Speaking to Energy News while visiting his Australian branch in Perth this month, ae CEO Ole Rygg, who just started in the role on August 10, said operators have made a habit out of delaying the inevitable, but need to realise the benefits low oil prices can bring to actually help their bottom line.
Stavanger-headquartered ae has a corporate partnership with Woodside to provide specialised well intervention engineering services both in the Aussie major's offices and in its own to keep the wells at Goodwin and Rankin flowing.
The company also did some engineering studies for some of Woodside's other upcoming projects, including Browse.
Rygg is a widely-respected industry figure who was instrumental in helping companies such as BP, PTTEP and Total recover from the 2010 Deepwater Horizon tragedy in the Gulf of Mexico, the 2009 Montara oil and gas spill in the Timor Sea and the more recent Elgin North Sea gas leak, respectively.
He has been with ae since its inception in 2008 off the back of a private equity fund buying up various quality service companies.
He told Energy News that while low oil prices ensured things were "slow for everybody", his firm has been talking to operators about "stepping out of the conventional way" of looking at developing fields and abandoning them at a much reduced cost.
"We're working with a couple of the bigger operators on those things, like abandonments where many companies are carrying large sums of money on their balance sheet to abandon wells, which isn't a good use of funds, but it must be done - NOPSEMA insists so," Rygg said.
He said it is about taking advantage of the low oil price environment, and his UK-born chief operating officer Dermot O'Keeffe believes there are big savings to be had.
O'Keeffe, whose company IPS ae bought out in 2010 to become the Norwegian firm's Australian base for drilling and well engineering, said rig rates have been cut in half over the last 12 months.
The ae executives declined to name which "big players" they're working with in this regard in the Carnarvon Basin.
"Before they [operators in general] carried $10 million on their balance sheet for an abandonment, it was because it was going to cost them $400,000 a day for a semi-submersible to come in and do it. Now you can get the same rig for $200,000," O'Keeffe told Energy News.
"So while abandonments in theory don't add any value as you're not getting any immediate return, you are actually taking it off your balance sheet. If you can take $10 million off and add $5 million back on as positive cash flow, then that's a good thing."
He said that even when operators drill a dry hole, many of them will suspend the well rather than abandon it, as it often costs more to abandon than suspend. The problem is that not only does the well just sit there on the seabed but stays on the books as a liability.
"So at some stage you've got to come back and abandon the well properly, and it's the regulator that decides when you need to do it," O'Keeffe said.
"Most people push it out as far as they possibly can, and actually a lot of the divestments that the big companies have made that the smaller companies have bought up also include buying the abandonment liability.
"So Chevron or Woodside [for example] might think they've come to the end of field life in their view, so they've reached a threshold and can't make money out of it anymore as they're such a big organisation, the smaller companies might be able to still make money on it.
"So there are different ways that the bigger companies take these liabilities off their balance sheets.
"When the oil price is low and equipment and services costs are low, that's the time to do it.
"We believe you can save up to 50% on average at the moment on what the original cost estimates are, depending on whether there were any problems in the well. You might go into a well and find things that were not expected.
"You just need to be smart about how you do it. It's all based on dates, because with abandonments you're not using a lot of tangible materials, you're taking stuff out rather than putting it in. So it's time based costs - you're looking at rig rates, third party servicing equipment, people and engineering."
If a well takes 10 days to permanently abandon, the rig alone might have cost $5 million two years ago. Now it's likely $2.5 million. Extrapolating third party services equipment and staffing costs, O'Keeffe says that instead of abandoning a well for $7-8 million it might be possible to undertake the work for $4 million.
