Publications

The upstream industry is facing a decommissioning wave larger and earlier than previously predicted. 'Lower for longer' oil prices have accelerated the rate at which fields are reaching the end of their economic lives, as operating and maintenance costs exceed production revenues. The industry must now confront the issue of abandonment and decommissioning, for which many companies, and governments, are unprepared. In Indonesia, the issue is more pressing because of the number of onstream PSCs scheduled to expire in the next ten years. These expiring PSCs are currently producing from more than 1,400 offshore wells and 500 fixed platforms, all of which must be safely decommissioned at the end of their life. In this paper, we explore the different approaches to decommissioning, and in particular, the potential economies of scale from collaborative decommissioning work. This approach involves a group of fields being abandoned together, selected by geographical proximity, operator or technical requirements. Batch decommissioning has the potential to significantly reduce total project costs, when compared with an individual decommissioning programme, via supply chain savings, design optimisation and efficiency gains. Mature developments and contract extensions present opportunities for new operators to breathe new life into Indonesia's upstream sector. However, as decommissioning looms on the horizon, it is key not only for regulators to provide greater legislative guidance but also for current and future operators to understand the future drivers of abandonment costs and liabilities.