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This paper was prepared for presentation at the SPE Asia Pacific Oil & Gas Conference and Exhibition held in Perth, Australia, 25-27 October 2016.
This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
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Abstract
Review the Activity Based Costing (ABC) and Earned Value Management (EVM) fundamentals of being
applied to the case study. Examine the constraints and its feasibilities in recommending the implementation
of ABC combined with EVM to well abandonment projects.
Well abandonment project is one of phase in the oil well's life span that must be done after it is no
longer producing and to protect environment. Instead of giving revenue, well abandonment projects are
spending money. To fulfill its deliverables with cost-effectively and in timely manner, the project coverage
requires good planning, scheduling, and control. This paper is an actual case study which documents the
abandonment of 7 oil wells located in Indonesia. ABC assigns resource costs to a cost object based on
activities performed for the cost object. EVM coordinates the work scope, schedule, and cost goals of a
program or contract, and objectively measures progress toward these goals.
By applying the fundamentals of ABC and EVM, the abandonment project of 7 oil wells was completed
in a total of 131 days, a slippage of 12% over the approved plan of 117 days and at a total cost of 1.078
million USD, versus the target cost of 1.074 million dollars.
This paper explores the step-by-step process that is used to create the Baseline Schedule, track
the progress against the schedule and report to the appropriate stakeholders. The paper concludes by
recommending ABC combined with EVM be applied to other well abandonment projects.
Keywords: well abandonment, project management, activity based cost, earn value management, project
control
Introduction
Well abandonment project is one of phase in the oil well's life span that must be done after it is no longer
producing and to protect environment. Instead of giving revenue, well abandonment projects are spending
money. Usually, the project covers site clearance work, pull the string out of hole, plugging the hole, and
managing the mob/demob of equipment between sites. The environmental restoration will be done in a
separate project. To fulfill its deliverables with cost-effectively and in timely manner, the project coverage
requires good planning, scheduling, and control.
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Activity based costing (ABC) and earned value management (EVM) were very well-known as
methodologies that measure cost and performance of projects. ABC assigns resource costs to a cost object
based on activities performed for the cost object. EVM coordinates the work scope, schedule, and cost goals
of a program or contract, and objectively measures progress toward these goals.
The abandonment project of 7 oil wells, onshore located in Indonesia, was completed in year 2012 with
a total of 131 days, a slippage of 12% over the approved plan of 117 days and at a total cost of 1.078
million USD, versus the target cost of 1.074 million dollars. This case was recorded as a successful project
management in well abandonment. There are many well abandonment projects in Indonesia and many more
potentials not properly planned, scheduled and controlled as well.
This paper explores the step-by-step process that is used to create the Baseline Schedule, track
the progress against the schedule and report to the appropriate stakeholders. Review the ABC and
EVM fundamentals of being applied to the case study. Examine the constraints and its feasibilities in
recommending the implementation of ABC combined with EVM to other well abandonment projects.
Well Abandonment
The terms of well abandonment is about plugging the wells in connection with: temporary suspension,
temporary or permanent abandonment of wells, permanent abandonment of a section of a well. The
definition of each terms described in Table 1 is summarized after NORSOK D-010.
1 Temporary Suspension temporary suspension of well activities and operations without removing the well control equipment
2 Temporary Abandonment where the well is abandoned and/or the well control equipment is removed, with the intention that the
operation will be resumed within a specified time frame (from days up to several years)
3 Permanent Abandonment permanent abandonment of a section of a well (side tracking, slot recovery) to construct a new wellbore
with a new geological well target
where the well or part of the well, will be plugged and abandoned permanently, and with the intention of
never being used or re-entered again.
The critical issues must be taken care of in abandoning the well are about the well barrier and the well
integrity. Well barrier preventing fluids or gases from flowing unintentionally from the formation, into
another formation or to surface with envelope of one or several dependent barrier elements. According to
NORSOK D-010, well integrity applies technical, operational and organizational solutions to reduce risk
of uncontrolled release of formation fluids throughout the life cycle of a well.
Well intervention operation by deploying tools and equipment (e.g. coiled tubing, wireline, snubbing,
crane or even rig) is delivered to abandoning the well. The well abandonment project explored in this paper
is applying permanent abandonment with proper well barrier and without any further integrity issues and
in compliance with the regulations those exist.
Prior to the well abandonment job, site clearance job including access road preparation usually completed
by the civil works, as different team to the well intervention team. Abandonment activities started after
the well intervention team moved and rigged up their equipments at the well site. The activities are: well
integrity checking, pulling the production tubing out of the hole, and pumping the cements to plug the
appropriate zone.
The conditions of 7 oil wells put in this abandonment project are some of them have lost their wellheads
(Fig. 1), poor well integrity, as well as potentially harmful to the environment. The company proposes the
SPE-182441-MS 3
well abandonment program, consists of well schematic comparison between the existing and the proposed
(Fig. 2), and the abandonment procedures which are standard compliants.
Figure 1—Wellhead(less) condition which is potentially harmful to environment as the reason for well abandonment
Figure 2—Well schematic comparison between the existing and the proposed for well abandonment
recommended by Amos, 2012, this estimating method will produce Class 2 cost estimate with the expected
acuracy range is +10/−5%.
The company proposes the budget using specified expenditure schedule. This expenditure schedule
summarizes the expenditure budget of particular projects. It consists of classification and breakdown in
terms of cost categories or elements. The purposes in utilizing such standard form are to provide the unit
costs for trends and comparisons study and estimate profitability. This traditional kind is also helpful for
evaluating the quotations of related services.
Problem Statement
Since the works are beneath the surface ground, well work activities always face uncertainties. The well
work project requires proper and comprehensive planning and controlling, and all resources require should
be well prepared. Continuous monitoring, measuring and controlling the activity during execution will
ensure it deliver as per plans and prompt response to any deviations and will make the project successful.
Drilling activities use the Chart of Time versus Depth versus Cost (TDC Chart) in measuring drilling
performance and progress. The performance is measured by its consistency to the plan curve and the progress
is shown by the depth drilled. The useful of this chart is the problem will immediately identified when the
line is shown flat or deviated from the plan curve.
Well servicing activities cannot use TDC Chart to measure its performance and progress. Since the wells
are already drilled, constructed and produced, the depth curve is not appropriate to serve as the progress
information. The cost curve will be the chart which provides the performance information as well as a
progress tracking tool.
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As a project, well abandonment as well as work activities with the very short duration needs the
accurate method of project monitoring, measurement, control and reporting. These needs allow the project
management to promptly respond to any problems that will affect the project completion.
reasons the project leader is assigned from the Team #2 to collaborate with the other teams and manage
the works as scheduled.
The site preparation for each location is budgeted for 7 working days. The moving time is calculated
according to the distances between location, the equipment loads and the trailer availability. The pulling
time will depends on the wellbore schematic and the integrity check result, but 4 days budget is allocated
for the work. Plug and cementing for each interval in compliance to the government standard and regulation
is calculated based on the information provided in the wellbore schematic. Rig down and clean up usually
takes 2 days only.
The company was proposing with the same number of duration and budget for each P&A of 7 wells job
except for the Well #7 which require additional rig job. Following the method discussed above, the proposal
was then evaluated and resulting the approved budget of 1.017 million USD is 17% cut.
Figure 6—The Earned Value and Baseline Chart for the Week 7 gives the information
that the progress of the work is behind schedule and the cost will be overrun.
The cost performance (CPI) and the schedule performance indices (SPI) are the ratio that measure
efficiency. According to Fig. 6, the calculated CPI is 0.81 and SPI is 0.74. These numbers also suggest that
the progress of the work is behind schedule and the cost will be overrun. Predicting the cost will be 50%
over budget, the company is proposing to revise the budget for this particular job.
budget. The final number CPI 1.0 and SPI 1.0 showing us that a credible cost estimation will result a very
accurate level of actual expenses.
Figure 8—The Earned Value at the Project Completion which gives the information that the time to complete the
project was slid about 2 weeks behind the schedule but the budget is slipped only 0.42% of the revised budget.
Fig. 9 shows the Gantt chart at the completion. It gives us another information that the site preparation
task done by the Team #1 also slipped about 11 days from the plan schedule and 28% budget overrun. Some
optimization have been made so that the well abandonment job conducted faster that its plan.
Figure 9—Project Gantt chart, Budget and Actual Cost at the completion
As a result in applying the fundamentals of ABC and EVM, the abandonment project of 7 oil wells was
completed in a total of 131 days, a slippage of 12% over the approved plan of 117 days and at a total cost
of 1.078 million USD, versus the target cost of 1.074 million dollars.
The case study of the well abandonment project shows that proper planning, scheduling and controlling
are necessity to guiding project to its successful conclusion. The constraints of this process are the resistants
to provide such level of detail in defining project objectives and scope of works. A thorough assessment in
scheduling and cost estimating also plays the role for a credible and reliable budgeting.
Conclusions
Applying ABC and EVM fundamentals is a new approach to the well abandonment project management. As
one of the petroleum operation, according to PSC, the well abandonment projects are part of the government
project. The government requires a high quality budget estimation and objective project management
process for they project.
The step by step of the project management process presented in this paper has implementing the ABC and
EVM methodology. The final number CPI 1.0 and SPI 1.0 shows that a credible cost estimation will result a
very accurate level of actual expenses. ABC and EVM approach answer the needs of the accurate method of
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project monitoring, measurement, control and reporting to allow the project management promptly responds
to any problems that will affect the project completion.
The ABC combined with EVM is recommended to be implemented to other well abandonment project
as well as work activities with the very short duration.
Acknowledgement
The authors wish to thank the management of SKK Migas for permission to publish this paper and recognize
ConocoPhillips Indonesia Inc. Ltd for their supports. The authors also wish to acknowledge all the parties
who kindly provide valuable works and contributions to support the preparation and presentation of this
paper.
Nomenclature
ABC = Activity Based Costing
ACWP = Actual Cost of Work Performed
BCWP = Budgeted Cost of Work Performed
BCWS = Budgeted Cost of Work Scheduled
CPI = Cost Performance Index
CV = Cost Variance
EAC = Estimate at Completion
EVM = Earn Value Management
MIRU = Moving In and Rigging Up
P&A = Plug and Abandonment
PSC = Production Sharing Contract
PV = Planned Value
RD = Rigging Down
SPI = Schedule Performance Index
SV = Schedule Variance
WBS = Work Breakdown Structure
References
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and on budget (5th ed.). New York, NY: McGraw-Hill.
Smith, D. K. (1993). Handbook on well plugging and abandonment. Tulsa, OK: PennWell Books.
Standards Norway (2004). NORSOK standard: Well integrity in drilling and well operations (D-010 Rev. 3)
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