20-year forecast shows fixed platforms to decline, floaters to rise
Mark J Kaiser
Center for Energy Studies, Louisiana State University
Academy of Chinese Energy Strategy
In the final article of this series, a forecast for the active structure inventory in the deepwater Gulf of Mexico (GoM) is presented through 2037. Active structures include all ‘standing’ structures and incorporate both installation and decommissioning activity. Using the decommissioning model results from part six for fixed platforms and floaters, active structure scenarios are developed using historic installation data for each structure subclass.
The size of the active inventory at any point in time is based on the difference between the cumulative number of installed and decommissioned structures at the time of evaluation:
Activet= CumInstalledt- CumDecomt
The difference between the cumulative number of installed and decommissioned structures in year t yields the active inventory count at year t.
Since new structures are continually being installed in the deepwater GoM and are expected to continue to be installed in the future, to forecast active inventories it is necessary to assume an installation rate and add this to the (previous) decommissioning forecast results.
Assuming a future installation rate is a speculative exercise, of course, since no one knows – or should pretend to know – what the future will bring, but under status quo conditions a reasonable case can be made based on historic activity.
Installation activity for fixed platforms in more than 400 ft (122 m) water depth peaked in the decade 1987-1996, while floater installations peaked a decade later from 1997-2006.
For fixed platforms, declining installations have been dramatic. From 1987-1996, 2.6 structures were installed per year on average, which declined to 1.8 structures per year from 1997-2006, to 0.2 structures per year from 2007-2016.
Over the past decade there were on average about two floaters installed per year, compared to three floaters per year over the preceding decade. Over the 30-year period from 1987-2016, 54 floaters were installed, or about 1.8 structures per year on average.
In the near term, projects sanctioned and under construction provide good short-term estimates for activity over the next two to three years, but for time horizons beyond five years or so and at the decadal level, speculation is required.
We assume future installation rates will be bound by historic activity over the past two or three decades. There are several reasons why such bounds are reasonable and probably the most convincing is related to the large capex and technical expertise required in deepwater developments that require structures and the long period of time from discovery to development.
Future fixed platform and floater installation activity over the next two decades is assumed to be bound between historic activity rates. Thus, fixed platform installation activity is assumed to be bound between 0.2 to 2.6 platforms per year, and new floater installations are assumed to be bound between 1 to 3 floaters per year. Fixed platform activity is expected to fall at the low end of the range while floaters are most likely to fall within the middle of its range.
The active inventory of fixed platforms and floaters is depicted for the slow and base case scenarios described in part six.
Under the slow scenario, fewer structures will be decommissioned which will lead to a larger standing inventory relative to the base case scenario. Thus, the model results for a given installation rate show the slow scenario above the base case.
Similarly, a lower installation rate will depress active structure counts relative to higher install rates since decommissioned structures will not be replenished. In this case, the trends are clearly separated.
For fixed platforms, the most likely future scenario shows a decline in the standing structures following the slow scenario with an assumed 0.2 structures per year install rate.
For floaters, the most likely scenario yields an increasing inventory that ranges midway between the slow and the base scenarios for an assumed 2 floaters per year installation rate.
The composite active inventory forecast indicates that there is likely to be a modest increase in the number of deepwater structures in the GoM over the next two decades.
The active structure forecast incorporates several features and assumptions:
• Decline curve models for producing structures with parameters that include oil and gas price, economic limits, and royalty rates.
• Status quo assumptions for the decline curve models – current well inventory, no new wells, no problem wells, no new regulations, no capital spending.
• Decommissioning time parameter τ after economic limit is reached reflect historic activity and structure class differences.
• User-defined decommissioning schedule for idle structures and marginal producers assumes uniform removals over a time horizon T.
• Future installation rates for fixed platforms and floaters are assumed similar to historic activity data over a 20- to 30-year period.