PTQ Q3 2022 Issue

Optimising oil and gas operations – when to decommission or modernise To make accurate, timely decisions to maximise the value of their assets today and in the future, refiners and other oil and gas companies need quality of data

Stuart Querns Delaware United Kingdom

T here are a large number of ageing oil and gas facili- ties around the world, which pose the problem of whether they should be decommissioned or mod- ernised. Here in the UK there are still around 10-20 bil- lion barrels of oil equivalent (BOE) that could be extracted offshore, according to industry regulator Oil & Gas Authority (OGA). We are seeing oil refineries under ever greater threat. Before the advent of COVID, industry observers were already projecting a significant downturn in the oil refinery sector across Europe, with businesses increasingly needing to rationalise their presence across the continent, particu- larly given that many of these refineries today are ageing fast. In August 2021, consultants WoodMac predicted a 9% drop in capacity across Europe in the period between 2022- 2023. At the same time, Goldman Sachs predicted refinery rates in 2021-2024 to be 3% lower relative to 2019, which they felt would lead to both permanent closure and greater levels of competition. While some oilfields are now close to being depleted and refineries are getting ever older, a new industrial challenge is emerging – decommissioning the infrastructure. But many facilities can be modernised to extend their useful lives. Making information visible So, how can oil and gas companies best decide whether a facility is to be maintained, modernised, or decommis- sioned? At the outset, it is important to highlight that upstream and downstream facilities should not, and typi- cally cannot, be divorced from each other. The two are core elements of a single, integrated oil and gas system. If one is impacted, so too is the other. However, whether we are talking about exploration and production or refining, one of the biggest issues oil com - panies face is the visibility of information. Having that visibility is especially important in making big decisions around whether to replace, decommission, or overhaul a major facility. Engineering operations teams need to have quality infor- mation at their fingertips to decide whether to spend money on replacing, or overhauling an ageing asset. That informa- tion could potentially come from multiple sources. It could come from the asset itself or be based on maintenance

activities. Whatever the individual sources, they need to be aggregated in a cohesive way to ensure the combined data can fully support a decision on the future strategy or tactics to be employed. Therefore, what sort of information are we talking about here? Cost-related information is certainly one key type. Operating expenditure (OPEX) is always a key metric when oil and gas companies are looking at what they should be doing, especially where it relates to capital assets, which can be hugely expensive to manage and maintain but even more expensive to purchase new. For the oil and gas com- pany concerned, looking at how much it costs to operate and maintain the asset is clearly a key decision point. Other Moving away from decommissioning towards extending the life of downstream assets requires a diversity of AI-based solutions learned from the world’s process facilities aspects of this that are critically important are how often the asset is failing. For example, is it reliable, or do you have to intervene frequently? Another key aspect here is the efficiency of the work - force. If the organisation is not effective at planning and scheduling activities, for instance, it could potentially miss maintenance schedules or not perform work in the right timeframe, which will also impact reliability. All of these different points of reference are sources of information that support any decision. If they are disjointed or don’t reflect in the same way across the asset, then the oil and gas business concerned is unable to make a decent decision or might make the wrong decision, or even fail to decide at all. That will, in turn, reflect on the performance of the asset itself. There are differences here in the approach employed by downstream and upstream companies. Downstream businesses, including refineries, are especially margin con - scious. They are only too aware of the negative financial impact of a production line being down for any length of

PTQ Q3 2022