5. Cessation
Turn every stone
Shutting down fields and facilities forms a natural part of petroleum activities. Before production ceases, it is important that all measures which could provide profitable production have been assessed.
Continuous technological progress, field development and tie-back of new discoveries may help to extend producing life. But the point will eventually be reached when the cost of continued production from a field is higher than the revenues generated by its own output and from any possible tied-back fields. The decision will then be taken to shut down and begin the work of removing the facilities. Estimating precise cessation dates for the various fields and installations is difficult, since they will depend on several factors. These could include oil and gas prices, expected developments in production, improved production techniques, operating and maintenance costs, and the technical condition and producing life of the installations. In addition to uncertainty over shutdown, the launch date and duration of the actual cessation project may be uncertain.
Fields which are or could shut down within five years
Up to 25 per cent of fields currently on stream could cease to produce over the coming five-year period. That might sound dramatic, but output from the relevant fields has only a minor impact on total production from the Norwegian continental shelf (NCS). At 31 December 2016, 23 fields had shut down on the NCS. Their output contributed six per cent of total Production.
Changed assumptions affect producing life
When a plan for development and operation (PDO) is submitted to the government, the licensees will have planned how and for how long the field is to produce. This is based on knowledge and data at the submission date. While these early estimates have proved over-optimistic in some cases, fields usually stay on stream longer and produce more than originally expected.
Fields which are or could shut down within five years
Up to 25 per cent of fields currently on stream could cease to produce over the coming five-year period. That might sound dramatic, but output from the relevant fields has only a minor impact on total production from the Norwegian continental shelf (NCS). At 31 December 2016, 23 fields had shut down on the NCS. Their output contributed six per cent of total Production.
Changed assumptions affect producing life
When a plan for development and operation (PDO) is submitted to the government, the licensees will have planned how and for how long the field is to produce. This is based on knowledge and data at the submission date. While these early estimates have proved over-optimistic in some cases, fields usually stay on stream longer and produce more than originally expected.
Cessation costs
Shutdown and disposal costs over the past five years totalled NOK 32.5 billion and NOK 8.5 billion respectively in 2016 value. These amounts are large viewed in isolation, but small compared with expenditure on exploration, development and operation and with revenues from the Fields.
All wells drilled on the NCS must be plugged once production or injection has ceased. Exploration wells also have to be plugged. The NPD has estimated that some 40-50 wells will need to be plugged annually over the next few years.
Regulations for shutdown and disposal
Cessation of petroleum activities and disposal of facilities are regulated by chapter 5 of the Petroleum Act. This specifies requirements for a decommissioning plan as well as rules on notifying termination of use, the disposal decision, liability, encumbrances and takeover by the state.