REGULATORY DEVELOPMENTS FOR WELL INTEGRITY IN BRAZIL – Analysis of ANP Technical Note No. 9/2024

This analysis is based on my background experience in Brazilian Regulations applied for Wells Integrity, my own views and interpretation of the documents referenced.

1.???? Regulatory Framework for Well Integrity in Brazil

In recent years, the National Agency of Petroleum, Natural Gas and Biofuels - ANP ( ANP - Agência Nacional do Petróleo, Gás Natural e Biocombustíveis ) has been working to strengthen operational safety in the oil and gas industry in Brazil through several initiatives, including the publication and review of Technical Regulations and Technical Notes.

It is important to highlight that, in the national context, oil and gas activities are governed by five main regulations, and each of them applies to a different asset, namely: Topside, Onshore Installations, Onshore Pipelines, Subsea Systems and Wells.

Regarding wells, in 2016, ANP Resolution No. 46/2016 was published, establishing the Operational Safety Regime for Well Integrity of oil and gas in Brazil. This resolution also approved the Technical Regulation for the Well Integrity Management System – WIMS (or as known in Brazil “SGIP” or “RTSGIP”). The “SGIP” defines the essential requirements and minimum standards for operational safety and environmental preservation that must be met by companies holding the right to explore and produce oil and natural gas wells in the country. The regulation covers the entire life cycle of wells, including the design, construction, production, intervention and abandonment stages.

Eight years after the publication of the “RTSGIP”, on June 24, 2024, the ANP published Technical Note ANP No. 9/2024/SSO-CSO/SSO. This note addresses the analysis of data from wells with degraded Well Barriers and proposes actions for Operators and Inspection.

But what is the role of Technical Notes in the national regulatory environment?

The Technical Notes published by the ANP aim to increase the transparency of ANP's actions and promote knowledge of regulated markets. Based on technical studies, they assist in the construction and dissemination of a knowledge base on the oil and gas industry. These notes do not necessarily reflect the definitive institutional position of the ANP but provide support for the decisions of the Agency and other spheres of the federal government.

Then, Technical Notes are intended to support and clarify technical regulations, without overriding them. Therefore, it is essential that professionals working in this area understand their importance and how they integrate into companies' daily regulatory routines. It is crucial to be aware of the possible impacts that new publications may have on the management systems implemented, for example, the need to create new operational routines, impact on training, procedures, scope and trails for internal audits, among others.

Regarding ANP Technical Note No. 9/2024, among the obligations of the RTSGIP (RANP No. 46/2016), which consists of 17 management practices, the following relevant points stand out:

"11.3.1 Ensure, throughout the Well Life Cycle, at least 02 (two) independent Well Barriers (Primary and Secondary).

11.3.1.1 In cases where it is not technically possible to compose 02 (two) independent Well Barriers in the Construction, Intervention and Temporary Abandonment Stages, assess the risks and apply mitigating and control measures, in order to maintain them at an ALARP level.

11.3.1.2 Install a DHSV (SSSV) in the Eruptive Wells as one of the Well Barriers Elements (WBE).

13.2.1.1 Ensure that the Duo Well Barriers and other critical systems and equipment are functional, suitable and available for use."

In this context, through Official Letter No. 182/2024/SSO-CSO/SSO/ANP-RJ-e, ANP requested information from Operators about wells with degraded barriers, and this status was later clarified by the agency to the Operators through the Item Number 2 of Official Letter No. 214/2024/SSO-CSO/SSO/ANP-RJ:

2. We inform that the data to be presented refers to whether or not the Well Barriers is available. If available, it is understood as not degraded. If unavailable, it is understood as degraded.

Subsequently, considering the clarification of the concept brought by the agency, a resume would be:

Like ANP Resolution No. 46/2016, Technical Note No. 9/2024 does not conceptually define what degraded Well Barriers are. In the case of RANP 46/2016, it is up to the Operator to establish its own methodology and criteria for classifying Well Barriers within its Well Integrity Management System (WIMS). So, this justifies the need for some Operators to have sought clarification from the ANP (ABPIP Letter No. 020 (SEI 3909427)), since each Operator, based on RANP 46/2016, follows its own methodology, according to the criteria implemented, what may be considered degraded for one Operator may not be for another.

2. 'Degraded' as Possible ANP Reference

The reference for “Degraded” according with ANP may lie in her Technical Note No. 4/2022/SSM-CSO/SSM/ANP-RJ - Methodology for Conducting Self-Diagnosis/Audit of Barriers. Although this technical note was originally written for production facility barriers, it has been ratified by ANP's well coordination for some time as also applicable to wells. An example of this can be found in past thematic audit processes for asset transfer, where the scope of wells was included in the self-diagnosis of barriers, with classification as established in ANP Technical Note No. 4/2022.

It is worth mentioning that ANP Technical Note No. 4/2022 provides an important methodology for barrier management. However, as ANP highlights in the note itself, the results obtained through thematic audits show that barrier self-diagnosis is not being adequately used by the industry. The methodology provided for this note can add immense value to operators in their operational routines, especially in asset transition processes, providing a global view of the status of critical barriers for both the transferor and the transferee. This note also presents a variety of concepts for the classification of Barriers. Below, I highlight those that are most relevant to the context in question:

• Available Barrier - Barrier designed or constructed in accordance with the relevant standards, physically available, with performance as predicted in the project and capable of performing its safety function when requested.

Note: Regarding the performance predicted in the project, it is understood as all the projected characteristics, including reliability.

Note: A barrier that does not meet the parameters set out in the design must be considered degraded, even if it is capable of performing its safety function. The fact that it fulfils its safety function facilitates the contingency of this degradation but does not reverse the degradation of the barrier.

• ?Contingent Unavailable Barrier - Barrier with its safety function unavailable, due to design failure, total mechanical failure, total failure in performance testing, among others. But which presents temporary and contingent measures, formally established and implemented, capable of reducing to acceptable levels the risks arising from its unavailability.
• Degraded Barrier - Degraded barrier, with its safety function compromised, due to design failure, partial mechanical failure, lack of performance testing, partial failure in performance testing, and which does not present temporary and contingent measures, formally established and implemented, capable of reducing to acceptable levels the risks arising from its degradation.

Note: In the case of a critical barrier, this status prevents the operational continuity of the system.

• Contingent Degraded Barrier - Degraded barrier, with its safety function compromised, due to design failure, partial mechanical failure, lack of performance tests, partial failure in performance tests, among others. But which presents temporary and contingent measures, formally established and implemented, capable of reducing the risks arising from its degradation to acceptable levels.
• ?Unavailable Barrier - Barrier with its safety function unavailable, due to design failure, total mechanical failure, total failure in performance tests, among others, and which does not present temporary and contingent measures, formally established and implemented, capable of reducing the risks arising from its unavailability to acceptable levels.

Note: In the case of a critical barrier, this status prevents the system from continuing to operate.

These concepts should generate a series of reflections for Operators, especially with regard to the routines and methodologies created in their Well Integrity Management Systems. Concepts such as Contingent Degraded Barrier and Contingent Unavailable Barrier are, in practice, classifications that summarise what is established in RANP 46/2016, in its item 9.2.2.2:

“9.2.2.2 After detecting a failure in one of the Well Barrier Elements, a failure management or change management procedure must be immediately executed to define the most opportune moment, in relation to safety, to restore the Well Barrier that has lost its integrity.”

I recommend an in-depth study of ANP Technical Note No. 4/2022, as it also covers other concepts that can also benefit Operators. In addition, considering the reassessment and adjustment of the management systems implemented based on the concepts presented in this note can be a positive path for Operators, as it would bring them in line with the language of the regulatory body.

This entire context is relevant, as it reaffirms to the market the ANP's constant search for integration between its regulations and the role of technical notes in this scenario. In addition, it highlights the need for a holistic view on the part of the teams that conduct and manage these processes within organisations.

Based on the concepts described above and the ANP's response to the Operators, it can be assumed that the agency was referring to the barrier classification statuses of ANP Technical Note No. 4/2022 to classify the Well Barriers in ANP Technical Note No. 9/2024. Therefore, the statuses that would prevent the system from continuing to operate would be those classified as “Degraded Barrier” and “Unavailable Barrier”, and it seems that this would be the set of wells of interest to the ANP.

3. Addressing Weaknesses in the ANP Reply about 'Degraded'

When ANP responded to the industry through Official Letter No. 214/2024, it stated that:

However, considering the concepts of ANP Technical Note No. 4/2022 previously presented, the agency may have generated new questions for Operators by combining some of these concepts in its response. To clarify doubts about the application of these concepts in well barriers and possible inconsistencies in ANP's response, I present below a summary with examples in Table 1:

Note, through the examples above, that ANP, when summarising in its response that “IF UNAVAILABLE Well Barrier = DEGRADED Well Barrier”, did not consider that each of these terms has different concepts and applications, as well as different levels of risk. It is important to highlight that assuming that the Primary Well Barrier is a Degraded Barrier due to the degradation of the DHSV element due to a leakage rate within the acceptable limit, as established by the API RP 14B standard, is completely different from assuming that the Primary Well Barrier is an Unavailable Barrier, as per the ANP response. Because, in this context, “Unavailability” does not mean degradation, but rather failure or absence.

In addition, it is crucial to realize that the level of risk is higher when operating a well in the Unavailable Barrier condition (DHSV in failure or absence) than in the Degraded Barrier condition (DHSV with leakage rate within the acceptable limit).

Another point to be considered for the example above is that, although a barrier was classified as “Degraded” based on API RP 14B, considered a reference for industry best practice and in line with the recommendations of RANP 46/2016, when ANP in its response equates a Degraded Barrier with an Unavailable Barrier, this refers to the concepts and definitions of ANP Technical Note No. 4/2022, in this way, the agency would be determining that a well with DHSV degradation with a leakage rate within the acceptable limit could not operate, contradicting some principles of Well Integrity Management, which for this example the well could be operated with risks maintained at ALARP levels and without violating any known national or international regulations.

Therefore, both the request and the agency's response for clarification to Operators about “wells with Degraded Well Barriers” may not have been technically clear. Potentially, this caused each Operator, based on their own interpretations, to adopt different response strategies, probably resulting in divergences in the results obtained and weakening the outcomes of this process.

4. Analysis of ANP Technical Note No. 9/2024

So, as a result of this request, of the 60 Operators acting in E&P in Brazil, 18 provided data on wells with degraded Well Barriers, totalling 559 wells in this condition. In addition, some Operators sent information on wells without any details on the status of their Well Barriers.

In addition, the majority of wells with degraded barriers were classified by the Operators, based on their own methodologies, as eruptive wells (400 wells). Of these, 45 wells require greater attention, as they have both primary and secondary Well Barriers degraded, which, according to the ANP concept for “degraded” and the conclusion reached by the agency in the Technical Note No. 9/2024, these wells would be without barrier elements capable of preventing a possible flow of fluids from the formation to the external environment.

It is essential to initially confirm the actual eruptive condition of these wells, as there are cases where inadequate methodologies are being used, providing misinformation to both the regulatory body and the companies, which in practice would mean adding more or less risk to the process, and therefore promoting inadequate integrity management.

Another point of alert is related to the wells with degraded Well Barriers in this groups:

• 42 eruptive wells that reached the pre-salt region.
• 32 wells in temporary abandonment without monitoring.
• 63 wells producing.

Still regarding the group of wells in temporary abandonment, the ANP database ?on June 30, 2024, shows a total of 807 wells with temporary abandonment without monitoring, indicating that the number reported by the operators (32 wells) may not be representative, being possible to assume that at least another 775 wells are possibly in an unknown condition regarding the integrity of their barriers by the Operators.

In Brazil (ANP database on June 30, 2024) at least 21,596 wells are part of the active number of wells for integrity management by the Operators. Of these, approximately 6,000 wells are in temporary abandonment, with or without monitoring, with construction conclusion dates ranging from 1941 to 2024.

5. General Points from ANP Technical Note No. 9/2024

The points raised by ANP in the Technical Note No. 9/2024, signal that the National Oil Industry should be prepared for what it is coming, statements from the document such as the following one support this:

“8.1 Information on wells with degraded barriers warns that WIMS inspection actions should be more frequent and incisive, in order to encourage Operators to carry out repair activities as quickly as possible, thus mitigating the possibility of incidental events that may affect the environment and people.”

The agency also highlights non-compliance related to some Operator’s routines with regulatory guidelines, and warned:

“5.19. Based on the data presented in Figure 6, it is clear that there are 293 wells with degraded barriers without any communication of the incident being found in the SISO_ incidents system.

5.20. Therefore, Operators are likely to be fined for not reporting these incidental events involving failure Well Barriers.”

And another critical point addressed by the agency is the lack of reasonableness from Operators in the forecast for repairing wells with degraded Well Barriers. Although ANP recognises, in item 5.16, the need for prior planning and adequate allocation of resources, it also points out that excessively long deadlines, as reported (up to 8 years for repair intervention) are not reasonable.

With the Technical Note No. 9/2024 ANP signposted the need for a more objective approach to measure the risk and act according with then, although it does not prescribe the method for this. Trying to help the National Oil Industry, for both Operators and Regulator, I had proposed a possible solution to balance the mutual interest on having safe wells that are available for production while also considering resource availability in my article “APPLYING WELLS QRA WITHIN THE REGULATORY FRAMEWORK FOR WELL INTEGRITY IN BRAZIL”.

6. Referencies

AMERICAN PETROLEUM INSTITUTE. API RP 14B: Design, Installation, Operation, Test, and Redress of Subsurface Safety Valve Systems. Sixth Edition, September 2015.

ANP TECHNICAL NOTE No. 4/2022/SSM-CSO/SSM/ANP-RJ - Methodology for performing Self-Diagnosis/Audit of Barriers.?

LETTER No 214/2024/SSO-CSO/SSO/ANP-RJ - Response to the request for clarification indicated in ABPIP Letter No. 020 (SEI 3909427).

National Agency of Petroleum, Natural Gas and Biofuels (ANP), Technical Regulation of the Well Integrity Management System (SGIP), 2016. RANP No. 46/2016.

Norsok D-010 Rev4, Aug 2013, Standard Norge.

TECHNICAL NOTE No. 9/2024/SSO-CSO/SSO/ANP-RJ - Analysis of data from wells with degraded barriers and proposed action for Operators and inspection for ANP.