DL Series: Economic Surprises of Late Life Production

About the lecture

For years, decommissioning costs were an after-thought to decision-making. They did not affect cash flows or business plans, and sometimes reserve reports did not even include them. Now, many legacy fields both within the U.S. and globally are declining to their final life stage. Even with many producing years remaining and a positive net present value, the total future cash flow can be – surprisingly – negative. Operators may not be ready for the unexpected reality since our industry has spent too little forethought on quantifying the scope of decommissioning, estimating its costs, ensuring security for the long term, and especially preparing funds for the surprisingly early onset of those costs. Though the price boom of recent decades delayed and distracted from the inevitable, natural depletion and the outlook for declining oil demand bring the issue to front. Now the industry finds itself with insufficient nomenclature, knowledge,…