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Quantifying Decommissioning Risk in the Deepwater Gulf of Mexico

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  • Mark J. Kaiser
  • Mingming Liu

Abstract

Deepwater oil and gas structures are expensive to install and will be expensive to dismantle when the asset no longer serves a useful purpose. Deepwater structures present special risk because decommissioning expenditures are expected to cost tens to hundreds of millions of dollars to perform, and occur when the asset no longer generates revenue. An analytic framework is presented to quantify the decommissioning risk of offshore structures by comparing the value of an asset's reserves to its undiscounted asset retirement obligations. The procedure is applied to the deepwater fixed platform and compliant tower inventory in the Gulf of Mexico circa January 2013.

Suggested Citation

  • Mark J. Kaiser & Mingming Liu, 2015. "Quantifying Decommissioning Risk in the Deepwater Gulf of Mexico," The Engineering Economist, Taylor & Francis Journals, vol. 60(1), pages 40-74, January.
    • Handle: RePEc:taf:uteexx:v:60:y:2015:i:1:p:40-74
    DOI: 10.1080/0013791X.2014.932036
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