The Midland WTI American Gulf Coast futures contract ... is a huge step forward for the industry and goes a long way to accomplishing the mission on which the task force has been working.”

Brent Secrest, Executive Vice President and Chief Commercial Officer of Enterprise’s general partner, said: “We are excited about this new crude oil futures contract, which features the combined strength of two extensive and complementary networks of midstream assets with a world-class trading platform to provide customers with greater supply reliability, flexibility and price transparency. 

As the market hub for Permian Basin production, Houston represents the most logical choice for a new futures contract. Between Magellan and Enterprise, we offer access to virtually all of the export capacity in the Houston region, redundant connectivity to all area refineries, a robust Gulf Coast storage position and interconnects to all of the relevant supply pipelines, including those owned by third parties.”

Jeff Barbuto, Global Head of Oil Markets at ICE, said combining efforts with Magellan and Enterprise to establish a benchmark for pricing Midland quality WTI on the Gulf Coast allows it to offer the industry a futures contract with over four million bpd of supply capacity from Midland into Houston, access to both domestic and foreign demand, and nearly 60 million barrels of storage capacity in the Magellan and Enterprise systems. 

"Traded on the same global platform as ICE Brent, Murban and Platts Dubai Crude Oil futures contracts, the new Midland WTI American Gulf Coast contract can also offer significant capital efficiencies to the industry and provide industry-leading quality that buyers have grown accustomed to in the Houston market," he said.

According to EIA forecastsglobal consumption of petroleum and liquid fuels will average 97.7 million bpd for all of 2021, a 5.4 million bpd increase from 2020. US crude oil production averaged 11.2 million bpd in March, up 1.4 million on February. 

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