• Dying intestate or with a will on toxic estate? an evaluation of petroleum fiscal systems and the economic and policy implications for decommissioning of onshore crude oil fields in Nigeria

      Afieroho, Erovie-Oghene Uyoyou-karo; Patil, Shirish L.; Dandekar, Abhijit; Reynolds, Douglas B.; Perkins, Robert (2018-05)
      Many giant fields in the world like the onshore fields in Nigeria which were initially discovered over half a century ago, have begun to see consistent decline in production and profit, and are gradually entering into the economic end of field life or decommissioning phase. Characteristically, in most regions with mature fields, the large multinational oil companies have begun to sell their oil fields to small indigenous companies who may not be financially robust enough to complete the decommissioning, when it occurs. Because of the pervasive societal impact of the oil industry, if an investor fails to properly decommissioning the infrastructure, a responsible government will have to pay for the proper decommissioning, else society will suffer the socioeconomic, political, health and environmental impact. Therefore, society needs to be effectively engaged in the development of a sustainable decommissioning policy framework, which is hindered if society is uninformed and lacks access to pertinent information. Currently, there is abysmal information in the public space on the cost of decommissioning liabilities of oil fields, especially in developing countries like Nigeria. The public also need simple interpretative ways to determine the vulnerability of a county or entity to decommissioning default risk and the imminence of a default risk. Furthermore, there is currently, no way to benchmark the level of maturity or level of preparedness for decommissioning phase such that countries and entities can identify their gaps to a sustainable decommissioning policy framework and define a roadmap to close the gaps. These are important challenges to vigorous public participation, which is an essential requirement for development and implementation of any sustainable public policy for a public issue like decommissioning of crude oil fields. This study adopted several research methods to develop and introduce a new cost estimating methodology that uses publicly declared cost of asset retirement obligations (ARO) to determine a plausible cost estimate range for decommissioning liabilities. It was demonstrated with Nigeria onshore crude oil fields, which it determined to have a rough order of magnitude cost estimate for decommissioning liabilities that could be as high as $3 billion. Secondly, it also introduced decommissioning coverage ratio (DCR) and decommissioning coverage ratio vector (DCRV) as new metrics to evaluate the vulnerability to and imminence of decommissioning default risk. In demonstrating these new metrics, this study determined that the imminence of and vulnerability to decommissioning default risk for the onshore crude oil fields in Nigeria, with respect to any of the available revenue streams, is high. Thirdly, it developed a graded scale maturity model for sustainable decommissioning of petroleum fields. The model described as Fairbanks maturity model for sustainable decommissioning in the petroleum industry, has five progressive levels of maturity. It leveraged the methodology used for similar maturity models developed in other industries and for business management, and a comparative analysis of level of progress in decommissioning frameworks between some countries with leading decommissioning experience in the petroleum industry, to develop the Fairbanks maturity model. Based on the Fairbanks maturity model, frameworks for sustainable decommissioning of Nigeria onshore crude oil fields were evaluated to be at Level 1, Ad hoc maturity level, which is the lowest maturity level. Recommendations to close the identified gaps were also were made. These methodologies can be applied to any petroleum producing region or entity in the world and are advancements to the frontier of knowledge in the management of decommissioning phase for petroleum fields in general and Nigeria onshore fields in particular.
    • Economic assessment of Alaska North Slope hydrate-bearing reservoir regional production development schemes

      Nollner, Stephanie P.; Dandekar, Abhijit; Patil, Shirish; Ning, Samson; Khataniar, Santanu (2015)
      The objective of this project was to evaluate the economic feasibility of producing the upper C sand of the Prudhoe Bay Unit L Pad gas-hydrate-bearing reservoir. The analysis is based on numerical modelling of production through depressurization completed in CM G STARS by a fellow UAF graduate student, Jennifer Blake, (2015). A staged field development plan was proposed, and the associated capital and operating costs were estimated using Siemens's Oil and Gas Manager planning software and costing database. An economic assessment was completed, incorporating the most common royalties, the current taxes laws applicable to conventional gas development, and most recent tariff estimates. The degree of vertical heterogeneity, initial average hydrate saturation, well spacing and well type had a significant impact on the regional gas production profiles in terms of cumulative volume produced, and more importantly, the expediency of gas production. The volume that is economically recoverable is highly dependent on how the field is developed. A field that has higher vertical heterogeneity and corresponding lower average initial hydrate saturation is most economically produced using horizontal wells at 160 acre spacing; the acceleration of gas production outweighs the increased drilling costs associated with the longer wells and tighter well spacing. The choice of development scenario does not impact the project economics significantly given a field that has lower vertical heterogeneity; however, development using horizontal wells at 320 acre spacing is marginally more economic than the alternatives. Assuming a Minimum Attractive Rate of Return of 20%, the minimum gas price that would allow economic production of ANS gas hydrates was found to be $29.83 per million British thermal units; this value is contingent on the reservoir having high average initial hydrate saturation and being developed with horizontal wells at 320 acre spacing. A slightly higher gas price of $36.18 per million British thermal units would allow economic production of a reservoir having low average initial hydrate saturation that is developed with horizontal wells at 160 acre spacing.
    • Wind energy: is there an economy of scale in Alaska?

      Ellanna, Dayne; Lewellyn, Levi; Hulsey, J. Leroy; Perkins, Robert; Whitaker, Keith (2015)
      The purpose of this project is to show the cost relationship per kilowatt hour (kWh) between small scale (< 25kWh), medium scale (> 25 kWh and < 100 kWh), and large scale (> 100kWh) wind turbines. Our analysis will compare the cost per kWh and identify the economy of scale between our custom small scale models to commercial models. The commercial models used for this project were installed by Golden Valley Electric Association (GVEA) at their Healy, Alaska wind farm. We requested their wind data, capital investment breakdown, and their operations and maintenance costs. This data will be compared to the costs and wind data associated with our custom built wind turbine. Wind energy is dependent on one major variable, the wind. Regardless of the wind turbine size, wind speed, frequency, and duration will affect the efficiency of every wind turbine. Commercial wind farms are new to Alaska. The first major wind power project in Alaska was in 1997 in Kotzebue. This wind farm, of 17 wind turbines, represents the first megawatt of wind power in Alaska. Installation and maintenance of these systems is more expensive in Alaska due to the states' remoteness. Small scale systems used in this study are custom built because small scale commercial systems are not "hardy" enough to withstand Alaska's harsh weather systems. Both medium and large scale systems, for this study, are commercially constructed systems that have been designed to withstand these harsh conditions.