ABANDONMENT REPORT AND REVIEW OF MMS DECOMMISSIONING COST ESTIMATE

Transcription

1 ABANDONMENT REPORT AND REVIEW OF MMS DECOMMISSIONING COST ESTIMATE LEASE OCS P-0166 PREPARED FOR: Minerals Management Service OXY USA Inc Pacific Operators Offshore Inc Phillips Petroleum Company Texaco Inc B Y: REVERSE ENGINEERING L IMITED 165D BURTON ROAD, D IDSBURY, MANCHESTER, M20 2LN, ENGLAND, U.K. TEL: (I NT ) FAX: (I NT ) REL D OCUMENT: 02-57/01-DR-001 REV. 2 June 2000 REVERSE ENGINEERING

2 Job No: 02-57/01 Revision 2 ABANDONMENT REPORT AND REVIEW OF MMS DECOMMISSIONING COST ESTIMATE Lease OCS P-0166 Submitted to: Minerals Management Service OXY USA Inc. Pacific Operators Offshore, Inc. Phillips Petroleum Company Texaco Inc. Submitted by: Reverse Engineering Limited 165D Burton Road Didsbury Manchester M20 2LN U.K. Date: June 20,

3 REPORT COVER SHEET Report Title: Review of MMS Decommissioning Cost Estimate: Hogan & Houchin Facilities Table of Revisions Revision Date Reason for Issue/Revision 0 9/03/2000 Draft Report Issued for POOI Comments 1 16/05/2000 Comments from POOI 2 19/06/2000 Addition of Appendices A & B Prepared by: Dr Brian G Twomey Date Checked by: Mr Steve Baker Date Approved by: Dr Brian G Twomey Date 2

4 CONTENTS EXECUTIVE SUMMARY 1. INTRODUCTION 2. INPUT TO REVIEW OF MMS COST ESTIMATE 2.1 TECHNICAL UPDATE 3. COST REVIEW Versatruss Installation of 3 Integrated Decks in Venezuela Versatruss Jacket Lifting System Status of Re-Usable Buoyancy System For Jacket Removal Onshore Dismantling & Disposal Update 3.1 Engineering & Planning 3.2 Permitting 3.3 Platform Preparation 3.4 Well P&A 3.5 Conductor Removal 3.6 Mobilisation of Marine Equipment 3.7 Platform/Structure Removal 3.8 Pipelines and Power Cables 3.9 Transportation & Disposal 3.10 Site Clearance 4. CONCLUSIONS APPENDICES Appendix A POOI Well Abandonment Estimate 3

5 EXECUTIVE SUMMMARY MMS DECOMMISSIONING COST ESTIMATE REVIEW LEASE OCS P INTRODUCTION Pacific Operators Offshore, Inc. (POOI) commissioned (REL) to provide a site specific abandonment engineering report utilising the Versatruss system and to review the decommissioning costs proposed by the MMS for lease OCS P-0166 (Hogan and Houchin facilities). The latter of which is base on a piece small removal approach to decommissioning. The main focus of this review was to examine each of the 10 MMS decommissioning cost estimate elements as outlined in Table 1 below [1]. Then to comment on the accuracy of each element, considering the assumptions of the MMS methodology [2], BASED ON REL s world-wide experience of offshore decommissioning. Cost Element MMS Estimate 1. Engineering & Planning $340, Permitting $375, Platform Preparation $582, Well P&A $7,551, Conductor Removal $1,664, Decks & Jacket (Assumed Mob / Demob) $5,400, Platform / Structure Removal $6,138, Pipelines & Power Cables $825, Transportation & Disposal $3,661, Site Clearance $733,000 Total Estimated Cost $27,269,000 Table 1: MMS Decommissioning Cost Estimate for Lease OCS P-0166 [1] In reviewing these estimates Reverse Engineering Limited include updates on the Versatruss deck & jacket lifting system and CVBS jacket lifting technologies and on recent discussions with onshore dismantling and disposal sites on the West Coast of the USA and Mexico. The estimates presented in this document represent the opinion of Reverse Engineering Ltd. and draws on the planning, engineering, cost estimating and decommissioning experience of over four hundred and thirty platforms world-wide over a period of eleven years. These costs have been verified by comparison with data from completed removal 4

6 operations. Much of REL s work in South East Asia is particularly relevant to the Pacific Coast of the US, as most of the marine equipment must be mobilised from distant parts. 2. INPUT TO REVIEW OF MMS COST ESTIMATE Previous cost estimates, including the generic MMS study for the Pacific OCS, have been based upon using a derrick barge to effect a piece small removal of the platforms. In this estimate REL will adopt a one piece topside removal followed by a one piece jacket removal for each of the platforms using the innovative Versatruss lifting system. The Versatruss system is considered to be a cost-effective alternative for the removal of the Hogan and Houchin platforms for the following reasons: Low relative mobilisation/demobilisation costs, especially to areas where no high capacity derrick barges are available, such as California. Has removed decks up to 6,000 tons and the engineering has been completed to remove decks of up to 20,000 metric tonnes, in the North Sea, in one lift. Typically, no major modifications are required to the jacket or the deck to suit the Versatruss system. Local availability of all required equipment except for boom trusses, which must be custom built. Versatruss employs a set of barges, lift booms and common multi-part rigging to either lift or set a large deck structure in one piece. Versatruss has been successfully used for salvaging the deck of Mobil s West Cameron 71 and the 1,300 metric tonne deck of Amoco s Eugene Island (EI) 367 A. The Versatruss system can also be employed for jacket removal although procedures to effect this are still under development. The cost estimate for removal of the platforms using the Versatruss system includes engineering, preparatory work, mob/demob, offshore removal and onshore dismantlement. In order to provide comparison, cost estimates for platform removal are also included for the removal of the Hogan and Houchin platforms using a derrick barge. The removal duration s have been re-estimated and applied to estimated spread costs to find a removal cost. No mob/demob, engineering or preparatory costs are included in this estimate. Discussions held with American Pacific Marine indicate that revised duration s are realistic given the level of engineering detail undertaken for this project. The cost for removal using a derrick barge has been included with estimates for process decommissioning, well abandonment, conductor removal, pipeline removal and removal of the onshore facilities to produce an estimate for the total decommissioning liability. 2.1 TECHNICAL UPDATE Versatruss installation of 3 integrated decks in LL-652 Field, Venezuela, 1999 A Chevron led consortium including Statoil, Arco, Phillips and PdVSA contracted Versatruss to install several facilities in approximately 70 feet water depth in the LL-652 oil 5

7 field in Lake Maracaibo, Venezuela. The installations were scheduled to take place between March and September The preliminary platform design called for installation by float-over. This method requires the jacket to be designed without upper cross bracing. This is to allow the installation barge to float between the jacket legs and then submerge to set the deck on the jacket. However, following seismic evaluations and analysis, the design was found to be unacceptable; hence, an alternative installation method was sought and bids were solicited from both Versatruss and other heavy lift vessel operators. Subsequently, the installation contract for this project was awarded to Versatruss by virtue of the fact that the nearest commercial bid was millions of dollars higher than the Versatruss proposal. The reason for this substantial difference in quotes is attributable to the fact that there is a bridge spanning the entrance to Lake Maracaibo. Crane vessels with the required lifting capacity for the project were not able to pass under this bridge without disassembling the crane and re-assembling once on the other side of the bridge, an expensive and time consuming operation. Reverse Engineering Limited (REL) provided on-site engineering support to Versatruss for the design of the deck lifting systems and engineering of the lift using the structural engineering codes Offshore-DYNA, SACS and WAMIT. Engineering analyses have been performed to assess both the integrity of the platform components and lifting system during tow and installation as well as for the design modifications for the platform decks. The REL work was independently checked and verified by Han Padron Associates and Chevron. Figure 1.01: Engineering Model of The 6,000 ton Deck During Transit 6

8 Versatruss transported the decks to the field on-the-hook in a trimaran formation with a centre transport barge supporting a proportion of the deck load. (See Figure 1.01) The system was able to pass under the bridge; hence the ability to make major cost savings compared with crane vessels. Figure 1.02: LL-652 Field in Venezuela: 6,000 Ton WIP Deck during Transit. Also in view are the 3,500 and 4,500 decks previously installed by Versatruss The platform decks were originally designed for installation by methods other than Versatruss. The analysis work undertaken by REL aided the platform fabricators to redesign the lifting points and to add structural reinforcing members for the Versatruss lift. The results of this analysis confirmed the system s ability to install the decks in the design sea state for the installations (significant wave height of 6 feet and a period of 5 seconds). Figure 1.03: Lifting of the 4,500 ton deck from the transport barge 7

9 Figure 1.04: Lifting of the 6,000 ton deck from the transport barge Figure 1.05: Installation of 6,000 ton deck, viewed between the 3,500 and 4,500 ton decks The decks were installed successfully using Versatruss. (See Figures ) This project was not only the first installation project performed using the system but also produced a major development in the system s offshore lifting capability. By successfully installing the 6,000-ton deck in one lift, the Versatruss system has demonstrated its 8

10 capability as one of the five largest (by lifting capacity) installation systems in the offshore industry. 9

11 2.1.2 Versatruss lifting of 3 jackets in Morgan City for LL-652 Field, Venezuela, 1999 The Versatruss Jacket Handling Frame (JHF) was used to off-load three jackets of between 650 and 800 tons at Morgan City (see Figure 1.06). This version of the JHF was designed to lift a maximum of 2,000 tons. Figure 1.06: Load-Out of an 800 ton Jacket By Versatruss Jacket Handling System The JHF was designed to be towed to the lifting location sea-fastened to a barge and erected near the lifting location. But the client, who owned the JHF, decided to transport the JHF erected, as shown in Figure The JHF was towed at between 6 and 10 knots for 2,200 miles before it hit bad weather, when it was badly damaged and lost at sea. Figure 1.07: Versatruss Jacket Handling System during Transit 10

12 A new JHS has been designed and is scheduled to be constructed in the next year. The lifting capacity of the new JHF will be 2,400 tons Development Status of Re-usable Buoyancy System For Jacket Removal INTRODUCTION Due to the weight of large offshore jacket structures exceeding the lifting capacity of the heavy lift vessels, they have traditionally been installed using buoyancy. This buoyancy includes the inherent buoyancy of the members, large diameter bottle sections in the jacket legs and temporary buoyancy. After launching the jacket from the transportation barge, the jacket would float horizontally with a small amount of freeboard. The upending of the jacket would then be performed by controlled flooding of some of the buoyancy in the structure to alter the position of the centre of buoyancy relative to the centre of gravity, thus causing rotation to re-establish equilibrium. By careful control, the jacket would be progressively rotated from horizontal to vertical and the temporary buoyancy, located to the top of the jacket, would support the jacket off the seabed for final positioning. After final positioning the structure would be ballasted down onto the seabed and the temporary buoyancy removed. The concept from which Controlled Variable Buoyancy System (CVBS) derives is that the reverse of the method of installation would be the most cost effective method of removal. CVBS is designed to be a purpose built system for removing offshore jacket structures, and due to being controllable, enables the removal to be without the use of expensive heavy lift vessels. The installation method establishes the confidence that CVBS is a viable method of removal. It is currently being developed as part of a Joint Industry Project (JIP) of which BP-Amoco is a co-sponsor, and the system that is proposed for this application would be a development of the JIP system. The majority of the temporary works equipment from the installation were removed after installation and the integrity of the remaining systems used during installation many years ago may be susceptible. CVBS is an add-on system that eliminates the need to use of any of the original installation equipment or systems. The buoyancy units, see Figure 1.08, will be available as passive units, in which the buoyancy is fixed after installation and remains unchanged through out and intelligent units in which the buoyancy bags would be inflated and deflated to suit operational requirements DESCRIPTION OF THE CVBS MODULE The CVBS modules consist of long, large diameter GRP buoyancy chambers grouped together and clamped around tubular jacket legs members. The GRP shells for the chambers are formed using filament winding techniques around a formed mandrill and are designed to resist an operating pressure differential of 6 barg. Steel bands are secured to 11

13 the GRP shell at the points where the steel clamps that are used to clamp the module to the leg of the jacket are located. Thick GRP bands will be laminated to the outer shell both above and below the steel band to act as shear keys to prevent the shell sliding out of the clamps. Figure 1.08: A CVBS Buoyancy Unit Attached To A Jacket Leg Intelligent Buoyancy Units (IBU s), which are designed to be controlled (i.e. inflated and deflated) using a remote control system and a series of valves, actuators, etc., have buoyancy bags located inside the GRP shells. The buoyancy bags are only inflated after the installation of the unit. Inlet holes penetrate the shell and allow it to free flood when lowered into the water. The shell can be opened at the bottom end to allow access for initially fitting the bag to the inlet and subsequently for general inspection and maintenance purposes. The opening is closed off with material that will allow water in and out of the shell but will prevent the internal buoyancy from being squeezed out should the pressure in the bag exceed its operational limits. With the end open to the water and 16m long, the pressure on the bottom of the bag will be sufficient to squeeze the air out of the bag thus reducing the buoyancy and the uplift force. The use of the GRP shells prevents the internal buoyancy bags from over inflating and provides additional protection to the fabric material throughout the operation including any handling were there is potential for the bags to be torn. Similarly during the pull down and securing operation the bags will be prevented from being snagged and torn when they are deflated and loose. 12

14 Figure 1.09: Multiple CVBS Buoyancy Units Attached To A Jacket To Remove It The control system will allow the IBU s to be inflated or vented, as and when required, which will increase or reduce the buoyancy. Once the structure is stable on the surface the IBU s can be inflated or deflated to suit the tow configuration or to ballast the structure out of the water to enable it to be taken into shallow water for abandonment. Increasing the buoyancy at any time may be done using the compressed gas bottles located on the IBU. Passive Buoyancy Units (PBU s) are similar to the intelligent units but are not remotely controlled. PBU s are of similar size and configuration as the IBU s, however the PBU s will be sealed pressure vessels with no means of adjusting the buoyancy provided after the initial charging with air. The PBU shells, which will be manufactured from GRP, are fitted with a non-return inlet valve at the top and a vent valve at the top and the bottom. After installation the unit will be filled with air, expelling the water used to flood the chamber for 13

15 installation out the bottom vent valve. The PBU will remain sealed during the removal operations as a pressurised unit. With the PBU s located at or near the surface when pressurised it is not considered necessary to control these units as the pressure differential acting on the shell will be almost constant during the whole operation. During installation of the PBU s both vent valves will be opened which will allow the tanks to free flood thus allowing them to be easily lowered into position. Once secured to the leg of the jacket the top vent valve will be closed and the hose from the air compressor located on the surface support vessel can be connected to the inlet valve on the tank. The tank may then be filled with air if required, which will expel the water out the bottom vent valve. With all the water out of the tank, the bottom valve will be shut and the hose disconnected from the inlet valve. The tank will then be a pressurised sealed unit. The main support clamps connecting the modules to the structure are hinged and are closed around the jacket leg by a hydraulic cylinder. The hydraulic supply is provided via a hose connected to the surface support vessel. This hose will only be connected during the location operation. Once the clamp has been shut, the ROV will tighten the studs on all the clamps with the required torque, thus locking the clamp in position. The system does not rely on the hydraulic ram to keep the clamp shut DESCRIPTION OF CVBS CONTROL SYSTEM (CS) The CVBS control system, is designed for the operation of four IBU units, with each unit comprising of up to 6 buoyancy tanks. The system makes use of industry standard SCADA, communications, PLC, and distributed IO standards. The control system will only be used to operate the Intelligent Buoyancy Units and is not required for operation of the Passive Buoyancy Units. Control cables run between the PCU located on the top of the jacket and the junction box (JB) on the IBU s on each jacket leg. These cables will be tensioned between the JB and the PCU using a Chinese Finger fitted to each end to hold the tension in the cable. The cables are to be connected to the JB, coiled up and fastened into a temporary basket and fitted with a buoy at the top end during the assembly of the IBU s. After installation a ROV will cut the lashings on the cable allowing the buoy to float free of the basket and up to the surface bringing the top end of the cable with it. The control cable will be recovered with the buoy, taken to the PCU where the cable will be tensioned using the Chinese Finger and plugged into the PCU. It is envisaged that the valves used on the IBU s will consist of a fail closed, hydraulically actuated inlet valve and failed close, hydraulically actuated vent valve located at the top of each IBU along with a single, non-return, pressure relief valve. The following illustrates a possible operational control methodology: The hydraulic actuator will be connected to an accumulator with a solenoid operated control valve. The accumulator is initially charged with nitrogen to approximately 90 barg. The hydraulic actuator will also have a solenoid operated vent valve to allow pressure release for operation of the return mechanism. Prior to installation, the accumulator will be 14

16 pressurised to 200 barg with hydraulic fluid. The pipework between the actuator on the valve and the accumulator will then be filled with hydraulic fluid and any air bled from the hydraulic system. To operate the inlet or vent valve, the appropriate accumulator will be opened by electrical input to solenoid valve. Due to the reduction in the pressure in the system the nitrogen will expand, forcing the hydraulic fluid out of the accumulator and into the valve actuator. To shut the valve the power to the solenoid valve will be reversed and the hydraulic supply from accumulator will then be isolated. The solenoid operated vent valve on the actuator would then be operated and the fluid keeping the valve open will be discharged from the actuator by the return mechanism as the valve closes. The solenoid operated valve would then be closed Disposal Update REL has identified two other options, one in Terminal Island, Los Angeles and the other in Lazaro Cardenas, Mexico Southwest Marine, Terminal Island, Los Angeles The Southwest Marine Shipyard is a full service shipyard with 2 large dry docks capable of lifting 11,175 and 2,438 metric tonnes. This yard is 110 NM from the Hogan and Houchin platforms. Figure 1.10: Southwest Marine, Terminal Island, Los Angles Harbour 15

17 Southwest Marine Inc. operates at Berths on Terminal Island, with four working piers totaling 3,535 feet (1,077 meters) in length. Alongside water depth is 35 feet (11 meters), enabling Southwest Marine to work on large vessels such as oil tankers. The main dry-dock is 559 feet (170 meters) long and 100 feet (30.5 meters) wide, and can accommodate vessels of up to 13,000 long tons (13,209 metric tons). A smaller dry-dock can handle ocean craft of up to 2,400 long tons. The dry-docks and piers at the Southwest Marine facility are served by seven ton (23-54 metric tons) cranes with an outreach of 100 feet (30.5 meters) Lazaro Cardenas, Mexico Lazaro Cardenas' is a large commercial port located at 17 54' 58" north latitude and ' 22" west longitude. This port has large steel mills, a large reinforced wharf of offloading material, deep water and large railway terminus. This port would be suitable for the onshore disposal of the Hogan and Houchin platforms. 16

18 3. COST REVIEW 3.1 ENGINEERING & PLANNING MMS Cost Estimate $340,000 REL Cost Estimate $340,000 The estimate does not appear to be excessive and in view of the high level of temporary works input. With multiple modules and sectioning of the jackets, the engineering requirement implicit in the removal could even be regarded as an optimistic estimate of the cost when using a small capacity derrick barge. The use of the Versatruss lifting system, and other single-lift systems, could reduce the offshore engineering costs further. Using single lift systems would eliminate the need for the offshore separation modules, Cranes etc. The Southwest Marine yard, based at San Pedro in L.A. Harbour, has previously dismantled four platforms removed from the Santa Barbara Channel [the 4 H-platforms]. After, discussions with Southwest Marine yard personnel, it was clear that minimal engineering will be required prior to dismantling all of the Hogan and Houchin platforms onshore. The Versatruss engineering costs have been included as part of the actual removal cost. In view of the above information, REL believes that is the MMS cost estimate of $340,000, is more than sufficient provided new technology is deployed. 3.2 PERMITTING MMS Cost Estimate $375,000 REL Cost Estimate $250,000 The method the MMS have used to determine the cost permitting is acceptable, if the company executing the decommissioning has to apply for all of the relevant permits. The basis would appear to be proportioning the cost equally between the four platforms in the Chevron 4-H Project. This could mean that the cost does not reflect the more likely scenario of significantly higher costs for the first and a proportional amount for each subsequent platform. However, it is important to note, that POOI (the lessee, Signal Hill Service, Inc s contract operator) currently holds all of the relevant permits necessary to operate the Hogan and Houchin platforms in the Santa Barbara channel. In particular, POOI has the air emission allocations for the operation of the Hogan and Houchin facilities, both onshore and offshore. Should POOI relinquish their operatorship and hence their operation permits, the decommissioning organisation would have to reinstate these permits. Should the existing operator decommission the Hogan and Houchin facilities, we believe the PERMITING cost estimate to be too high. We estimate the additional abandonment PERMITING if handled by POOI, would be approximately $250,

19 3.3 PLATFORM PREPARATION MMS Cost Estimate $582,000 REL Cost Estimate $450,000 In 1994 an independently commissioned report for Banque Paribas estimated the cost of process decommissioning at $400,000. If the Hogan and Houchin offshore facilities were moved using a single lift technology [i.e. Versatruss], the platform preparation costs estimated in the MMS reported would be considered too high. Based on some eleven of the Versatruss single deck lifts carried out over the last five years, we believe in the platform preparation costs for both the Hogan and Houchin platforms to be about $450, WELL P&A MMS Cost Estimate $7,551,000 REL/POOI Cost Estimate $3,128,000 In 1994 an independently commissioned report for Banque Paribas estimated the cost of plugging and abandoning 69 wells at $3,622,500. Since that time, the operator (POOI) has plugged and abandoned a number of wells in preparation for a redrilling program in This actual field experience increases the confidence of well abandonment estimate immeasurably. POOI also has all of the necessary equipment and technical staffing in situ to complete all well abandonment and plugging operations. As a result of the actual field experience and a recent well by well detailed mechanical well review, the current well abandonment estimate is $3,128,000. In addition, if POOI s redevelopment plans are carried out, the future well abandonment will actually decrease due to the fact that existing wellbores with multiple packers and tubing strings will have already been cleaned out (and no further multiple packer completions are anticipated). Under that scenario, the future well abandonment is expected to drop to $2,714,500. Based on POOI s actual experience the MMS cost estimate of $7,551,000 is considered excessive and unrealistic. Table 2 is a summary of the well abandonment cost estimate. In addition, an attached cost report (Appendix A) of POOI s actual well P&A s carried out during the 1998 redrilling program provides additional verification of the well abandonment estimate. PLATFORM HOGAN Wells Clean wells 22 Wells needing fishing 14 Wells Abandoned 3 Total wells 39 Present Day Abandonmen $1,701,500 Future Abandonment $ 1,446,000 18

20 Review of MMS Decommissioning Cost estimate For Lease OCS P-0166 Platform Houchin Clean wells Wells needing fishing Wells Abandoned Total wells Present Day Abandonment Future Abandonment Job No: 02-57/01 Wells $ 1,427,000 $ 1,268,500 Table 2: Well Abandonment Cost Summary for Lease OCS P-0166 Another factor that is important for containing the well abandonment cost is use of the existing POOI contracted platform rigs which would eliminate costly rig mob & demob expense. These rigs and crews have been specifically adapted for use on these platforms and have a 10 year proven track in well abandonment, remedial work and re-drilling operations. Figure 1.11 shows the existing platform Hogan rig. FIGURE 1.11: DRILLING RIG ON HOGAN PLATFORM DURING A WELL ABANDONMENT 19

21 3.5 CONDUCTOR REMOVAL MMS Cost Estimate $1,644,000 REL Cost Estimate $600,000 In 1994 an independently commissioned report for Banque Paribas estimated the cost of conductor removal at $220,000. The total number of conductors currently in place are 39 on Hogan and 35 on Houchin). The average cost based on the MMS estimate would be $22,217 per conductor. The cost effective solution would be to remove the conductors with the jacket by clamping the conductors above and below the guide frames. All of the conductors run through slots in conductor guide frames at three levels in the jacket (i.e ft, ft and ft levels in Houchin). The methodology would be to cut the conductors 15 feet below the mud line. Then use divers to clamp the conductors to the conductor s guide frame, to prevent them moving as the jacket is removed with the conductors and the piles in situ. The jacket was barge launched with buoyancy tanks attached, hence the jacket is strengthened to take excess lateral and torsional loading. POOI would propose to remove the jacket package either by the Versatruss jacket lifting system or attaching re-usable buoyancy tanks. The removal of the conductors as part of the jacket package would reduce the MMS cost for conductor removal from $1,644,000 to about $600, MOBILIZATION OF MARINE SPREAD DECKS & JACKETS MMS Cost Estimate $5,400,000 REL Cost Estimate:- Versatruss $1,500,000 REL Cost Estimate:- HLV (Asia Mob) $3,700,000 It would appear that this cost is based on the mobilisation & demobilisation of the spread used for the heavy lifts. It is presumed that the figure has been derived for a Gulf of Mexico 2,000t heavy lift vessel (HLV) requiring 200 days for mob / demob. If the lift capacity for the derrick barge were 620t, as per the Noble Denton & Associates Inc. report, a significant mobilisation cost would be unavoidable. A locally sourced crawler crane mounted on a flat-top barge is not feasible due to the lift capacity required and the down-rating imposed by the use in a marine application. A significant reduction to about $3,700,000 could be achieved by use of a SE Asia HLV. The Versatruss and buoyancy systems could be mobilised at Southwest Marine s shipyard located at Terminal Island, Los Angles Harbour. This shipyard has all of the required facilities to prepare the equipment for towing to the Hogan and Houchin platforms. There is also an extensive fleet of suitable cargo barges in the Los Angeles harbour area available from which to deploy the Versatuss and buoyancy equipment. The approximate mobilisation/ demobilisation costs for Versatruss deck lifting equipment based at New Orleans would be about $1,100,000. The mobilisation costs for the buoyancy system would be about $400,000. Detailed engineering and planning would be 20

22 required to confirm these costs, however, such engineering is not expected to result in a significant change in this estimate. In addition, Versatruss has just completed the design for a new jacket lifting system. The system would be capable of removing both the Hogan and Houchin jackets. This jacket lifting system will be available in approximately 12 months. The prior Versatruss jacket lifting system, which was destroyed by storm while on tow, has successfully completed three lifts of jackets weighing about 1000 tons. The mobilisation costs for the jacket lifting system from New Orleans, if mobilised at the same time as the deck lifting system, would also be about $400,000. In summary, the mobilisation costs for Versatruss system to remove the Hogan and Houchin decks and jackets [with the conductors fastened to the jackets] would be about $1.4 million. Currently, the buoyancy systems for lifting jackets are being built and tested in Scotland. The first major offshore lift has been scheduled for 2001 subject to be successful completion of trials in Scotland this summer. At this time it is difficult to predict the exact cost of using the reusable buoyancy system to remove the Hogan and Houchin jackets, but to enter the market and to compete against the existing heavy lift vessel is it must be substantially cheaper PLATFORM / STRUCTURAL REMOVAL MMS Cost Estimate $6,138,000 REL Cost Estimate:- Versatruss $3,500,000 The cost of the removal of the platform and more so the jacket will be significantly influenced by the HLV capacity and the level of the engineering performed prior to arrival on site. Removal of the jacket in particular has been shown to be highly sensitive to the quality of the preparations and selection of appropriate cutting techniques. We have considered the information available but are unable to ascertain how the total cost has been derived. The MMS cost estimates are of a very generic nature as they do not specify the lift capacity of the vessel or any operational procedures. If the platforms were to be removed by Versatruss deck and jacket lifting systems the total removal costs for both platforms would be about $3,675,000. Further engineering and planning would be required to confirm these costs, however, such engineering is not expected to result in a significant change in this estimate 21

23 3.8 PIPELINES & POWER CABLES MMS Cost Estimate $825,000 REL Cost Estimate:- Versatruss $750,000 In 1994 an independently commissioned report for Banque Paribas estimated the cost of removing 600ft of one pipeline at $650,000. Again, assuming the existing operator were to remove the pipelines and power cables, they have the local air emission permits to operate the required equipment. The pipelines near the shore, which are required to be removed the can be transported to Southwest Marine's yard for final disposal. TO 3.9 TRANSPORTATION & DISPOSAL MMS Cost Estimate $3,661,000 REL Cost Estimate:- Versatruss $1,800,000 The MMS transportation and disposal cost was based on taking the platforms to Portland, Oregon. This is a tow distance of some 950 nautical miles. The tow route from Point Conception to Portland has only a few safe haven ports along a potential exposed lee shore and transits through a region renowned for heavy seas. There is also a 55 NM passage up the Columbia River to the Cascade Shipyard facility in Portland Harbour. REL has identified two other options, one in Terminal Island, Los Angeles and the other in Lazaro Cardenas, Mexico. Southwest Marine, Terminal Island, Los Angeles The Southwest Marine Shipyard is a full service shipyard with 2 large dry docks capable of lifting 11,175 and 2,438 metric tonnes. This yard is 110 NM from the Hogan and Houchin platforms. This yard has a most recent experience of platform decommissioning as it dismantled onshore the 4-H. platforms, which were removed a few years ago. Southwest Marine had no difficulty in disposing of all of the platform components. This is the preferred onshore receiving yard and disposal site for the Hogan and Houchin facilities. REL personnel recently had an onsite meeting with Southwest Marines management to verify their capabilities and interest to receive and dismantle platforms Hogan and Houchin. Southwest Marine is very interested in winning this work and has the capability to complete it in a safe manner. Lazaro Cardenas, Mexico There are also a number of large commercial ports on the western coast of Mexico which would be suitable for the offloading and disposal of the Hogan and Houchin platforms. The most suitable of the Mexican if it latitude and ' 22" west longitude. This port has large steel mills, a large reinforced wharf of offloading material, deep water and large railway terminus. As Southwest Marine, Terminal Island, Los Angeles is the closest port with suitable facilities we propose to use this as the offloading port. This will reduce the estimated transport and disposal costs to $2,000,

24 3.10 SITE CLEARANCE MMS Cost Estimate $733,000 REL Cost Estimate:- $420,000 It is our opinion that the above cost is overstated, particularly as some of the operations would be coincident with other removal operations. This would minimise the specific time and spread costs for site clearance. For example, any debris identified in the pre-removal survey would be cleared as part of the jacket removal operation and debris generated during removal could be controlled. Typical controls being material tracking and incident reporting with the locations logged to allow recovery at an appropriate time. 4.0 CONCLUSIONS The review of the decommissioning costs has examined nine of the ten categories identified by the MMS (see Table 1 above). The Well P&A cost review has been carried by POOI personnel. In REL s experience it is unreliable to apply a generic cost model, particularly one from a different region (i.e. Gulf Of Mexico) or even different platforms in the same region to a site specific decommissioning process on the Pacific Coast of the US. Each offshore facility has it s own particular nuances and should be treated on a caseby-case basis. The MMS estimates contained in Table 1, for the Hogan and Houchin offshore platforms, above do not reflect this particular decommissioning case. In the actual removal operation of Hogan and Houchin platforms the following would be applicable: 1) A removal price reduction obtainable by POOI under competitive bidding process. 2) Cost savings if the platform decommissioning were to be managed by the existing operator under their existing permits, air emission allowance and most importantly their facility knowledge and local offshore experience. 3) The use of the existing POOI contract rigs for well abandonment and decommissioning. 4) The advancement in new cost effective offshore lifting technologies. 5) Potentials for further saving due to reuse/resale of the two platforms. 6) The onshore disposal of the facilities in LA port, which has a suitable facility and which is prepared to take on the work. 7) The advancement in new cost effective offshore lifting technologies. 8) Based upon the MMS assumption that 5 platforms could be removed concurrently in the Pacific OCS, additional cost savings should be realized. REL has now examined all costs and has summarised it s findings in Table 3 below. Based upon REL s experience and judgement, a prudent management of the decommissioning process as outlined herein should not exceed $12,738,500. REL believes that the Versatruss system has proved itself by completing eleven topside lifts with the largest lift of 6,000 tons. The latest Versatruss system also solves the small air gap problem by a new patented connection system and hence eliminated the need to jack-up the platform prior to lifting. 23

25 LEASE MMS Cost REL OCS-P 0166 Estimate Engineering & Planning 340, ,000 Permitting 375, ,000 Platform Preparation 582, ,000 Well P&A 7,551,000 3,128,500 Conductor Removal 1,664, ,000 Mobilization & 5,400,000 1,500,000 Versatruss & Buoyancy Demobilization equipment Removal of Decks & 6,138,000 3,500,000 Versatruss & Buoyancy Jackets equipment Pipelines & Power Cables 825, ,000 Transportation & Disposal 3,661,000 1,800,000 No scrap value assumed Site Clearance 732, ,000 Shell Mounds issue Not included Total MMS Estimate 27,268,600 12,738,500 TABLE 3: REL REVIEW OF MMS COST ESTIMATE RESULTS 24

26 REFERENCES [1]. Letter August 18 th, 1999, from J. Lisle Reed, Regional Director Of the MMS, Camarillo Office to Mr R.L. Carone, Signal Hill Service Inc., reference Lease OCS-P-0166 Decommissioning Estimate. [2]. Clingan, Richard et al, MMS Report, March 31, 1999, Offshore facility decommissioning costs Pacific Offshore Region [3]. REL Internal world-wide decommissioning cost base to

27 Appendix A Well Abandonment Estimate OCS P-0166 Platforms Hogan & Houchin May, 2000 Prepared by: Pacific Operators Offshore, Inc. 26

28 The total estimated cost of wellbore abandonment at the present time on both Platform Hogan and Houchin is $3,128,500. If the current redevelopment operations continue and the remaining wellbores are cleaned out prior to final abandonment the estimated cost of wellbore abandonment is $2,714,500. The summary of the well abandonment cost estimates for each platform is: PLATFORM HOGAN Wells Clean wells 22 Wells needing fishing 14 Wells Abandoned 3 Total wells 39 Present Day Abandonment $1,701,500 Future Abandonment $ 1,446,000 Platform Houchin Wells Clean wells 22 Wells needing fishing 10 Wells Abandoned 3 Total wells 35 Present Day Abandonment $ 1,427,000 Future Abandonment $ 1,268,500 The Carpinteria Offshore Field is currently in the midst of an active redevelopment program. The abandonment of wells, and the field itself will be managed as a portion of the redevelopment. This will lower the overall cost of the field abandonment by continuing economic oil production right up the final stages of field abandonment. Costs of platform operations (boat, operator support, crane service etc) will be born by the field production. 27 wells are currently on production, with plans to redrill or workover most of the remaining 68 active wells in the field. The original production method in the field consisted of gas lift, utilizing multiple packers in the well for zonal segregation. This gas lift system became inefficient due to falling reservoir pressures, and has been discontinued. The redevelopment effort has focused on returning many of these idle wells to production, either by pulling the production equipment from the well, and converting to ESP or rod driven production systems, or by redrilling the wells. The continued redevelopment efforts are lowering the cost of well abandonment by removing the existing production equipment from the wells. The cost of abandoning a wellbore without gas lift equipment is much lower than fishing the production equipment. It is anticipated that most if not all wellbores will have the gas lift production equipment removed from the wellbores, prior to final abandonment. Therefore, the cost of well abandonment at the future economic limit of the field, after redevelopment operations, will be much lower than if well abandonment operations began tomorrow. The abandonments will consist of basically four types: 27

29 1. Wellbores with no packers in well, and a cemented prod./inter. casing annulus 2. Wellbores with no packers in well, and an uncemented prod./inter. casing annulus 3. Wellbores with packers in the well and a cemented prod./inter. casing annulus 4. Wellbores with packers in well and an uncemented prod./inter. casing annulus The wellbore abandonment procedures (see attached program templates) will consist of three operations for the four types of abandonment: 1. Production interval abandonment 2. Uncemented annular abandonment if necessary 3. Surface abandonment plug Cost estimates for the well abandonments have the benefit of being made after the completion of the pilot 6 well redrill program completed in Prior to redrilling, each of the wells existing producing intervals had to be abandoned prior to redrilling. It was necessary that these abandonments effectively seal the existing production interval, to prevent communication of the new production intervals with the watered out perforated intervals. All wells have had no signs of communication with the previous production intervals, which were abandoned. The following table summarizes the results of that abandonment program: Carpinteria 1998 Redrill Abandonment Summary Well Type Abandonment Cost A-44 No packer $16,901 A-43 No packer $19,890 A-14 No packer $21,005 A-48 No packer $22,688 A-49 Packer $33,034 A-22 Packer (with problems) $50,503 Four of the well had no packers to be fished, and were very straightforward to abandon. Two wells had packers in the well, of which one was very straight forward to abandon and the second had complications removing the well bore equipment. Based on these results the attached abandonment templates and cost estimates were formulated. Detailed estimates for each platform are attached, on a per wellbore basis. $10,000 was included per well for each of the previously abandoned wellbores, with $50,000 to cover any complications from abandoning B-32 (the deep test). The following table summarizes the anticipated individual well abandonment costs: 28

30 Well Abandonment Cost Summary Well Rig Days Abandonment Cost Well with no packers / ann. cmt. 4 $33,000 Well with no packers / no ann. cmt. 5 $42,500 Well with packers / ann. cmt. 5 $46,750 Well with packers / no ann. cmt. 7 $63,250 The final casing and conductor cut and retrieval operations will be accomplished at the time of platform removal. Platform Hogan Abandonment summary Present Redevelopment Well Clean? Ann. Cmt. Comment Abandonment Cost Abandonment Cost A-1 N N $ 63,250 $ 42,500 A-2 N N $ 63,250 $ 42,500 A-3 Y Y $ 33,000 $ 33,000 A-4 Y N $ 42,500 $ 42,500 A-5 RD A-43 A-6 Y Y $ 33,000 $ 33,000 A-7 Y N $ 42,500 $ 42,500 A-8 RD A-51 A-9 N N $ 63,250 $ 42,500 A-11 Y N $ 42,500 $ 42,500 A-12 PA PA $ 10,000 $ 10,000 A-14WB1 Y N $ 42,500 $ 42,500 A-15 RD A-46 A-16 RD A-51 A-16A N N $ 63,250 $ 42,500 A-17 RD A-47 A-18 Y Y $ 33,000 $ 33,000 A-19 Y N Tbg $ 42,500 $ 42,500 stuck A-21 N N $ 63,250 $ 42,500 A-22WB1 Y N $ 42,500 $ 42,500 A-23 Y N $ 42,500 $ 42,500 A-24 PA $ 10,000 $ 10,000 A-25 N Y SWD $ 46,750 $ 33,000 A-26 Y N $ 42,500 $ 42,500 A-27 RD AG27 AG-27 Y Y $ 33,000 $ 33,000 A-28 N Y $ 46,750 $ 33,000 A-29 PA $ 10,000 $ 10,000 A-30 N N $ 63,250 $ 42,500 A-31 N Y $ 46,750 $ 33,000 A-32 N Y SWD $ 46,750 $ 33,000 A-36 Y N $ 42,500 $ 42,500 A-37 RD A-44 29

31 A-38 RD A-48 A-39A RD A-49 A-40 Y N $ 42,500 $ 42,500 A-41 Y N Cut&Run $ 42,500 $ 42,500 A-42 RD A-50 A-43 Y N Cut&Run $ 42,500 $ 42,500 A-44WB2 Y Y $ 33,000 $ 33,000 A-45 N Y $ 46,750 $ 33,000 A-46 N N $ 63,250 $ 42,500 A-47 Y N Cut&Run $ 42,500 $ 42,500 A-48WB1 Y Y $ 33,000 $ 33,000 A-49WB1 Y N $ 42,500 $ 42,500 A-50 N N $ 63,250 $ 42,500 A-51 Y N Cut&Run $ 42,500 $ 42,500 A-52 N N $ 63,250 $ 42,500 A-53 Y Y Cut&Run $ 33,000 $ 33,000 Totals $1,701,500 $ 1,446,000 Platform Houchin Abandonment summary Present Redevelopment Well Clean? Ann. Cmt. Comment Abandonment Cost Abandonment Cost B-1 Y Y $ 33,000 $ 33,000 B-2A Y Y $ 33,000 $ 33,000 B-3 Y N $ 42,500 $ 42,500 B-4 Y Y $ 33,000 $ 33,000 B-5 PA RD B-34 B-5A N N $ 63,250 $ 42,500 B-6 PA RD B-47 B-7 PA RD B-40 B-8 Y Y $ 33,000 $ 33,000 B-9 Y Y $ 33,000 $ 33,000 B-10 PA RD B-35 B-11 Y N $ 42,500 $ 42,500 B-12 Y Y $ 33,000 $ 33,000 B-13 Y Y Junk IH $ 33,000 $ 33,000 B-15 Y N $ 42,500 $ 42,500 B-16 Y N Junk IH $ 42,500 $ 42,500 B-17 N N $ 63,250 $ 42,500 B-18 Y N $ 42,500 $ 42,500 B-19 N Y Junk IH $ 46,750 $ 33,000 B-21 N Y $ 46,750 $ 33,000 B-22 PA RD B-37 B-23 PA $ 10,000 $ 10,000 B-26 PA RD B-38 B-27 N N $ 63,250 $ 42,500 B-28 N Y $ 46,750 $ 33,000 B-29 N Y $ 46,750 $ 33,000 B-30 N Y $ 46,750 $ 33,000 B-31 PA $ 10,000 $ 10,000 B-32 PA $ 50,000 $ 50,000 30

32 B-33 Y N $ 42,500 $ 42,500 B-34 Y N Cut&Run $ 42,500 $ 42,500 B-35 Y N $ 42,500 $ 42,500 B-36 Y Y $ 33,000 $ 33,000 B-37 Y N Junk IH $ 42,500 $ 42,500 B-38 N Y $ 46,750 $ 33,000 B-39 Y N $ 42,500 $ 42,500 B-40 Y Y $ 33,000 $ 33,000 B-43 Y N $ 42,500 $ 42,500 B-45 N Y $ 46,750 $ 33,000 B-46 Y N $ 42,500 $ 42,500 B-47 Y Y $ 33,000 $ 33,000 Totals $ 1,427,000 $ 1,268,500 31

33 Well Abandonment Template Well with No Packers (No production casing annular space communicating with uncemented open hole) 1. MIRU remedial rig. Bleed well down. Set BPV and remove tree. 2. Install and test Class III BOPE according to established POOI procedures. 3. POOH with production equipment. 4. RIH with 7 all wgt. scraper and bumper sub. POOH and lay down scraper. 5. RIH with 7, permanent bridge plug on tubing and set at. (Within 50 of top perforations). Fill casing with seawater, and circulate hole clean. Test plug to 1000 psi. POOH and lay down setting tool. 6. RIH with open ended 2 7/8 tubing to the top of the bridge plug. Rig up cementers. Equalize a 100 lineal plug with Class G cement mixed with seawater. POOH with tubing. WOC 12 hrs. 7. Pressure test casing to 1,000 psi. RIH with tubing and tag TOC. Mud wellbore with 72# mud from TOC to point production casing to be cut. POOH. 8. Cut and retrieve production casing string. Ensure that the stub top is within 300 of mudline. 9. Lay a minimum 200 surface cement plug to within 150 of the mudline, with 50 within the casing stub. WOC 12 hours and pressure test. Tag cement after pressure testing. Displace hole with seawater, until clean to remove any remaining mud and oil from wellbore. NOTE: Remaining surface string and conductor removed during final platform decommissioning. Clear all obstructions to 15 below mudline. 32

34 Well Abandonment Template Well With No Packers (No production casing annular space communicating with uncemented open hole) Rig Time Day Rate Days Cost Cementing Completion Fluids Bits 1000 Well Equip (Bridge Plug, retainer, etc) Acidizing 1500 Fishing Slickline Perforating Cased Hole Logging and Perf. Roustabouts Surface Equipment Tubing Rods Pumps Rentals Transportation 500 Misc. Contingency 3000 Total

35 Well Abandonment Template Well with No Packers (Production casing annular space communicating with un-cemented open hole) 1. MIRU remedial rig. Bleed well down. Set BPV and remove tree. 2. Install and test Class III BOPE according to established POOI procedures. 3. POOH with production equipment. 4. RIH with 7 all wgt. scraper and bumper sub. POOH and lay down scraper. 5. RIH with 7, permanent bridge plug on tubing and set at. (Within 50 of top perforations). Fill casing with seawater, and circulate hole clean. Test plug to 1000 psi. POOH and lay down setting tool. 6. RIH with open ended 2 7/8 tubing to the top of the bridge plug. Rig up cementers. Equalize a 100 lineal plug with Class G cement mixed with seawater. POOH with tubing. WOC 12 hrs. 7. Pressure test casing to 1000 psi. RIH with tubing and tag TOC. Mud wellbore with 72# mud from TOC to point production casing to be cut. POOH. 8. Cut and retrieve production casing string. Ensure that the stub top is within 100 of surface casing shoe. 9. RIH with open ended 2 7/8 tubing to the top of the stub. Rig up cementers. Equalize a 200 lineal plug with Class G cement mixed with seawater with a minimum of 100 inside intermediate casing stub. Use as much as 100% excess cement. POOH with tubing. WOC 12 hrs. 10. Pressure test casing to 1000 psi. RIH with tubing and tag TOC. Ensure wellbore is mudded from TOC to surface with 72# mud. POOH. 11. Lay a minimum 200 surface cement plug to within 150 of the mudline, with 50 within the casing stub. WOC 12 hours and pressure test. Tag cement after pressure testing. Displace hole with seawater, until clean to remove any remaining mud and oil from wellbore. NOTE: Remaining surface string and conductor removed during final platform decommissioning. Clear all obstructions to 15 below mudline. 34