“With over 380 fields expecting to cease production in the next decade, the magnitude and cost of work can no longer be ignored. Through learning from global decommissioning projects, the industry can adopt and adapt practices best suited for Asia Pacific’s own set of challenges.”
With more than 1,500 number of structures and more than 7,000 number of wells in Southeast Asia (Malaysia, Indonesia, Thailand and Vietnam), Southeast Asia presents a lot of opportunities for offshore decommissioning, and could cost over $100 billion. Decommissioning is a rapidly developing market sector in the petroleum business, with major potential and major risks. Decommissioning is a source of major liability for governments, contractors, and the public sector, which must be understood if it is to be managed cost effectively. According to Boston Consulting Group, a country needs a strong regulatory foundation for decommissioning in order to achieve three main objectives:
- Enabling the most prudent and efficient use of public funds
- Creating incentives for operators to maximise and continually improve their performance, in terms of both cost efficiency and environmental compliance
- Allowing supply chain participants to play an active role in developing the solutions and technologies needed in each basin
“About half the structures and wells expected to become uneconomical in the 20 years are in Southeast Asia, Latin America, and West Africa” – BCG
National governments need to regulate decommissioning projects by establishing various frameworks and regulations for the decommissioning process. Asia Pacific has geared up for increasing activity as more guidelines and regulations are formed.
In Malaysia, the PDA-Petroleum Development Act 1974 is an act to provide for exploration and exploitation of petroleum by a Corporation, control downstream activities and development and provide for the establishment of a Corporation under the Company Act 1965 [Act 125]. There is a lack of governing legislation for decommissioning, but any decommissioning projects have to comply with the 8 laws which are aligned with key international guidelines.
For example, Thailand has established a legal framework called the Petroleum Act and the Petroleum Income Tax Act. A government initiative, known as Decommissioning 2.0, aims to accelerate and streamline the decommissioning process by creating a one-stop service for obtaining decommissioning approval process and complete the process within six months.
In terms of Indonesian national guidelines for decommissioning, there is minimal legal clarity. Marine dumping legislation states that rigs are allowed to be placed into the sea however there are no technical guidelines for this. The guidelines also has not issued detailed P&A guidelines. Despite it’s huge potential, outdated contracts and a lack of legislative guidance and clarity suggest the low level of the country’s readiness for offshore decommissioning.
Decommissioning is a costly challenge, and governments play a role in providing the right framework for operators, contractors and other stakeholders. Hence, for operators and contractors alike, knowing how to develop a decommissioning strategy is important to ensure the costly operation goes as smoothly as possible.
Interested to read other articles on decommissioning? Check out: Decommissioning and Abandonment 2018
Decommissioning and Abandonment is a 3-day training course designed to provide the delegate with a comprehensive understanding of the key aspects of decommissioning. The delegates will have a unique opportunity of discussing and comparing their individual decommissioning requirements both with the trainer and the other delegates. A key feature of the course will be the opportunity for the delegates to take part in the development of a decommissioning strategy and plan for a typical field.
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