Delivering Asset Life Extension as part of Maximising Economic Recovery

1.0       Introduction

The first discussions on Asset Life Extension (ALE) started in 2000; by 2003, ALE was described as the review and making of recommendations on three critical areas, namely:

·      Asset integrity: The identification of fatigue, stress and potential failures through reviewing asset performance, maintenance, repairs and modifications and the subsequent identification of incremental and accumulative risk

·      Obsolescence: the modification or replacement of asset components with OEM and or Grey Spares

·      Strategic capability: The competency of people and resources

The above were further defined and developed in the OGUK 2012 Guidelines on the “Management of Ageing and Life Extension for an UK Oil and Gas Installation. These core guidelines built on the above three areas and, in addition, included the business drivers from an industry perspective:

·      Major accident prevention and safe operating in later / extended life

·      Operational viability from both a technical and economic perspective

·      Maintaining the asset within legal compliance, i.e.,   OGA, HSE, BIES, industry standards etc.

The key challenge is the degree of complexity involved; this includes the assumptions that must be made and the potential unknowns attributable to the asset’s history. It includes balancing all of these against the ability to complete the necessary work whilst keeping a positive cash-flow and a sound economic future.

If it could be determined that the asset, for example, met verified standards after rigorous reviews, it would be easier to extend its field life beyond its original design life and operating parameters. Critical data might include positive results in each of the following areas:

·      Verification of rigorous inspection, testing and maintenance through a recognised Risk Based Inspection (RBI) program and where all PMRs are shown to have been executed in accordance with the requirements and performance standards of the applicable Technical Authorities / Verification bodies

·      Evidence of the full tracking of all modifications to the asset in association with both incremental and accumulative risk assessments to ensure that the collective modifications have not increased the risks / threats to the asset in the longer term. The lower the number of asset modifications that have been executed, the easier the assessment will be

·      The documented condition of every element of the asset. This is critical considering the possibility of structural fatigue, internal and external corrosion, the history of the equipment / components and the status of the maintenance undertaken

·      Comprehensive records of the design life of each of the components of the asset, especially all Safety and Environmental Critical Elements (SECE), and records of the analytical work undertaken to ensure the future integrity of these components

·      A current perceived risk profile from a Safety Case perspective as well as the key asset risk register

In addition to the above, there is the Government / Regulator (BIES / OGA) overlay that seeks to Maximise Economic Recovery (MER), especially within the current economic climate, and to push decommissioning as far out in time as possible, thereby helping to improve GDP, reduce shorter term liabilities and minimise budget constraints.

The Government’s core energy objectives are:

·      Security of Supply of the UK energy sources to businesses and individuals thereby maximising MER and sustainability

·      Sustainability of our environment – Climate change and Net Zero emissions are becoming ever more an important part in detailing the life of field programs; these must now consider emissions right through the supply chain, i.e.,, power generation, oil overboard, spills, gas flaring, vessel and fuel usage, logistics etc.

·      Affordability - to ensure that the UK remains competitive, the GDP continues to grow and the quality of living in the country is maintained, or increased, thereby allowing the public services to be maintained and improved.

Figure 1 illustrates these considerations.

Figure 1: The three key elements of maximising economic recovery / return

At the highest level of asset life extension, there are five sets of metrics to consider when looking at a plan for an asset:

1.      Security of supply, sustainability and economics at the Government level

2.      Accident prevention with safe operations, operational viability and legal compliance at the Regulatory level

3.      Asset integrity, obsolescence and strategic capability at the Industry level

4.      Investment strategy and approvals at the business level

5.      Execution methodology at the project level

These factors are summarised in Figure 2.

Figure 2.0         Key drivers at each level combined in an overall set of objectives

 2.0       A systematic approach to addressing Life of Field ageing and extension

The OGUK guidelines set out the key requirements as a systematic approach that should be considered in any Life of Field evaluation. These guidelines provide advice on where the focus should be during the appraisal, selection and definition stages of any project. These provide an excellent guide in the definition  of the larger parameters: nevertheless, the process, considering the level of detail required, can be rather daunting.

The systematic approach suggested references the following parameters:

·      Leadership and policy on Asset life ageing and extension

·      Ownership and accountability

·      Leadership commitment and engagement

·      Business Strategy and Life of field planning

·      Management systems

o  Overall business management system

o  Operational management system

o  Asset Integrity management system

o  Wells Integrity management system

o  Maintenance Management system

o  HSE management system

o  Management of Change process, procedure, and compliance

o  Stakeholder management

·      Organisational factors

o  Organisations demographics and competencies

o  Staff turnover and successors

o  Roles, responsibilities and accountabilities

o  Training and development

o  Role and use of Technical Authorities

o  Effective communication

o  Interface Management

·      Support activities

o  Supply chain and contracting strategies

o  Conflicts of interest, internal, across JV partners, external

o  Documentation, information management and administration

o  IT and IS systems

In building the asset life extension project, the overall business objectives and a systematic approach as to how the asset may be effectively managed beyond its design life has been identified. The operational window adds a degree of complexity and uncertainty which needs to be defined so that the team has a realistic understanding of what needs to be done.

3.0        WHY, HOW and WHAT

An underlying key problem is that many people move directly to WHAT they need to do before asking the critical questions of WHY and HOW. Without considered responses to the WHY and HOW, the success of the project, at best, is problematic.

3.1        Why?

The first question is Why the field life of any complex asset confronting several threats and past its calculated design and operational life should be extended. The following factors should in all instances be considered:

1.      When new fields are explored, the reservoir and resources within the block will not be fully understood. Such understanding only builds-up with time with the development of more wells and production. There is always a trade-off between frontend expenditure and the start of development. Many assets realise much more oil and gas than first anticipated and or that the commodity price has increased allowing the asset to operate economically for a much longer period than the original base assumptions. Not extending the asset in such circumstances could lead to the impairment of company value by writing off reserves that could otherwise be produced.

2.      The core strategy of BIES and OGA remains the maximisation of economic recovery. Every asset therefore needs to have a plan in place to extract oil and gas to support the three key government drivers, namely resource security, sustainability and affordability.

3.      Joint Venture (JV) partners, or other resource owners in the area, may only be able to produce their fields economically through existing infrastructure. Asset owners have an obligation to explore such circumstances as part of the license agreement and MER;

4.      There is an original design life associated with each asset. If this design life is to be extended then there are many unknowns that must be investigated and actions taken to ensure that safe and reliable operations are maintained and that the safety of the asset, the people, the environment and the business are maintained; and

5.      Any equipment that goes beyond its design life is considered a material change to the safety case so full justification is required along with an appropriate action plan to allow submission and re-approval of the safety case

For most assets, the answer to WHY relates to all, or to most of the factors above. To succeed the project will require the full commitment and engagement of the leadership / management team to take these questions seriously and to allocate appropriate budgets in a timely fashion, to attract the right resources and to set out a clear plan.

3.2        How?

‘How’ is a hard to describe, as it requires the project leader to consider a whole range of subject matter including the Government Drivers, the Regulator Drivers, the Business Drivers and the systematic approach as defined in the OGUK Guidelines.  Superimpose on these the various dimensions associated with the technical Asset review and analysis, and the inherent complexity of the initiative, and it starts to become quite complex in the early stages. The technical detail is required includes the following: -

·      Subsurface: this will include modelling, profiles, liquids content, sand characteristics, water and other issues. The latter could include data on existing producing field(s), additional 2P from those fields, new fields with current owners and other potential fields and developments in the area

·      Wells: this will include data on well performance, Integrity, productivity index, sand production, water production, intervention scopes, infill, and side-tracks plus information on new wells

·      Subsea infrastructure: from the well heads/ trees through to risers and connections on the facilities. This should include information on interiority, operations, obsolescence, internal and external corrosion, flow assurance and potential back-out issues

·      Topsides processing plant

·      Topsides utility plant

·      All structures

·      Accommodation

·      Export routes

·      Commercial structures and deals

·      Economic models

·      Risk model including risk register and full DRA analysis for safety case

·      HSE and Safety case requirements

·      Inspection, maintenance, repair and modification performance/ activities

The key Asset Life extension methodology, process and key procedures are essential to making sure that a systematic approach in accordance with ascribed guidelines is achieved and that there is a robust methodology in place. The accomplishment of both ensures that the work and forward plan picks up all the elements necessary for safe and reliable operations for the next period as set out in the business plan and in accordance with stated objectives.

The starting point is how can an independent review of the whole asset reduce the ‘known unknowns’ and the ‘unknown unknowns to minimise the risk of failure beyond the original design and operating life. To accomplish this, the team needs full access to the standards, the asset data and the physical asset to create a robust Red flag report and subsequently to validate this report against the observations of the verification body and technical authorities. By having two or three lenses, the best information and recommendations for red flags, success can be achieved. This is inherently difficult as there are several key questions that need to be reviewed and analysed:

1.      How good was the original design and analysis and do they still hold water?

2.      Were the operating conditions lower or higher than the assumptions that were made with respect to environmental conditions, changes in volumes, maintenance strategy etc.

3.      What deviations have occurred from first production to the current day?

4.      What is the forward plan in terms of production, profiles and Economic Cessation of Production?

5.      How robust has the inspection, testing and repair regime been over the period and how will this effect longer term asset integrity and risk level within the safety case?

6.      What has been the modification history? Has this been fully documented including weight control and annual reviews for accumulated risk against the safety case?

7.      Is the contracting strategy changing, and how will this impact future operations?

8.      Interviews with both onshore and offshore staff to distil the stories into facts?

9.      Performance around the maintenance backlog, inspection backlog, Operational Risk Assessments, inhibits etc?

10.  The robustness of the management system and its appropriateness for proposed future operations?

11.  What is the status with the regulators?

12.   What is the asset life extension proposed and will this timeline be reviewed again later?

13.  What are the economics of the asset in terms of possible capital and operational costs?

14.  What POB may be available to execute the extended work above normal operations and how will this be executed?

In terms of HOW, a high-level process and detailed planning is needed to enable a systematic approach and project methodologies to be fully and effectively deployed. The first element is framing the project in terms of scenarios, budgets and business objectives together with alignment, commitment and engagement from the leadership team. This is followed by a capital investment process as follows:

I) Challenge Stage

Phase 1 – an absolute need for open and transparent access to all data, information, performance metrics and people on the asset to enable a full review/analysis and to generate all potential red flags for verification and grouping; and

Phase 2 - The red flags must be reviewed and short-term red flags handed back to operations and engineering for action; the remaining red flags need to be organised into thematic clusters / subject matter areas. The latter can then be clustered into key scopes of work that can be understood more easily by the senior management and operational teams. These will take the form of Statement of Requirements (SOR).

ii) Appraisal Stage

Phase 1 - Unlike a new project, an asset life extension project requires a distinct approach as there may be numerous sub-projects where some are interrelated and some are not. Not only that, but there are also multiple options from

o  Do nothing

o  Change procedures

o  Complete minor modifications

o  Look for grey spares rather than OEM spares

o  Major modifications

o  Replace, and if replace, what with: like for like, or with something different

Phase 2 - There must be a robust process executed to appraise the SORs and red flags along with all potential options in an efficient and effective way to ensure that business objectives are met. The screening process (see also Figure 3) might include:

o  First pass technical review with team

o  SWOT analysis to compare options and reduce the number of options

o  Cost Benefit Analysis to further reduce options on an economic basis with Decision Risk Analysis support

o  Criticality and Viability Assessment

o  Table of final options to be taken forward to ultimate selection

iii) Selection Stage

Phase 1 – The requirement is to achieve real alignment, engagement and commitment from the leadership team and the JV partners as the selection process narrows to potential scopes of work for final decision and BoD/ FID. The complex, larger and / or scopes that are misaligned must attain real focus.

Phase 2 - critical at this juncture is to make sure that the business objectives and stakeholder management are aligned in addition to adopting all other scopes. At this point the project may transition from a single project with an independent team to the asset between the operations and engineering department as a set of modifications and asset integrity work-scopes under an asset life extension program.

iv) Definition Stage

At this point, it may transition from a major project and each scope continues at its own pace within the asset engineering modifications and maintenance systems unless there is a need for one or two substantial new modifications / projects that require and specialised team. Work-scopes should have a place holder in the asset management system to help plan the offshore work-scopes, POB requirements and procurement etc

 v) Execution Stage 

This may be arranged in two different categories: work-scopes that can be completed over time with the existing crews and asset POB / Accommodation, and work-scopes that require a campaign approach and additional POB that could be either non shutdown or shutdown related.

vi) Close-out Stage

As it is possible that the asset life span may be revisited at a future time, not only should all the as-building documentation be closed out, a project review with the risks, actions and lessons learnt should be performed to highlight both generic and asset specific items that might be built into the next extension / review

Figure 3 Process flow to review, optimise and select scopes for Asset Life Extension

 3.3        What?

 The last question is What? Most of the relevant material has been covered, but an asset life extension cannot be completed by just looking at the topsides, or just looking at the wells, or just looking at obsolescence etc. The full picture must be examined as only then can the right judgements and decisions be made, ones which align to MER and both safe/reliable operations and operational viability. Therefore, the following must be considered:

1.      All subsurface history, forward production curves and resource opportunities, as these profiles provide the basis for the economics and the estimated CoP date.

2.      The condition and status of the wells as well integrity and the cost of interventions, side-tracks and new wells could swing the balance on the economic life of the field.

3.      The status of all subsea infrastructure as it is hugely expensive to replace, but also hugely expensive should there be a failure. Such costs could tip the balance in the CoP data and continued investment.

4.      Detail on riser systems and the main structures. This data should focus on fatigue analysis rather than fatigue life (whether above or under a fatigue life of 1), and more about remaining fatigue and what mitigating actions are necessary to monitor the fatigue.

5.      Detail on all primary, secondary and tertiary steel work.

6.      Detail on process systems including those relating to oil, gas, water including information on high pressure, medium pressure and low-pressure systems. Review of process optimisation and capacity to accommodate changing fluid compositions must be included.

7.      Detail on all utility systems including power, water, air, drains, emergency controls, nitrogen, inert gas, steam, comms, GA/PA etc.

8.      Detail on offtake and export routes.

9.      Detail on accommodation support including HVAC, emergency response, HSE considerations, offshore morale / motivation etc.

10.  Detail on all key management systems and reporting mechanisms.

11.  Detail on organisational capability in including cultural alignment.

12.  Detail on overall asset economics including alignment with commercial structures.

13.  Detail on execution methodologies which could be onshore with FPSO, or new modules to offshore with a range of accommodation / POB options; and

14.  Detail on COP and the decommissioning strategy.

4.0       Moving forward

It is clear that a systematic approach is not enough, There is a need for a clear and well-articulated business case, comprehensive processes, explicit techniques and specific tools to facilitate the execution of asset life extension projects in a manner that will respect and protect both MER and HSE standards into the future.

There is a need to move away from the VUCA world in a reactionary sense and move to a VUCA world in a more proactive sense, i.e.,

Reactionary     VUCA   =           Volatility, Uncertainty, Complexity, Ambiguity

Proactive          VUCA   =          Vision, Understanding, Clarity, Agility

It must be remembered that the first obligation of safe and reliable operations is to protect people, the asset, the environment and the business.

The second obligation is to UK plc to support GDP in terms of security of supply, sustainability and cost by aligning with and implementing MER and Net Zero goals to allow the prudent development of further oil and gas operations into the future.

Quote of the day

"A bird sitting on a tree is never afraid of the branch breaking, because her trust in not in the branch, but on it's own wings. Always believe in yourself - Then together we can do amazing things."

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