Guidelines For Upstream Pre-Project Decommissioning Estimates

REPORT SEPTEMBER
667 2023
Guidelines for upstream pre-project

decommissioning estimates
Acknowledgements
This Report was produced by the IOGP Asset Retirement Obligations (ARO) Expert
Group of the IOGP Decommissioning Committee, with support from Turner &
Townsend Energy Ltd.
Front cover photography used with permission courtesy of

© Alextov/iStockphoto and © Jan Miko/Shutterstock
About
This Report provides guidance on the development and maintenance of pre-
project technical cost estimates for upstream oil and gas industry asset
decommissioning, with particular emphasis on estimates for asset retirement
obligations.
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IOGP welcomes feedback on our reports: publications@iogp.org
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REPORT SEPTEMBER
667 2023
Guidelines for upstream pre-project

decommissioning estimates
Revision history
VERSION DATE AMENDMENTS
1.0 September 2023 First release

Guidelines for upstream pre-project decommissioning estimates
Contents
Introduction 6
1. Overview of pre-project estimating 7

1.1 What is a pre-project estimate for decommissioning? 7
1.2 The process of developing a pre-project estimate for decommissioning 8
1.3 Estimates supporting Asset Retirement Obligations (ARO) provisioning 9
1.3.1 What is ARO? 9
1.3.2 The regulations that govern ARO 9
1.3.3 What is an estimate supporting ARO? 9
1.4 The structure of this guideline 9
2. The principles of pre-project decommissioning estimating 10

2.1 Making assumptions 10
2.2 Defining the inventory 10
2.2.1 Understanding the inventory 11
2.2.2 The work breakdown structure 11
2.3 Understanding regulatory, contractual, and other restrictions 15
2.4 Establishing the end state 16
2.5 Selecting the approach to achieving the required end state 17
2.6 Identifying sources for cost and schedule information 17
2.7 Developing the estimate 18
2.7.1 Approaches to estimating 18
2.7.2 Estimate accuracy 18
2.7.3 Cost phasing 19
2.7.4 Managing estimate uncertainty 19
2.7.5 Assuring the estimate 21
2.7.6 Dealing with estimates prepared by others 21
2.8 Documenting the basis of estimate 22
2.9 Maintaining the estimate 22
2.9.1 Routine maintenance 22
2.9.2 ARO considerations arising from divestments and acquisitions 23
3. Detailed approaches to estimates supporting ARO 24

3.1 Project management 26
3.1.1 What is included 26
3.2 Post-CoP running costs 27
4
3.3 Well decommissioning 29

3.3.1 What is included? 29
3.4 Facilities and pipelines permanent isolation and cleaning 31
3.5 Topsides preparation 33
3.6 Topsides removal 34
3.7 Substructure removal 35
3.8 Topsides and substructure onshore disposal 37
3.9 Subsea infrastructure 38
3.10 Site remediation 40
3.11 Post decommissioning monitoring 42
3.12 Floating facilities 42
3.13 Onshore facilities 43
Appendix A.1 – Pre-project decommissioning estimating- examples of the different

approaches for each WBS category 44
Appendix A.2 – Post CoP running costs estimates - worked examples 46
Appendix A.3 – Well decommissioning

costs estimates - worked examples 47
Appendix A.4 – Topsides removal cost estimates - worked examples 48
Appendix A.5 – Pipeline decommissioning cost estimates - worked examples 49
Glossary 50
Table of abbreviations 50
Definition of terms 51
References 57
5
Introduction
Background
IOGP believes that industry-wide standardization is a valuable and attainable goal. The IOGP
Decommissioning Committee identified variations in the development of estimates supporting
Asset Retirement Obligations (ARO) provisions across the oil and gas industry. These guidelines
are intended to improve consistency in the development of all pre-project estimates for upstream
assets decommissioning, and to allow lessons to be shared across companies and regions.
Purpose
The purpose of this document is to provide guidance on the development of pre-project cost estimates
for upstream oil and gas assets decommissioning, with particular reference to those that support the
determination of ARO provisions. These guidelines define the development of consistent and appropriate
pre-project estimates for decommissioning that are fit for purpose, transparent, and credible.
This Report contains recommended approaches based on the experience of IOGP Member
Companies. It provides recommendations, not requirements or regulations.
Scope
The scope of this document is limited to the provision of guidelines for the development of pre-
project cost estimates for upstream oil and gas asset decommissioning, with particular reference to
those supporting ARO provisions.
‘Pre-project’ refers to an asset’s life from establishment until a project team is formed to manage
and execute asset decommissioning.
Guidelines are provided for:

• Establishing appropriate end-state assumptions
• Selecting a Work Breakdown Structure (WBS)
• Defining the necessary level of technical detail
• Detailing appropriate estimating techniques and methodologies
• Illustrating the expected accuracy range
• Defining processes for recognizing opportunities and uncertainty
• Suggesting approaches to deal with co-venturer estimates
• Guiding on the content of the basis for estimate document
• Maintaining the estimate over time
• Managing any ARO implications arising from acquired or divested assets
These guidelines are intended to be broadly applicable to upstream offshore and onshore assets
in all geographical locations. This guidance may also be applied to decommissioning estimates for
midstream and downstream assets; however, these asset types are not directly referenced.
For the most common asset types, asset archetypes are provided as appendices. These work
through the selection of estimating approach and provide examples.
6
1. Overview of pre-project estimating
1.1 What is a pre-project estimate for decommissioning?

A pre-project estimate for decommissioning is:
• An estimate of the costs of the activities required to undertake the assets
decommissioning, in a timely manner, at the end of their life.
• An estimate carried out from the sanction of the asset development project through to the
establishment of a project team to decommission the asset. It is therefore distinct from:
– The decommissioning consideration included in the project economics when
initial asset development is sanctioned
– The project estimate for the decommissioning project
At a high level, the pre-project estimate should generally include costs for:
• Project management
• Asset operation from cessation of production onwards (post-COP running costs)
• Permanent plugging and abandonment (P&A) of all wells
• Permanent isolation and cleaning of all assets as required
• Where an asset is to be removed, all work required to prepare for removal. Where it is
to be left in situ, any required preparation work
• Removal and transport of materials to a disposal site
• Recycling and disposal of removed materials
• Site remediation
• Post-project monitoring as required
A pre-project cost estimate could be used for a number of purposes, including:

• Input to the ARO provisioning process
• Capital planning
• Meeting regulatory or stakeholder requirements
• As part of an asset divestment or acquisition
It is important that the pre-project cost estimate is credible. This can be defined by the
following characteristics:
• Based on a suitably detailed and accurate understanding of the inventory
• Presumes an end-state that is supported by regulation and industry good-practice
• Includes assumptions based on reasonable precedents
• Recognizes the uncertainty inherent in the estimate
• Has pragmatically adopted estimating approaches that provide an accuracy level
that is suitable for the intended purpose
• Is supported by key stakeholders
Other terms equivalent to ‘credible estimate’ in this context include ‘best estimate’,
‘most likely estimate’, or ‘P50 estimate’.
7
1.2 The process of developing a pre-project estimate for

decommissioning
The process of developing a pre-project estimate for decommissioning follows similar
steps regardless of the asset type or location. These are shown below and are expanded
further in the sections indicated.
Define the inventory of the asset in alignment with a consistent See

and comprehensive Work Breakdown Structure (WBS). Section 2.2
See Section 2.1
Understand the relevant contractual and regulatory framework, along See

with any restrictions imposed by other stakeholders or corporate policies. Section 2.3
Credible assumptions based on reasonable grounds and fully documented
See
Establish the end state. Section 2.4
Select the approach to achieve the required end state safely,

See
with no harm to the environment, in compliance with all regulations Section 2.5
and stakeholder expectations, and economically.
Identify sources of cost and schedule information See

from which to build the estimate. Section 2.6
Develop an estimate at expected present value for See

bringing the asset to the required end state. Section 2.7
See
Document the basis of the estimate, including all assumptions. Section 2.8
See
Once developed, the estimate should be periodically reviewed and updated. Section 2.9
Figure 1: The process of developing a pre-project estimate for upstream asset decommissioning
8
1.3 Estimates supporting Asset Retirement Obligations

(ARO) provisioning
1.3.1 What is ARO?

The development of oil and gas wells, facilities, and infrastructure (assets), frequently
gives rise to an obligation to decommission these items at the end of their life. Accounting
standards require that the parties responsible for these obligations make recurring
accounting provisions for the projected cost of decommissioning, referred to as ARO.
AROs in the balance sheet represent the value of future liabilities, estimated at a given time in
the life of the asset. They materialize at the end of life of wells, facilities, or infrastructure.
1.3.2 The regulations that govern ARO

Standards for the recognition and accounting of ARO are published by the Financial
Accounting Standards Board (FASB) in the United States and by the International Financial
Reporting Standards (IFRS) for the rest of the world.
IFRS standards are developed by the International Accounting Standards Board (IASB),
which set out how a company must prepare its financial statements. “International
Accounting Standard 37 Provisions, contingent liabilities and contingent assets (IAS37)”,
defines and specifies the accounting for, and disclosure, of provisions, contingent liabilities,
and contingent assets.
For the USA, “ASC 410-20 Asset Retirement and Environmental Obligations: Asset
Retirement Obligations” sets out similar requirements.
There may be differences prescribed by local and generally accepted accounting practices.
As the requirement to recognize ARO provisions arises from financial standards, the
timing of this recognition should be directed by an organization’s finance specialists, with
agreement of financial auditors, as appropriate.
1.3.3 What is an estimate supporting ARO?

The estimate supporting ARO will, in many ways, be the same as any other pre-project
technical cost estimate for decommissioning. However, it may also have some distinct
assumptions and be subject to particular requirements relating to its update and
maintenance. These will be highlighted as appropriate throughout this guideline.
1.4 The structure of this guideline

Section 2 of this guideline details the principles of each step outlined in Section
1.2, including proposing a WBS structure for organizing pre-project estimates for
decommissioning. It provides context for the remainder of the document.
Section 3 looks in detail at what should be considered in a pre-project estimate for
decommissioning. Each WBS element is examined in turn, detailing what should be
included, suitable approaches to estimating, and any special considerations that may apply.
9
2. The principles of pre-project

decommissioning estimating
This Section explores the principles of developing a pre-project estimate for upstream oil and
gas asset decommissioning. Section 3 will discuss individual facility types in more detail.
2.1 Making assumptions

Many assumptions are made when developing a pre-project estimate for decommissioning
because of the following aspects:
• The number of years until actual decommissioning when developing an estimate
supporting ARO
• Uncertainty of the future condition of the assets to be decommissioned
• The necessarily pragmatic approach to the level of technical definition,
estimating approach, and estimating effort employed in development
Assumptions could include:

• Inventory of the asset
• Regulation at the point of asset decommissioning
• The end-state to be achieved
• Technology and methodology to be employed
• Availability and capability of people, equipment, and vessels
• Capability, availability, and location of suitable destinations for removed materials.
In all cases, assumptions should be:

• Credible and based on reasonable grounds
• In line with standards, regulation, stakeholder expectations, corporate policy,
and industry best practice
• Well documented, so as to record the reasoning for the assumptions and to allow
for future understanding, review, and challenge
2.2 Defining the inventory

It is important to have an up-to-date and suitably detailed understanding of the inventory
of the asset to be decommissioned. This should be organized in a consistent manner that
aligns with sources of reference information.
10
2.2.1 Understanding the inventory

To estimate decommissioning costs, the inventory of the asset must be understood.
This includes:
• Key assets within the decommissioning scope:
– existing assets must be included
– assets under construction should be considered based on the proportion
of the value already delivered
– planned developments that have not yet commenced should not be included
• Characteristics of these assets, such as:
– Location characteristics, including water depth and site constraints
(such as access, neighbours, and so on)
– Size (for example, well counts, topsides weight, pipeline length, building area,
road length)
– Age of the facility, design life, and length of time until assumed
decommissioning
– Functionality and complexity (for example, facilities functions, well complexity,
congestion)
– Construction and installation methodology (such as, modularized, stick built,
single lift, multiple lift with offshore integration)
This information is informs the assumptions and helps identify sources of information
to be used in preparing the pre-project decommissioning estimate.
The level of detail of the inventory is a pragmatic decision as discussed in Section 2.1.
Section 3 of this guideline considers appropriate granularity of inventory for different facility
types in more detail.
2.2.2 The work breakdown structure
2.2.2.1 Background
It is important that what is to be achieved, how it will be achieved, and what it will cost,
is organized in a consistent manner. This is done by adopting a defined work breakdown
structure (WBS), designed to divide the work into discrete chunks, understood and
estimated separately. Use of a defined WBS supports consistency and helps ensure that the
approach to developing the estimate is comprehensive and controllable.
The adoption of a common work breakdown structure (WBS) framework aids consistency
and assists with communication internally, with regulators, co-venturers and other
stakeholders, and financially interested parties, such as auditors and host governments.
It also enables effective learning and facilitates benchmarking.
A good decommissioning WBS will have the following characteristics:
• Offers a logical and straightforward breakdown.
• Distinctive start and end points to each WBS element.
• Enables all regulatory reporting requirements to be met.
• Reflects likely/typical contractual arrangements.
• Has a good level of cross industry acceptance.
11
The decommissioning sector of the oil and gas industry is not new. One WBS has become
established in several countries and companies. This is the Offshore Energy UK (OEUK)
’11 box model’1 also adopted by Offshore Norge2 and used by several IOGP Members
throughout their decommissioning profiles.
The IOGP ARO Expert Group have concluded that this WBS, shown in Figure 2, is suitable
for use across the upstream industry and recommend its adoption when preparing pre-
project estimates for decommissioning.
The WBS is outlined here with full detail of each element provided in Section 3. The
following should be noted:
• This WBS is intended as guidance. Operators are free to deviate from the WBS where
project or business needs require.
• This is a high level WBS and does not provide the complete structure necessary for
project management, planning, and cost control. Operators’ own execution WBS or
ISO190083 should be used in conjunction with this WBS.
• Whilst the categories of the WBS are in some ways sequential, they are not intended
to represent a sequential process and may be concurrent or not required in some
projects or regulatory regimes.
• The WBS is clearly focussed on offshore assets, predominately fixed platforms and
subsea, however the same categories can be applied to floating facilities (see Section
2.2.2.3) and onshore (see Section 2.2.2.4).
2.2.2.2 Decommissioning WBS ‘11 box model’

This WBS is offshore focused. Guidance on application on onshore projects is provided in
Section 2.2.2.4 and throughout this guideline.
Operator’s core project management team. Also

1 Project management includes overhead costs such as project insurance,
tendering, paid studies, and assurance activities.
2 Post-CoP running costs Asset operational costs after termination of production.
All activities relating to the permanent isolation

3 Well decommissioning
of any rock formations with flow potential.
1
OGUK, Decommissioning Work Breakdown Structure Guidelines, October 2019, https://oeuk.org.uk/product/decommissioning-work-
breakdown-structure-guidelines/
2
Offshore Norge, Decommissioning Work Breakdown Structure Handbook, https://offshorenorge.no/globalassets/dokumenter/drift/
plugging-av-bronner/wbs-handbook-v1.pdf
3
International Standards Organisation ISO19008 Standard cost coding system for oil and gas production and processing facilities
https://www.iso.org/standard/63708.html
12
Isolate assets from sources of pressure and ensure

Facilities and pipelines
4 they are, as far as practical and required, free of
permanent isolation and cleaning
hydrocarbons and contaminants.
Alterations to the facilities necessary to support

5 Topsides preparation decommissioning and to the enable the facility
to become ‘not normally attended’ if required.
Offshore removal of topsides from their

6 Topsides removal substructure, along with transportation and
load-in at the disposal location.
All activities associated with the removal of

7 Substructure removal substructures, including transportation and
load-in at the disposal location.
Re-use, recycling, or disposal of removed

Topsides and substructure
8 topsides and substructures, including destruction
onshore disposal
and waste management.
Removal or remediation of all subsea elements,

9 Subsea infrastructure including transportation load-in and disposal of
any removed materials.
Removal of oil field debris as required, along with the

10 Site remediation
transportation and disposal of all removed materials.
Post decommissioning Surveys and monitoring programmes for any

11
monitoring infrastructure left in place, as required.
Figure 2: Decommissioning WBS ‘11 box model’ (© Offshore Energies UK)
2.2.2.3 Applying the WBS to floating facility projects

Although not explicit in the high level WBS, activities associated with floating facilities
decommissioning can be attributed to the WBS categories, noting the following:
• Topsides removal: most floating facility topsides will not be removed and instead
will be towed away still on top of the substructure. However, in-situations where the
topsides are to be removed (such as, spars), activities should be included in this WBS
category as described in Section 3.6.
• Substructure removal: this should include disconnecting and towing the floating
facility, following the approaches described in Section 3.7. This section should also
include any modifications required to install/re-instate tow points or to return a vessel
to class, if required.
• Topsides and substructure onshore disposal: if the floating facility is not to be sold or
reused elsewhere, the activities associated with disposal should be included in this
WBS element, as described in Section 3.8.
13
2.2.2.4 Applying the WBS to onshore projects

This WBS was designed with offshore projects in mind, but activities associated with
decommissioning onshore assets can be attributed to the categories of this WBS with the
following considerations:
• Where the WBS references ‘topsides’, the equivalent onshore category would be
‘onshore plant’ and activities can be included in the appropriate WBS elements on
this basis.
• Onshore pipelines should be included wherever the WBS references offshore
pipelines. Buried and unburied pipelines should be distinguished.
• The demolition of onshore facilities, and associated waste management, should be
included in the ‘topsides and substructure onshore disposal’ WBS element. There
may be varying approaches to onshore demolition and removal. By including all
activities in one WBS element, different methodologies can be compared.
• Site remediation will be a much more significant cost category than it is for an
offshore project and could include site restoration/reclamation and remediation or
decontamination. These activities should be included in the ‘site remediation’ WBS
category. Some of these activities may be difficult to distinguish from those associated
with demolition and waste management. Due to variation in site remediation
requirements, these activities should be separated.
2.2.2.5 Applying the WBS in jurisdictions where less detail is mandated

This ‘11 box model’ WBS has been recommended because it represents a useful level of
distinction between activities, allowing the decommissioning project scope to be adequately
explored to develop an appropriately defined pre-project estimate.
In some jurisdictions, a different WBS, or level of detail, is mandated for government

reporting. It is still recommended that the pre-project estimate for decommissioning
should be prepared following the recommended WBS. Elements may then be rolled up
(combined) to meet reporting requirements.
No situation has been identified where the ‘11 box model’ would prevent the required level
of detail being reported. However, as stated in Section 2.2.2.1, operators may deviate from
the WBS where needed.
14
2.2.2.6 Applying the WBS where it differs from contracting strategies or project
execution
There are situations where established contracting strategies differ from the recommended
approach defined by the WBS. For example:
• Topsides and substructure removal may be executed under one contract.
• EPRD (engineering, procurement, removal, disposal) contracts may be awarded.
• Activities that may be part of one WBS element may take place as part of another
scope of work for practical reasons such as, isolation and cleaning, which may be
undertaken by the asset operations team alongside post-CoP operations work and
may be difficult to distinguish.
When undertaking a pre-project estimate, the above would typically be regarded as immaterial.
One of the purposes of adopting a consistent WBS is to ensure that all activities are
accounted for and that they are included in the same place between estimates and
between companies. At the pre-project estimate stage, following this principle is more
important than accurately reflecting a contracting strategy or practical execution issue that,
at this stage, can only be an assumption.
Projects with contracting strategies or with execution practicalities that do not align with
the WBS will cause problems when collecting reference data for future estimates or
benchmarking. It is hoped that the adoption of a consistent WBS across the industry will
encourage projects to impose reporting requirements on contractors that align with the WBS.
2.3 Understanding regulatory, contractual, and other restrictions

When defining decommissioning activities and costs for an asset, restrictions imposed
by regulation, financial standards, contracts, co-venturer requirements, stakeholder
expectations, and corporate policy should be recognized and adhered to.
• The government regulator may dictate what must be achieved by asset
decommissioning and permit or prohibit certain solutions. They may also impose
a permitting regime that will require effort from the owner’s team and may have
schedule implications.
• The financial standards governing ARO (see Section 1.3.2) impose some restrictions
on assumptions that can be made.
• Contracts for leased facilities, tiebacks, production sharing contracts (or similar),
contracts for asset divestments or acquisitions, and other legal arrangements may
contain requirements or restrictions for asset decommissioning.
• It may be necessary to obtain agreement from co-venturers.
• Other stakeholders may have expectations that should be managed.
• Corporate policies of the company executing the decommissioning may impose more
restrictions than the above.
Where regulations, contracts, or corporate policies leave uncertainty about requirements

or restrictions, best endeavour should be applied in clearing such uncertainty.
15
2.4 Establishing the end state

The ‘end state’ is the assumed target status of all wells, facilities, and infrastructure in
an asset upon completion of decommissioning, along with any necessary plan for ongoing
monitoring. The plan may vary from facilities being left isolated but in-situ, through to full
facility removal and complete site remediation/restoration. The end-state established will
form the basis of the estimate.
The major assumptions of the end state should be informed by:

• Safe execution with no harm to the environment
• International, local, or regional regulation
• Agreed or reasonably expected derogations from regulatory requirements
• Contractual or permit obligations
• Corporate policy
• Expectations of co-venturers and other stakeholders
• Economic considerations
• Industry recognized standards and good practice
Where regulation clearly defines the required end state, or a derogation from regulation
can be reasonably expected, this should form the basis of the estimate.
In locations where regulations are less clearly defined, credible assumptions should
be made to establish the end state by following precedent and industry good practice.
In this circumstance:
• The most likely end state should be assumed.
• All major assumptions should be documented.
• A plan of engagement with regulators and stakeholders is a good practice to
understand and support the development of regulations.
Expected events and anticipated changes may sometimes be included in the end state
assumptions. These could be legislative changes or technical developments. Where such
assumptions are made:
• All assumptions should be objective and have reasonable grounds.
• All assumptions should be documented.
• Action plans should be in place to realize all opportunities and mitigate risks.
• The risk of the assumption not proving correct should be recognized.
• For estimates supporting ARO, the approach to recognizing expected events and
anticipated changes must be supported by the applicable accounting standard (as
referenced in Section 1.3) and by the company’s financial auditor.
16
2.5 Selecting the approach to achieving the required end state

The objective is to select an approach to achieving the required end state safely, with no
harm to the environment, in compliance with all regulations and stakeholder expectations,
and economically.
Often, the approach to achieving the required end state will be clear and established by
precedent. In these cases, the estimate can follow the pattern of similar projects and derive
costs and durations from past experience.
There may be more than one acceptable methodology, in which case:

• The most likely methodology should be assumed.
• Alternative approaches can be recorded on the risk and opportunity register and
reviewed when the estimate is next revised.
In general, only technical solutions currently available, or that can be reasonably expected
to be available, should be adopted as approaches to achieving the required end state.
When developing the approach to achieving the end state:

• All assumptions should be objective and have reasonable grounds.
• All assumptions should be documented.
The asset inventory and the approach to achieving the end state form the technical
quantification of the decommissioning scope for input into the cost estimating process.
2.6 Identifying sources for cost and schedule information

To develop the estimate, a source for costs, rates, and durations is required. Many sources
may be used, including:
• Historic experience of similar projects or activities
• A bottom-up approach where activities are modelled, and rates and norms applied
• Studies from a third party such as an engineering contractor
• Publications
The pre-project estimate for decommissioning is an estimate at expected present value. It is

not necessary to incorporate future market conditions. However, to avoid volatility in reporting
due to changes in market activity, a three-to-five-year average of rates should be used.
There may be local content requirements on the decommissioning project. Appropriate

assumptions should be made regarding the location of activities so that the correct rates
can be selected.
17
2.7 Developing the estimate
2.7.1 Approaches to estimating

Given the uncertainty of the condition of the asset when cessation of production (CoP)
is reached, and the effect of inflation and markets between establishing the estimate and
the activities being undertaken, there is a pragmatic balance needed when determining
the effort to be expended in developing the estimate, and the targeted accuracy.
A very detailed estimate will take time, effort, and cost to establish and maintain yet may
offer no more certainty than a simpler estimate. However, an estimate that is not built
upon credible scenarios and lacks rigour or sufficient technical basis:
• may not stand up to scrutiny from co-venturers, auditors, or regulators
• may offer insufficient certainty for its purpose
• may result in under or over provisioning with ensuing financial implications
• does not form a foundation for learning and improvement
There is therefore an ‘optimum’ or ‘best practice’ approach to pre-project estimating for

decommissioning that minimizes effort while arriving at a reasonable and justifiable estimate.
Where a number of broadly similar items are to be estimated, it will generally be sufficient
to regard these as essentially identical and estimate the same costs for each. For more
complex or uncommon assets, greater technical definition and effort may be required for
the same accuracy.
Details of suitable approaches to estimating for each WBS element are detailed in Section 3.
2.7.2 Estimate accuracy

The conventional AACE estimate classes detailed in recommended practice 18R-974 do not
neatly apply to pre-project estimates for decommissioning. This is due to the significant
time expected to elapse before project execution, and the number of assumptions that
must be made to handle this inherent uncertainty.
Simple, standard, and asset-specific estimating approaches are outlined for each element
of the WBS in Section 3.
• Simple approach: for a simple asset such as, a high number of onshore wells or simple
offshore installations such as wellhead platforms, estimating approaches including
capacity factoring, parametric models, judgment, or analogy would be typical.
• Standard approach: for most assets, the broad characteristics of a study or feasibility
estimate are appropriate. Methodologies such as equipment factoring, or parametric
models, are recommended.
4
AACE International Recommended Practice No. 18R‐97, Cost Estimate Classification System – as applied in Engineering,
Procurement, and Construction for the Process Industries, August 2020 https://web.aacei.org/docs/default-source/toc/toc_18r-97.
pdf?sfvrsn=4
18
• Asset-specific approach: in some circumstances, a semi-detailed estimate may

be necessary to justify costs. This will depend on the purpose of the estimate and
the characteristics of the asset. This additional estimating effort is particularly
recommended for challenging decommission scopes or where asset divestments or
acquisitions are being evaluated.
2.7.3 Cost phasing

The execution of a decommissioning portfolio often spans multiple years. Cost phasing
involves spreading the estimated project costs to align with the scheduled project
execution.
While project execution is still many years off, and the CoP date may be uncertain, the
effect of cost phasing is of limited materiality. However, when estimating for ARO, the effect
can be more significant due to the impact on the discounting process when establishing
ARO provisions.
Rather than develop a sophisticated cost phasing model, it is generally adequate to assume that:
• wells P&A costs are incurred early in the decommissioning project.
• all other costs will be incurred at the mid-point of the project.
There are situations where actual decommissioning occurs long after the end of the
petroleum contract, and where ARO estimates are used to determine contractual
decommissioning funding (such as, escrow account payments). In such situations,
an appropriate approach should be agreed with the regulator, for example, assuming
decommissioning at the end of the contract, or at the end of asset life, but spread pro rata
over the contract’s duration.
2.7.4 Managing estimate uncertainty

Uncertainty is an inherent characteristic of estimates. Estimates are correctly described
by a statistical distribution but the need to make accounting provisions requires developing
a single value that represents a credible estimate, based on reasonable grounds, often
referred to as the “best”, “P50”, or “most likely” estimate. Whilst company and country
practices and terminology vary, three components are included in decommissioning
estimates, each characterized by the level of definition or inherent uncertainty:
1) Quantified estimate: These estimate elements are characterized by well-defined
scope, measurable performance outcomes, and predictable market rates (for
example, an experienced contractor will use a proven vessel for an offshore removal
in a predictable time at an established market rate).
2) Specific allowances: Specific allowances are included in estimates to allow for
defined but less predictable costs. Amounts are typically based on the range of
outcomes experienced on previous projects. Allowances should be added to the
individual element of the WBS where appropriate. For example, a vessel could be
affected by weather downtime, which data predicts will vary between 10% and 30%.
In this case it may be appropriate to allow a 20% weather allowance, representing a
mid-range in the estimate.
19
3) Contingency: “Contingency” reflects provision for adverse risks which experience

suggests typically materialize as a project progresses and impact the “real world”
cost outcome.
• Contingency is typically applied as a percentage that is varied as a function of
available estimate definition level. A single percentage can be applied to the
whole estimate, or different percentages can be allocated to specific elements
of the WBS according to the definition and risk profile of each. An early
estimate with limited definition should attract higher contingency than a well-
defined estimate based on reference to a recently completed close equivalent.
• Where there is limited historical data, technology or a supplier is unproven,
or regulatory driven scope risk is high, this should be reflected in increased
contingency.
These components of a pre-project estimate are illustrated in Figure 3 below.
Since contingency is an allowance for costs that statistics show will materialize due to yet
undefined risk, it is difficult to justify that an estimate that does not include contingency
(or allowance for risk) is based on reasonable grounds. The exception is where large
data sets of historical analogues exist (such as, platform well operations). Pre-project
decommissioning estimates typically include contingency amounts ranging between 0%
and 30%. The basis for the contingency should be clearly documented.
Complex methods can be used to determine allowances and contingency, but these are not
generally appropriate for pre-project estimates. The inclusion of contingency is not intended
to provide a “not to exceed” amount The purpose of its inclusion is to enable a credible
estimate. It is not intended to allow for major changes in the estimate basis (such as, a
regulator requiring a full jacket removal where a partial jacket removal had been assumed).
Whilst specific allowances and contingency are generally included to allow for adverse
risks, favourable opportunities should be identified and included when appropriate. Where
reductions are proposed (such as, a campaign approach is assumed to avoid mobilization
cost) they should be specific and have a credible chance of occurrence.
Where an estimate has been prepared to support ARO it should align with the accounting
principles detailed in Section 1.3, and be supported by applicable financial auditors.
20
Quantified estimate
1 Project management
Allowances
Quantified estimate
2 Post-CoP running costs
Allowances
Quantified estimate
Credible pre-project estimate for decommissioning

3 Well decommissioning
Allowances
Estimate contingency (typically 0%-30%)

Quantified estimate
4 Facilities and pipelines permanent isolation and cleaning
Allowances
Quantified estimate
5 Topsides preparation
Allowances
Quantified estimate
6 Topsides removal + =
Allowances
Quantified estimate
7 Substructure removal
Allowances
Quantified estimate
8 Topsides and substructure onshore disposal
Allowances
Quantified estimate
9 Subsea infrastructure
Allowances
Quantified estimate
10 Site remediation
Allowances
Quantified estimate
11 Post decommissioning monitoring
Allowances
Figure 3: Recognizing uncertainty in a pre-project estimate for decommissioning.
2.7.5 Assuring the estimate

To assure a pre-project estimate for decommissioning, these criteria should be evidenced:
• Solid technical parameters, such as complete facility and infrastructure inventory,
wells complexity categorization, and technical characteristics of facilities
• Assumptions that comply with local regulatory approval processes and requirements
• Sound cost and commercial basis, with references, such as contract unit rates,
historical costs, and market factors
• A technically feasible solution that reflects a realistic execution strategy
• The basis of planning of decommissioning activities
• Benchmarking with internal and external data/metrics, where possible
2.7.6 Dealing with estimates prepared by others

The operating partner in a joint venture or similar partnership may be required to provide
decommissioning cost estimates to all co-venturers throughout the life of the asset. These
should be reviewed by the non-operating co-venturers, and adopted if deemed suitable. If
they are not sufficient then the estimate should be conditioned by the non-operating co-
venturer, with all significant adjustments documented and justified.
21
2.8 Documenting the basis of estimate

AACE International Recommended Practice 34R-055 offers guidelines for the structure and
content of a cost basis of estimate document. These are applicable to pre-project estimates
for decommissioning.
The basis of estimate should:

• detail the project scope
• document all assumptions
• reference all documents
• document the effective date of the estimate along with escalation factors and
exchange rates used in its preparation
• detail the class and accuracy of the estimate
• describe the tools, techniques, and methodologies used
• record and reference key rates along with their basis and source
• detail the basis of quantities
• detail the basis of planning and duration
• identify and detail allowances and contingencies
• identify other projects referenced or benchmarked against
• detail the historical relationships between estimates throughout the life of the field
• highlight uncertainties or weaknesses in preparation that may impact the estimate
• log changes to the estimate
2.9 Maintaining the estimate
2.9.1 Routine maintenance

Once established, estimates should be maintained routinely. This is likely to be annually as
an input to ARO provisioning.
Maintenance should include:

• Update to current costs to reflect inflation and market conditions
• Recognition of new technologies that could change the way decommissioning may
be carried out
• Incorporation of changes in regulation that may change the assumed
decommissioning methodology or end state
• Re-evaluation of scope and quantities to reflect any changes in asset inventory.
This could include:
– New facilities, infrastructure, or wells added
– Redundant facilities removed, or wells plugged and abandoned
5
AACE International Recommended Practice 34R-05, Basis of Estimate, October 2021 https://web.aacei.org/resources/recommended-
practices
22
• Re-evaluation to reflect any change in the expected condition of the asset at CoP that
may affect decommissioning scope or methodology. This may arise from a change in
assumed CoP date, or from faster or slower changes in the asset condition relative to
what was predicted
• Review of all assumptions to ensure they remain valid
• Review of all risks and opportunities
There may be no change other than escalation of the estimate to a new basis date, but each
of these maintenance items should be considered at each review.
Reviewing the assumptions not only improves the estimate over time, but also provides a
clear record for the auditors that the owners have researched the market to justify their
ARO provisions.
2.9.2 ARO considerations arising from divestments and acquisitions

When assets are divested, some decommissioning liability may remain with the legacy
operator. This will depend on the conditions of the asset sale, aligned with regulation.
This means that asset divestment does not automatically signify that there is no
requirement for an estimate supporting ARO or an ARO provision. All remaining liabilities
should be reflected in the estimate supporting ARO.
Similarly, when an asset is acquired, the estimate supporting ARO should only reflect those
aspects of the decommissioning scope for which the new owner is responsible.
Companies with retained liabilities should maintain communication with the current
operators of assets to ensure they are aware of any changes in the asset that may affect
these liabilities.
23
3. Detailed approaches to estimates

supporting ARO
This section of the guideline provides detailed guidance for each of the WBS elements
outlined in Figure 2 in section 2.2.2. It includes:
• What should be included in each WBS element
• Recommended approaches to estimating
Although the WBS is offshore derived and the terminology is offshore focussed, it is also
applicable onshore and this is detailed throughout this section and in Section 3.13.
Where appropriate, ‘simple’, ‘standard’, and ‘asset-specific’ estimating approaches are

outlined for elements of the WBS. Choosing the appropriate estimating approach involves
considering several factors outlined in Figure 4 below.
Evaluating your situation against the descriptions for each factor will provide guidance
on the approach that may be appropriate for your decommissioning estimate.
For each WBS category, the remainder of Section 3 provides full detail of each approach.
An overview of each of the approaches can also be found in Appendix A.1.
24
Complexity of approach
Simple approach Standard approach Asset-specific approach
Factors that influence the selection of approach
Increasing complexity of asset
Such as, multiple onshore wells, Typical asset Such as, complex processing
simple WHPs platform, GBS
Innovation in decommissioning methodology
Established methodology, previously Established methodology but asset or Innovative approach or

used for this asset type and location location factors contribute to uncertainty challenging location
Importance of estimate accuracy
Internal high-level, long-term capital ARO Financial transactions such as,

planning purposes asset divestments and acquisitions
Materiality of estimate to your company
Major operator, asset is only a small portion Large asset that makes up a large portion of
of overall decommissioning liabilities an operator’s decommissioning liabilities
Decreasing time to CoP
Early field life Mid-life Decommissioning project

expected within 3-6 years
Lack of experienced local supply chain
Established, experienced, and local Established, reasonably local supply Limited or no local supply chain
supply chain chain, with some decom experience with decom experience
Level of definition of regulator or other stakeholder requirements
No regulatory or stakeholder Regulators or other stakeholders Regulators or other stakeholders

requirements require reasonable rigour are likely to engage with and
challenge the estimate
Figure 4: Factors influencing the selection of estimating approach
25
3.1 Project management

This WBS element is applicable to all offshore and onshore projects.
3.1.1 What is included

Project management includes:
• The cost of the owner’s team required to execute the decommissioning scope of work
and all associated IT, travel, and expenses, sometimes known as “home office costs”
• All studies and surveys required by the decommissioning scope
• The preparation of all documentation
• Obtaining regulatory approvals, permits, licences, consents, and derogations along
with insurance
• Costs associated with tendering and awarding contracts for project activities
• Management of relationships with all co-venturers and stakeholders
• Company overheads, which should be separated into ‘sole costs’ of the operator and
those that are to be shared with co-venturers, if necessary
Project management costs directly associated with the programme of wells plugging and
abandonment (P&A) are typically inseparable from the activities recorded in the wells P&A
WBS element.
Project management does not include management activities undertaken by contractors

when delivering their work. These should be included in the WBS element to which the
work delivered by the contractor applies.
It is beneficial to have a separate understanding of the owner’s project management

activities because they can vary in ways unrelated to the technical characteristics of the
asset being decommissioned. They can depend on, for example:
• The regulatory environment
• The location of the team
• The duration of the project
• Characteristics of the operator’s methodology and practices
Simple approach
A simple allowance based on the experience of past projects.
Standard approach
The owner’s project management costs can be expressed as a percentage of total project
expenditure, based on the experience of similar facilities or from studies. The percentage
used will differ from that of a typical facilities CAPEX project and will vary depending on the
facility to be decommissioned and its location.
26
Asset-specific approaches
In the absence of past project experience, aspects that differ from experience, or where
a more rigorous estimate is required, it may be necessary to model a bottom-up project
management (PM) team, activities, and durations, to be priced from market rates, for use
in the estimate.
3.2 Post-CoP running costs

This WBS element is applicable to all offshore and onshore projects.

Post-CoP running costs are the operational costs of an asset from the end of production
to when the asset is removed. They do not include the cost of preparing the asset for
removal. Instead, they reflect the cost of maintaining the necessary and regulatory level
of integrity, operability, and safety to allow preparation for removal or wells P&A to take
place, as applicable.
Included costs:
• The asset operations and support team (onshore and offshore, as applicable)
• Fuel and other consumables
• Activities necessary to judge and maintain the integrity and operability of assets to
meet regulatory and project requirements
• Logistics and accommodation
It is possible for facilities to be left in an isolated and unmanned state for some time prior
to their removal. All costs for monitoring and maintaining the asset during this time should
be included in the post-CoP running costs.
Special considerations when identifying post-CoP running costs include:

• Time from CoP to removal depends not only on the work required to prepare the asset
for removal, but also on the timing of removal. It is useful to separately understand
the post-CoP running costs and the assumptions behind them.
• There may be interaction between the duration of post-CoP running costs and the
timing and methodology of asset removal. In some circumstances it has proven
advantageous to delay asset removal to reduce heavy-lift costs. The post-CoP running
cost estimate should align with the strategy for asset removal.
• Preparing for decommissioning during late-life operations can reduce the time from
CoP to removal. If this is assumed, then it should be reflected in the estimate.
• For some jurisdictions or operators, post-CoP running costs are regarded as
operating expenses (OPEX). This does not prevent them from being understood
and estimated as part of this WBS element, within the pre-project estimate for
decommissioning. Doing so may optimize overall costs. However, where they
are accounted for or reported should continue to follow the pattern required by
jurisdiction or operator policy.
27
• Once native production has ceased, it may be necessary for parts of an installation
to remain operational to support other infrastructure. These costs would typically be
excluded from post-CoP running costs and assigned as OPEX for the supported assets.

A worked example of each of the estimating approaches is provided in Appendix A.2.
Simple approach
A simple allowance based on benchmark costs derived from past projects or studies, and
the planned duration of the decommissioning project.
Standard approach
Post-CoP running costs can be derived from final year OPEX, and a high-level percentage
applied to these, to reflect reduced personnel and consumables required to maintain the
necessary level of operation after CoP. These annual costs can then be applied to the
expected duration the asset will be operating in this state.
Asset-specific approach
Post-CoP running costs can be derived from final year OPEX and are defined according to the
personnel and consumables required to maintain the necessary level of operation after CoP.
There are three distinct phases to the post-CoP period, each with different running costs.
Whilst it may not be necessary to recognize these in the ‘simple’ or ‘standard’ approaches,
they should be recognized when adopting the ‘asset specific’ approach.
• ‘Live’: when the facility is ‘live’ (connected to a source of hydrocarbons), post-CoP
running costs typically remain about 80%-90% of final year OPEX.
• ‘De-energized: when no bulk hydrocarbons are present, running costs can be
assumed to reduce. Estimates for this period will typically apply a percentage
reduction over time. The basis of this reduction should be clearly stated.
• ‘Cold’ (if applicable): shut down and de-energized, with remote monitoring or periodic
visits, no permanent personnel and only essential maintenance. The estimate here
will largely be the cost of the remote monitoring team, helicopters and/or vessels
along with personnel for the periodic visits, and any necessary power supply or other
requirements.
Key to the estimate for the post-CoP running costs will be the duration of each of these
three states. Where possible, these durations should be derived from experience of similar
activities. The basis for the durations and any assumptions made should be clearly recorded.
The difference between standard and asset-specific approaches is the level of rigour
applied to establishing the reductions to final year OPEX, applied to each of the above
phases of the post CoP period, and to the time these costs are applied.
28
3.3 Well decommissioning

This WBS element is applicable to all offshore and onshore projects. Any differences in
approach are detailed below.
3.3.1 What is included?

Wells decommissioning involves the permanent isolation of the well bore from any flow
potential and the remediation of the well site to the state required by regulation.
The following activities should be included as applicable:

• The completion of studies and surveys directly related to the well programme
• Installation of all permanent barriers needed to isolate the reservoir and any
intermediate zones with flow potential
• Removal of the wellhead and well conductor along with the well origin at the surface
• The cost of any well intervention vessels, mobile drilling rigs, or the installation or
reactivation of fixed drilling facilities, along with any associated marine spread or
other resources
• The reuse, recycling, and/or disposal of equipment and waste retrieved
• Well integrity tests
• All materials, consumables, and services required to complete well abandonment
• The onshore and offshore wells project team and all associated costs and logistics

Industry experience is that wells decommissioning typically forms around 50% of all
decommissioning costs6 and as such it is particularly important that these estimates are
robust and suitably detailed.
A general approach to pre-project estimating of wells decommissioning costs is to form an

inventory of wells, categorized according to their technical characteristics. Each category
can then be considered separately.
Expect the inventory of onshore wells to be much larger than offshore, although they are
less likely to be complex and, the cost to plug and abandon each well will be lower. For
onshore wells it is both necessary and practical to use broad well categories in pre-project
estimates for decommissioning.
Offshore, where the number of wells is lower and the cost implications more significant,
it is recommended that more attention is paid to the characteristics of each well and a
greater number of more detailed categories are developed.
An offshore worked example of each of the estimating approaches is provided in Appendix A.3.
6
OEUK Decommissioning Insight 2022, section 3.2 https://oeuk.org.uk/product/oeuk-decommissioning-insight-2022/
29
Simple approach
An estimate for well decommissioning can be derived from a simple well count and an all-
in benchmark cost per well from experience of similar projects or from studies.
Even at this level, it is appropriate to consider the types of well to be decommissioned and
whether they are equivalent. For example, if there are both platform and subsea wells, then
different costs per well for each category should be used.
Standard approach
A more detailed approach is to use benchmark durations from past well decommissioning
campaigns or studies and build a programme for the well inventory of this project. Market
rates for the rigs/equipment required can then be obtained and an estimate developed. An
allowance for other costs related to the well decommissioning must be added, as detailed
above. This allowance can be derived from benchmark costs from past projects.
Well types and decommissioning methodologies should be considered so that benchmark

durations and rig rates can be selected.
OEUK propose a system for the categorization of wells according to the location and
complexity of three phases of abandonment7. This approach is summarized below and
is suitable for pre-project estimates for decommissioning where a detailed and rigorous
estimate is required.
Wells are categorized by location as:

• onshore
• offshore platform wells
• offshore subsea wells
The three phases of wells P&A are then considered as these reflect the work scope,
the equipment required, and the timing of the different phases of work. These are:
1) Reservoir abandonment
2) Intermediate abandonment
3) Wellhead and conductor removal
For each phase, the complexity of the activities is considered, according to the following
classifications:
No work required – A phase or phases of work may already have been completed.
Simple rig-less abandonment – Using wireline, pumping, cranes, jacks. Subsea will use
light well intervention vessel and be riser-less.
Complex rig-less abandonment – Using Coil Tubing Unit (CTU), Hydraulic Workover Unit
(HWU), wireline, pumping, crane, jacks. Subsea will use heavy duty well intervention vessel
with riser.
7
OEUK Guidelines on Well Abandonment Cost Estimation, Issue 2, July 2015 http://oeuk.org.uk/product/guidelines-on-well-
abandonment-cost-estimation-issue-2/
30
Simple rig-based abandonment – Requiring retrieval of tubing and casing.
Complex rig-based abandonment – May have poor access and poor cement requiring
retrieval of tubing and casing, as well as milling and cement repairs.
Allowances for real-life performance should be made, including:

• Non-productive time
• Waiting on weather
• ‘Learning curve’ effect for repeat activities; however, this must be defensible
• Unexpected difficulties in with problematic wells
• Tubing contaminated with normally occurring radioactive material (NORM), requiring
specific handling and disposal
For each well location/phase/complexity category, durations and spread rates can be
estimated. These estimates should be based on either past activities or a deterministic
modelling of the work required. To these estimates must be added campaign one-off costs.
3.4 Facilities and pipelines permanent isolation and cleaning

This WBS element is applicable to all onshore and offshore facilities and pipelines, along
with all subsea infrastructure.

All field-located activities to:
• De-energize all surface and subsea facilities and infrastructure and isolate them from
all sources of pressure
• Remove any inventory of bulk hydrocarbons
• Clean and flush the facilities to ensure that they are, as far as is reasonably
practicable and necessary, free of hydrocarbons and contamination to be safe for
removal
• Process and dispose of all liquid and solid waste associated with the above activities,
in accordance with applicable requirements and/or good industry practices
The requirements of cleaning and flushing may be defined by regulation, permits, or

dictated by the abandonment end state. Where permitted and practical, cleaning activities
should be limited to only those required for safe removal of the asset with no harm to the
environment, while the remainder takes place at the disposal facility later (see Section 3.8).

The cost of isolation and cleaning is normally only a small portion of the overall pre-project
estimate so a realistic approach should be taken to the effort level applied to estimating
these costs.
Where benchmark values are required, these could reference decommissioning projects but
also brownfield upgrade projects, well tiebacks, and regular turn-around (TAR) activities.
31
Simple approach
A simple allowance based on benchmark costs or studies for similar onshore plant,
topsides, subsea systems, or pipelines in a similar location.
For topsides and onshore plant, this should be calculated on a cost per tonne basis.
For subsea systems, the number of wells and length of flowlines/risers should be used.
For pipelines, a cost per kilometre is appropriate.
At the simplest level, there may be one estimate value for all WBS elements directly related
to the decommissioning of the asset, i.e., elements 4, 5, 6 and 7.
Standard approach
Benchmark durations should be established for the work based on benchmarks from
reference projects or studies.
Topsides and onshore plant: The duration should be calculated on an hours/days per tonne
basis, factored from the isolation and cleaning of similar projects. It is important that the
benchmarks selected represent a facility of equivalent complexity, condition, and location
so that realistic durations are derived.
Subsea: Isolation should be calculated based on duration per well, whilst cleaning should
be derived from a duration per kilometre of flowline/riser. Both durations should be
obtained from analysing reference subsea isolation and cleaning projects or studies.
Offshore and onshore pipelines: The duration should be based on pipeline length and be
calculated from reference pipeline isolation and cleaning projects or studies.
All-in cost per hour/day should then be derived from reference projects or market
intelligence and applied to the durations to form the estimate. If a cost per day/hour is not
available, a spread rate for the resources required should be calculated.
Where handling of hazardous waste such as NORM, mercury, or asbestos is required, this
should be recognized on a cost per tonne basis.
The most detailed recommended approach follows the standard approach above but tailors
durations and rates with more details in mind, including:
• The detailed inventory including topsides or onshore plant functionality and number
of wells should be used to tailor the durations and rates, either through selection of
reference projects or through factoring.
• The available space for personnel on board (POB) has a major influence on the time
needed to liquidate any activities.
• The presence of NORM, mercury, or asbestos, or facilities that have been processing
heavy or waxy oils require additional effort to clean and flush the facility and this
should be reflected in the durations.
• When deriving costs from past projects, if possible, the labour per tonne of topsides
should be analysed separately from the chemical requirements, rather than looking at
the overall cost per tonne.
32
• A learning curve can be incorporated into the durations. To be justifiable, this should
be for repeat activities, such as flushing multiple pipelines or the isolation of multiple
subsea wells.
• Some isolation and cleaning activity may be undertaken prior to CoP, reducing the
work to be included in the decommissioning estimate. If this is assumed, it should be
clearly stated.
3.5 Topsides preparation

This WBS element is applicable to preparing for the removal of offshore topsides and
onshore modular processing facilities. It is unlikely that an onshore project will have any
costs to attribute to this category.

This stage follows the isolation and flushing of facilities and infrastructure and includes all
activities to manage the fixed or floating facility topsides during its isolated status until it is
removed. This may include:
• Upgrading and re-engineering the facilities, such as, power upgrades, crane
upgrades, module separation, dropped object surveys, and remedial actions.
• Installation of navigational aids if an offshore facility is to be ‘not normally attended’.
This WBS element should exclude activities directly related to enabling the topsides
removal, such as structural strengthening or reinstatement of lifting points. These should
be included in the topsides removal WBS element in Section 3.6.
It is unlikely that this WBS element will be required in an onshore decommissioning project.
If equivalent preparation is needed for onshore plant, this should be included with all other
deconstruct activities in the ‘topsides and substructure onshore disposal’ WBS category
(see Section 3.8).
Simple approach
A lump sum derived from benchmarking similar reference projects or studies.
to the asset decommissioning of the asset, i.e., elements 4, 5, 6, and 7.
Standard approach
Allowances for all significant activities required, derived from benchmarking activities on
reference projects or from studies.
High level, bottom-up duration estimates for all significant activities, along with a spread
rate for the required resources.
33
3.6 Topsides removal

This WBS applies to removing any offshore topsides or onshore modular facility, noting that:
• For onshore facilities, it is unusual to remove modules; they are typically demolished
in situ. Such activities should be included in WBS element 3.8.
• For most floating facilities except spars, it is unusual to remove the topsides; they
are typically towed away on top of the floating substructure. Such activities should be
included in WBS element 3.7.

All activities relating to removing offshore facility topsides or onshore modules:
• Any installation or re-instatement of lifting points, structural strengthening, or
modifications required
• Removal by any method
• Lift vessels or equipment, along with the spread required to support this activity
• Transportation to the disposal location, and load-in
Modifications included here differ from those in the topsides preparation WBS element (see
Section 3.5). That WBS element should include activities and costs associated with enabling
the facility to remain in-situ in an isolated state until removal, rather than those directly
connected to topsides removal, such as structural strengthening or reinstating lifting points.

The effort required to remove an offshore topside or onshore module, and the cost to be
estimated, varies according to several factors, including:
• The high-level inventory of what is to be removed, usually defined by weight and
condition, as documented by surveys, or from assumptions, noting that weight reports
for older structures can be inaccurate
• Functionality (processing, accommodation, well-head, etc.)
• The removal methodology being adopted (such as, piece small, reverse installation,
or single lift)
• Location, considering:
– Season and weather condition variability
– The availability of specialist transportation and personnel
– Mobilization and operating rates of resources
– Available options for the disposal location
– Transportation costs
It may be necessary to make assumptions about the future availability of vessels or lifting
equipment, and disposal locations. These should be clearly stated, reasonable, and
fully documented.
34
The level of effort to carefully consider these factors for every facility individually is
beyond the expectations of most pre-project estimates for decommissioning. Pragmatism
is appropriate.
A worked example of each of the estimating approaches is provided in Appendix A.4.
Simple approach
Lump sum based on benchmark data from reference projects or studies for removal costs.
At the simplest level, there may be one estimate for all WBS elements directly related to
the decommissioning of the asset, i.e., elements 4, 5, 6, and 7.
Standard approach
A benchmark cost per tonne from similar regional reference projects or from detailed
studies for removal. The removal approach (single lift, module reverse install, piece small)
should be considered when selecting appropriate reference projects.
Duration estimates for all significant activities, along with market rates for the required
resources, including consideration of:
• Number and weight of lifts
• Duration per lift
• Required spreads and rates
• Transportation time to disposal location
• Season and weather conditions variability
• Phasing of operations
• Learning curve efficiency factor across the campaign
3.7 Substructure removal

This WBS element applies only to offshore projects. There are no equivalent onshore activities.
Activities associated with disconnecting and towing a floating facility should be included
in this WBS element.

This WBS element should include all activities relating to removing a fixed platform
substructure, or disconnecting and towing a floating facility, such as:
• Removal preparation, including removing appurtenances, structure strengthening,
and installation or re-instatement of lift or tow points
• Returning a floating facility to class, if required
• Pile cutting and removing associated mud mats
• Cutting and lifting of the structure
• Lift vessels and any related marine spread
35
• Disconnecting moorings or anchor chains associated with a floating facility including

recovery, transportation, and load-in at the disposal site
• Transportation of the substructure or floating facility to the disposal site, and load-in
at that location
If a substructure is to be left in situ or reefed, then any needed works should be included here.
If the substructure removal includes any risers or conductors, these should be included
in the inventory and weights.
Disconnection and recovery of risers and umbilicals associated with a floating facility
should be included in the subsea infrastructure WBS element (see Section 3.9.)

Substructure removal should be estimated based on:
• high-level inventory of what is to be removed
• expected ‘as-is’ condition of elements at CoP
• required end-state (i.e., what can be left behind or whether a clean seabed is
required)
• regional availability of specialist vessels, technologies, and personnel
• water depth and regulation dictating whether divers can be used
• lift weight and duration to identify vessel requirements
• transportation location to identify transportation vessel requirements
• availability and capacity of lift vessels, and transportation options, should be
considered to define the appropriate removal methodology and programme
assumptions
It may be necessary to make assumptions about the future availability of vessels and
disposal locations. These should be clearly stated, reasonable, and fully documented.
Simple approach
Lump sum for removal costs based on benchmark data from reference projects or studies.
to the decommissioning of the asset, i.e., elements 4, 5, 6, and 7.
Standard approach
A benchmark cost per tonne for substructure removal from similar regional reference
projects or studies. Scope and approach should be considered when selecting appropriate
reference projects.
Duration estimates for all significant activities, along with market rates for required
resources, including the consideration of:
36
• number and weight of lifts

• Duration per lift
• Required vessel spreads and rates
• Transportation time to disposal location
• Season and weather conditions variability
• phasing of operations
• learning curve efficiency factor across the campaign
3.8 Topsides and substructure onshore disposal

This WBS element applies to both offshore and onshore facilities.
• For offshore fixed facilities, this WBS element relates to onshore deconstruction of
the removed topsides and substructure.
• For offshore floating facilities, this WBS element relates to onshore scrapping of the
facility.
• For onshore facilities, this WBS element relates to in situ demolition of the facility.
• Subsea and pipelines should not be included here; they form the subsea
infrastructure WBS element (Section 3.9).
• This WBS element also excludes those materials managed as part of isolation and
cleaning (Section 3.4) or wells P&A (Section 3.3).

Activities relating to receiving, offloading, and eventual onshore recycling, re-use, or
disposal as waste of materials from the decommissioned facility, including all residues.
All permits should be included, along with requirements for handling and disposing of
hazardous materials.
It may be necessary to invest in the development of onshore disposal facilities or yards. If

these activities are part of the decommissioning project, then they should be included here.

The estimate for facilities disposal should include:
• receiving and offloading materials
• decontamination as required, recognizing specific hazards such as, contaminants
including Low specific activity (LSA)/NORM, or asbestos
• destruct activities as required
• disposal and/or recycling charges, including transportation costs
• any establishment or upgrade costs for the disposal yard
• permits along with preparing and implementing special procedures and training
37
It may be necessary to make assumptions about the future availability of disposal locations.
These should be clear, reasonable, and fully documented.
The treatment of costs recouped from recycling or reuse of materials differs among
operators. Some offset these against disposal costs; others disregard them. This is unlikely
to be material to the pre-project estimate for decommissioning. The approach taken should
be clearly documented.
Simple approach
Lump sum based on benchmark data for disposal costs from reference projects or studies.
Topsides and substructure should be estimated separately.
Standard approach
A benchmark cost per tonne for disposal from similar regional reference projects or
detailed studies. Scope, location, and approach should be considered when selecting
reference projects. Topsides and substructure should be estimated separately.
Typically, a weight-based estimate, as outlined in the standard approach, is suitable for
disposing of facilities such as topsides and substructures. The scope detail used when
developing the rate is the main area where further rigour can be applied to the pre-project
estimate for decommissioning.
3.9 Subsea infrastructure

This WBS element includes all:
• offshore subsea infrastructure
• offshore pipelines
• onshore pipelines
• any other onshore facilities dedicated to the pipeline, such as boosting stations,
roads, and power generation, that are not part of another plant

Preparation and recovery/ remediation of items to be left in situ (including trenching, burial,
or rock dumping) for all pipelines, flowlines, jumpers, manifolds, templates, umbilicals,
flying leads, cables, bundles, mattresses, and any other structures not attached to a
surface facility when offshore, or serving an onshore pipeline but not directly associated
with an onshore plant.
Removal and recovery of risers associated with the subsea or pipeline system should
be included here. When considered part of fixed platform substructure, they should be
included there (Section 3.7).
All cleaning, flushing, and pigging of the infrastructure should be included in the WBS
element ‘facilities and pipelines permanent isolation and cleaning’ (Section 3.4).
38
This element should also comprise disposing of recovered materials, including vessels, sea
fastening, trucks (for onshore), transport to disposal, load-in at that location, and disposal
costs (recycling and associated water management). There may be limited local availability
of facilities suitable for disposing of complex subsea elements.
Removal of onshore pipelines should be covered here, along with all dedicated facilities if
they are not part of another plant. This could consist of items such as boosting stations,
roads, power generation and so on. Buried and unburied pipelines should be distinguished.
Where onshore pipeline facilities are part of another plant, decommissioning should be
considered as part of that facility.
Removal of well sites/well pads should be captured with Wells P&A (Section 3.3).

Infrastructure should be itemized by a high-level inventory of installed materials and
equipment, such as:
• number of wells
• length, diameter and materials of flowlines and intra-field pipelines
• length, diameter and materials of export pipelines (it is recommended to consider
export pipelines separately from flowlines and intra-field pipelines)
• length and diameter of umbilicals, cables, and associated lines
• number and weight of structures and how they are fixed to the ground/seabed
• area of buildings; length and pavement of roads
Buried and unburied elements should be distinguished. Elements to be recovered should

be distinguished from those to be left in situ. Requirements for trenching/rock-dumping
should be recognized. Complications introduced by transporting hydrocarbons, such as
those containing mercury or waxy crudes, should be recognized.
The effort to carefully consider these factors for every asset individually is beyond the
expectations of an estimate supporting ARO. A pragmatic approach is appropriate.
A worked example of each estimating approach for offshore pipeline decommissioning

is shown in Appendix A.5
Simple approach
Lump sum based on benchmark data for similar reference projects or studies. The broad
characteristics of the reference projects as listed above should be considered, with factors
applied to better align with the scope.
Standard approach
For pipelines, flowlines, and risers, benchmark duration can be surmised based on lengths for
disconnection, removal, trenching, or burial. Appropriate market rates can then be applied.
For other materials, duration per tonne of inventory should be derived from similar projects
or studies. Appropriate marine spread rates can then be applied.
39
Asset specific approach

The number of lifts required should be calculated based on the main elements of the
subsea inventory. It is reasonable to only directly calculate removal of those elements
considered material and to include smaller items such as spools, jumpers, or flying leads
via an estimate allowance.
Market rates for the required spreads can then be applied to the calculated duration.
Consideration may also be included to account for:

• metocean conditions and weather
• accessibility constraints for onshore scopes (including potential need for a
temporary camp)
• availability and capability of equipment, specialist technologies, and personnel
• complications introduced by the transportation of hydrocarbons, such as those
containing mercury or waxy crudes
3.10 Site remediation

This WBS element includes site remediation activities for all offshore and onshore facilities.
• Offshore site remediation is unlikely to be a material part of the estimate.
• Onshore, this will be one of the most material components of the estimate and one of
the highest profile parts of the decommissioning scope.

Once the facilities are removed, the state to which the site must be returned will be
determined by contractual obligation, regulation, agreement with regulators or landowners,
company policy, or coventurer agreement. Activities related to achieving this should be
included here and should include associated surveys and waste management.
Offshore, this may include debris removal around structures and pipeline corridors and
overtrawl surveys.
Onshore, these activities may be difficult to separate from facilities removal. Given varying
site remediation requirements, it is important that facility removal and subsequent site
remediation are considered separately.
Onshore remediation includes restoration/reclamation along with remediation of the site.

• Restoration/reclamation involves returning the disturbed site to its former or otherwise
agreed state and land use. This is typically dictated by regulation or agreement with
landowners and other stakeholders and the scope of this work can be reasonably well
defined from early in the life of the facility.
• Remediation may involve removal or neutralization of substances, wastes or
hazardous material to prevent adverse effects on the environment. The extent of
remediation work involved is unlikely to be understood until close to the end of facility
life and may require intrusive soil and ground water investigations to determine.
40
Simple approach
Offshore: a lump sum based on benchmark costs from similar reference projects or studies.
Onshore: restoration/reclamation and remediation should be estimated separately.
• Restoration/reclamation: based on benchmark costs for restoration/reclamation
activities on similar reference projects or studies.
• Remediation: scope is likely to be ill-defined. An allowance should be made based
on a typical project. The basis of this allowance should be reasonable and well
documented. If remediation is understood to be a significant exercise, a more detailed
estimating approach should be used.
Standard approach
Offshore: an allowance of days based on indications from similar reference projects or
studies, along with market rates for the offshore vessel spread required. An allowance
should be included for transporting recovered materials.
Onshore: restoration/reclamation and remediation should be estimated separately.
• Restoration/reclamation: an allowance of days based on similar reference projects
or studies, typically on a days vs site area basis. This can be combined with market
rates for the required resources (personnel, materials, and equipment). An allowance
should be included for transporting recovered materials.
• Remediation: this scope is unlikely to be well defined. Periodic interim assessments
of expected end-of-life site conditions can be conducted and used to inform the
estimate allowance. The basis of the allowance should be reasonable and well
documented. As the facility nears end-of-life, the remediation scope will become
more predictable. If it is to be significant then the ‘asset-specific’ approach of
estimating should be adopted.
Offshore: it is unlikely that the site remediation scope will be sufficiently material for
this estimate definition to be required. However, a detailed duration-based estimate can
be developed based on survey information and activities required. Market rates for the
required vessel spread can then be applied. Phasing of activities in campaigns and learning
curve efficiencies for repeat activities may also be considered and factors applied to
account for these.
Onshore: site remediation is likely to be material to the decommissioning project. Increased

estimate definition may be required. The detail of the site remediation activities required
will be defined in agreement with regulators, land-owners, and other stakeholders.
An activity plan should be established for key restoration/reclamation and remediation.

Items that should be considered include:
• intrusive soil and groundwater surveys
• landscaping works including salvaging, storing, and replacing soil
• removal or neutralization of substances, waste, or hazardous material
• restoration of drainage
• revegetation
41
The estimate should be developed based on the durations required for each key activity,
along with needed equipment, personnel, and materials. This should be derived from past
project experience or studies. Market rates can then be applied. Allowances should be
included for minor activities.
3.11 Post decommissioning monitoring

Post decommissioning monitoring for any onshore or offshore facility should be included in
this WBS element.

Requirements for post decommissioning monitoring will be determined by regulation,
agreement with regulators, co-venturer agreement, or corporate policy. They are likely to
vary significantly depending on what, if anything, is left in place.
Post decommissioning monitoring may be short-term or indefinite. For the pre-project

estimate for decommissioning, long term requirements are not expected to be included,
however, initial status surveys and the establishment of monitoring programmes should be
recognized in the estimate.
Whatever is included in the estimate, and any assumptions made, should be clearly stated.

Only one approach is recommended. Post-decommissioning monitoring will primarily be
driven by:
• what is to be monitored
• frequency required
• the duration of each monitoring exercise
• personnel, equipment, and transportation/vessels required
The estimate is not expected to include provisions for indefinite monitoring. It is therefore
recommended that the estimate for a single monitoring exercise is documented, along with
the assumed frequency and length of time for which monitoring is included in the estimate.
3.12 Floating facilities

Although not explicit in the WBS, activities for decommissioning of floating facilities such as
FPSOs, FSUs, FPUs, TLPs, spars and semi-submersibles can be allocated to the same cost
structure, noting that not all WBS elements will be required.
Floating facility decommissioning activities should be assigned to the WBS as indicated

here, and same estimating approaches should be used.
• Project management: as described in Section 3.1.
• Post CoP running costs: as described in Section 3.2.
• Well decommissioning: as described in Section 3.3.
42
• Permanent isolation and cleaning of facilities and pipelines: as described in Section 3.4.
• Topsides preparation: as described in Section 3.5.
• Topsides removal: most floating facility topsides will not be removed and instead will
be towed away still on top of the substructure. In situations where the topsides are to
be removed (such as spars), activities and costs should be included here as described
in Section 3.6.
• Substructure removal: should include disconnecting and towing the floating
facility, and follow approaches described in Section 3.7. Also include here are any
modifications required to install/re-instate towing points or to return a vessel to class,
if required.
• Topsides and substructure onshore disposal: if the floating facility is not to be sold or
reused elsewhere, activities and costs associated with disposal should be included in
this WBS element, as described in Section 3.8.
• Subsea infrastructure: as described in Section 3.9.
• Site remediation: as described in Section 3.10.
• Post decommissioning monitoring: as described in Section 3.11.
3.13 Onshore facilities

The WBS was designed with offshore projects in mind, but activities associated with
decommissioning onshore assets can be attributed to the categories of this WBS with the
following considerations, noting that not all WBS elements are required:
• Project management: as described in Section 3.1.
• Post CoP running costs: as described in Section 3.2.
• Well decommissioning: as described in Section 3.3.
• Permanent isolation and cleaning of facilities and pipelines: as described in Section 3.4.
• Topsides preparation: It is unlikely that WBS elements 5,6, and 7 will be
• Topsides removal: required for an onshore project. All potentially related
• Substructure removal: activities will typically be attributed to element 8.
• Topsides and substructure onshore disposal: demolition and waste management of
the onshore plant, as described in Section 3.88.
• Subsea infrastructure: onshore pipeline and other infrastructure removal or
remediation, as described in Section 3.9.
• Site remediation: all area restoration/reclamation and remediation/decontamination
required, as described in Section 3.10.9
• Post decommissioning monitoring: as described in Section 3.11.
8
There may be varying approaches to onshore asset demolition and removal. By including all activities in one WBS element, differing
methodologies can be compared. The exception is site remediation, which should be included in element 10.
9
It may be difficult to separate these activities from those undertaken in WBS element 8.
43
Appendix A.1 – Pre-project decommissioning

estimating- examples of the different
approaches for each WBS category
This Appendix provides a worked example of the different approaches to pre-project
decommissioning estimating for each WBS category. Appendix A.2, A.3, A.4 and A.5 provide further
worked examples for estimating post-CoP running costs, well decommissioning, topsides removal,
and pipeline decommissioning.
Table A1: Pre-project decommissioning asset estimating- examples of different approaches for
each WBS category
44
WBS Simple Standard Asset-specific
1 Project management Single cost Percentage of total project cost no. of FTE x FTE cost x project duration
Cost per monitoring exercise x number

2 Post CoP OPEX Single cost OPEX decommissioning time x Percentage of final year OPEX
of exercises assumed
• Simple vs complex wells

• barrier strategy
3 Well decommissioning Cost per well well decommissioning time x P&A spread rate • efficiencies from campaigns/learning
curve
• multiple spreads/phasing
Facility and pipelines As standard method but with particular

Single
4 permanent isolation isolation and cleaning time x isolation and cleaning spread rate attention to the characteristics of the
cost
and cleaning asset
Single • Allowances for specific activities

5 Topsides preparation allowances for specific activities derived from past projects or studies
cost • Cost per tonne
Single • Cost per time/lift
6 Topsides removal topsides removal time x topsides removal spread rate
cost • Multiple spreads/phasing
45
• End state: reefing/derogation/reuse/
Single removal
7 Substructure removal substructure removal time x substructure removal spread rate
cost
May be a single number

• Campaigns/learning curve
Topsides/substructure Single • LSA/NORM

8 tonnage x Cost per tonne
onshore disposal cost • Reuse
• Cost per length/cost per tonne

9 Subsea infrastructure Single cost subsea decommissioning time x subsea decommissioning spread • Use multiple spreads/phasing
• End state: in situ/removal
As standard method but more

attention to scope and efficiencies
site remediation site remediation decommissioning
10 Site remediation Single cost x such as,
decommissioning time spread
multiple spreads/phasing, campaigns/
learning curve
Post decommissioning
11 Cost estimate for single monitoring exercise x number of exercises assumed
monitoring
Appendix A.2 – Post CoP running costs

estimates - worked examples
This Appendix provides worked examples for the different approaches to estimating post CoP
running cost for an asset archetype. All costs included here are for illustrative purposes only.
Table A2: Post CoP running costs estimates- worked examples
• 4 leg drilling and production fixed platform

• Central North Sea
• 100m water depth
Asset: • Mid 1990s construction
• Oil & gas production
• 12 wells, 4 subsea tiebacks
• POB 90
• Benchmark cost: $55 million/year

Simple
• Benchmark duration: 2 years Cost estimate $110 million
approach
• 2 x $55 million/year = $110 million
• Final year OPEX estimate: $60 million

Standard
• P&A/prep OPEX @ 75% final year Cost estimate $90 million
approach
• 75% x 2 years x $60 million = $90 million
• Final year OPEX estimate: $60 million

• P&A 25% wells SIMOPS pre-CoP
• P&A @ 90% OPEX for 75% of wells, duration 1.5 years
Asset-specific
• Prep @ 40% OPEX for 0.5 year Cost estimate $81.8 million
approach
• Hot stack until subsea completion for 0.5 year @ 10% OPEX
• Cold stack until HLV campaign 2 years @ 5% OPEX
• ((1.5x90%)+(0.5x40%)+(0.5x10%)+(2x5%))x$60million=$81.8million
Attributes: Method/resources:
• Type prod (oil/gas) • Final year OPEX
• Age/condition • P&A/prep duration
• POB • P&A method (rig, mobile rig, rigless)
• Fixed/floating • Hub strategy with subsea
• Subsea • POB during decom
• Well count • Hot/cold stack duration
• Region (regulations) • Phased OPEX
• Water depth • Learning
• Pre/post CoP split % reduction
46
Appendix A.3 – Well decommissioning

costs estimates - worked examples
This Appendix provides worked examples for the different approaches to estimating well
decommissioning costs for an asset archetype. All costs included here are for illustrative purposes only.
Table A3: Well decommissioning cost estimates- worked examples
• 4 simple wells
• Platform based
Asset: • Existing rig
• Gulf of Mexico
• 3 barriers
Simple • Benchmark cost: $1.6 million/well

Cost estimate $6.4 million
approach • 4 x $1.6 million/well = $6.4 million
• Benchmark duration: 12 days per well

Standard
• Market rate platform rig: $130k/day Cost estimate $6.2 million
approach
• 12 days x $130k/day x 4 wells = $6.2 million
• Benchmark duration: 12 days per well

• Experienced crew up-learning curve (-10%)
Asset-specific • Market rate platform rig: $130k/day
approach • Use rigless conductor cut/pull – duration 4 days per well
• Rigless conductor pull market rate: $75k/day
• 4 x (8 x 130 + 4 x 75) x (90%) = $4.824 million
• Simple/complex wells • Platform rig
• Barrier strategy • MODU
• Platform/subsea wells • Jackup
• EA • Rigless
• TA • LWIV
• PA • Phased campaign
• Region (regulations) • Learning
• Water depth • Pre/post CoP split % reduction
47
Appendix A.4 – Topsides removal cost

estimates - worked examples
This Appendix provides worked examples for the different approaches to estimating topsides
removal costs for an asset archetype. All costs included here are for illustrative purposes only.
Table A4: Topsides removal cost estimates- worked example
• 8 leg deck
• 5 modules @ 250 tonnes/each
• 2000 tonnes structure
Asset:
• Lift points need reinstating
• Gulf of Mexico (GoM)
• Summer campaign
Simple
• Benchmark cost: $8 million Cost estimate $8 million
approach
Standard • Benchmark cost for GoM: $2250/tonne

approach • 5 modules x 250 tonnes x $2550/tonne = $7.3 million
• Benchmark duration: 8 days with mob/demob share

• Market rate heavy lift vessel: $350k/day
Asset-specific
• Reinstate lift points from HLV: 4 days Cost estimate $6.3 million
approach
• Market rate cargo barge and tugs: $80k/day
• Cargo barge and tug duration: 30 days
• (((8+4)+350k)+(30x80k))*95%=$6.3 million
• Single lift • Heavy lift vessel $/day
• Modular • Cargo barge
• Piece small • Tug
• Condition • Grillage
• Lifting points required • Labour crews
% reduction
• Reinforcement required • Phased campaign
• Access prep pre mob • Learning
• Weather risk • NPT/weather % increment
• Region (regulations)
• Water depth
48
Appendix A.5 – Pipeline decommissioning

cost estimates - worked examples
This Appendix provides worked examples for the different approaches to estimating pipeline
decommissioning costs for an asset archetype. All costs included here are for illustrative purposes only.
Table A5: Pipeline decommissioning cost estimates- worked examples
• 3 infield pipelines
• 8” x 5000m fusion bonded epoxy coated carbon steel pipe
• Water depth 100m
Asset: • 2 buried, 1 unburied
• Riser to riser end connection
• Buried pipelines to be left in-situ, surface pipeline to be removed
• Gulf of Mexico
Simple • Benchmark cost: $1.5 million per pipeline

approach • 3 x $1.5 million = $4.5 million
• Benchmark pipeline decom disconnect: 7 days

Standard • Benchmark pipeline removal: 14 days
approach • Market rate for vessel: $200k/day
• ((2 x 7) + (1 x 14)) x 200 = $5.6 million
• Benchmark duration: 4 days

• Market DSV rate: $250k/day
Asset-specific • Benchmark burial: 2000m/day
Cost estimate $3 million
approach • Market rate burial spread: $150k/day
• (3 x 4 x $250k) + (5000/2000 x $150k) x 90% = $3 million
• In-situ/buried/removed • Vessels required $/day
• Coating material • Cargo barge & tugs
• Installed method • Jetting/dredging
• Trawl protection • Phased campaign
• Seafloor composition • Learning
% reduction
• Diameter, wall • NPT/weather
thickness and length • In-situ/buried/removed
• Cathodic protection • Recycle or reuse % increment
• Crossings
• Region (regulations)
• Water depth
49
Glossary
Table of abbreviations
AACE Association for the Advancement of Cost Engineering
ARO Asset retirement obligation
ASC Accounting standards codification
CAPEX Capital expenditure
CoP Cessation of production
DSV Dive support vessel
FPSO Floating production, storage, and offloading vessel
FPU Floating production unit
FSU Floating storage unit
FTE Full time equivalents
GBS Gravity based structure
HLV Heavy lift vessel
IAS International accounting standards
IFRS International financial reporting standards, developed by the IASB
LSA Low specific activity. A form of radioactive accumulation similar to NORM.
LWIV Light well intervention vessel
MODU Mobile offshore drilling unit
NORM Normally occurring radioactive material
NPT Non-productive time
OEUK United Kingdom Offshore Energies Association
OPEX Operating expenditure
P&A Plugging and abandonment of wells
POB Personnel on board. The number of available beds to accommodate
personnel on an offshore facility.
TLP Tension leg platform
WBS Work breakdown structure
WHP Well-head platform
50
Definition of terms
11 box model
A term used for the decommissioning WBS developed by OEUK10 and adopted in this guideline.
Relates to the 11 WBS elements defined.
Allowance
An allowance is an amount included in an estimate to allow for defined but less predictable or less
material costs. Where it is not practical or pragmatic to quantify a scope item to be estimated, a
monetary or percentage allowance can be included instead.
Examples include:
• An allowance for weather downtime in a vessel days estimate. The actual days of weather
downtime cannot be defined, so a percentage based on typical experience is included.
• An allowance for remediation/decontamination of an onshore site. Until the end of asset life,
the full extent of required work is unknown. An allowance is therefore included to recognise
the scope and acknowledge inherent uncertainty.
• Smaller elements that are immaterial to the overall estimate may not justify the effort to
define the scope sufficiently to allow an estimate to be produced. In these circumstances, an
allowance will be included instead, generally based on experience of the proportion of overall
project costs that this scope element typically represents.
Appurtenance
Items attached to a fixed platform substructure.
Asset
A general term used in this guideline to refer to the subject of the decommissioning estimate.
In this guideline, this refers to the most detailed approach outlined for pre-project estimates for
decommissioning and is recommended when additional rigour is required to justify the estimate.
Adoption will depend on the purpose of the estimate and the characteristics of the asset. This
additional effort is particularly recommended for challenging scopes or where asset divestments or
acquisitions are being evaluated.
Asset retirement
See decommissioning.
10
OGUK, Decommissioning Work Breakdown Structure Guidelines, October 2019, https://oeuk.org.uk/product/decommissioning-work-
breakdown-structure-guidelines/
51
Asset Retirement Obligations (ARO)

The development of oil and gas wells, facilities, and infrastructure (assets) frequently leads
to an obligation to decommission these items at the end of their life. Accounting standards
require that responsible parties make recurring accounting provisions for the projected cost of
decommissioning these assets, referred to as Asset Retirement Obligations (ARO) provisions, or
simply ARO.
AROs in the balance sheet represent the value of future liabilities, estimated at a given time in the
life of the asset. They materialize at the end of life of wells, facilities, or infrastructure.
ARO also designates a test performed under the Sarbanes-Oxley regulation for companies listed in
the USA. It assesses the robustness of ARO provisions.
Bottom-up
An estimating approach where activities are modelled and estimated based on detailed quantities,
rates, and norms.
Cold
A cold asset is shut down and de-energized, with remote monitoring or periodic visits, no
permanent personnel and only essential maintenance.
Contingency
“Contingency” reflects provision for risks which experience suggests typically materialize as a
project progresses and impact the “real world” cost outcome.
• Contingency is typically applied as a percentage that is varied as a function of available
estimate definition level. A single percentage can be applied to the whole estimate or different
percentages can be allocated to specific elements of the WBS, according to the definition and
risk profile of each. An early estimate with limited definition should attract higher contingency
than a well-defined estimate based on reference to a recently completed close analogue.
• Where limited historical data exists, technology, or a supplier is unproven, or regulatory driven
scope risk is high, this should be reflected in increased contingency.
Credible estimate
When used to describe the pre-project estimate for decommissioning, ‘credible’ indicates that the
estimate:
• is based on a suitably detailed and accurate understanding of the inventory.
• presumes an end-state that is supported by regulation and industry good-practice.
• includes assumptions that are based on reasonable precedents.
• recognises the estimate’s inherent uncertainty
• has pragmatically adopted estimating approaches that provide an accuracy level that is
suitable for the intended purpose.
• is supported by key stakeholders.
Other terms equivalent to ‘credible estimate’ in this context include ‘best estimate’, ‘most likely
estimate’, or ‘P50’ estimate.
52
Decommissioning
Asset retirement activities to remove an asset from active status that take place at the end of an
asset’s life. This may involve removal and disposal (and all activities required to enable this) or
anything required for a facility to remain in situ.
De-energized
A description of the state of an asset once it has been disconnected from sources of hydrocarbons
and has no bulk hydrocarbons present.
Disposal
Re-use, recycling, or disposal of materials from decommissioned assets. May require specialist
handling and decontamination.
End-state
The required state of the asset at the end of decommissioning such as, complete removal, left in
situ, reefed, trenched and so on.
Flowlines
Pipes carrying un-stabilized produced hydrocarbons from the well to the processing facility or
carrying injection fluids or gases from the facility to the injection well. They can be offshore or
onshore. Offshore (and outside of a topside) the term refers only to the section of the line on the
seabed. The section connecting the seabed flowline to the surface facility is referred to as a ‘riser’.
Infrastructure
The facilities supporting the operations of a field. This may include a hydrocarbon transportation
network and export facilities. Onshore, it can also include dedicated roads, power generation or
network, accommodation camps, and so on.
Inventory
The complete list of asset elements that will be present at the end of life, to be used as the basis
for the estimate. This could include the number of wells, the length of pipelines, number and size
of processing facilities and so on. The required level of detail of the inventory required depend on
its purpose: more detailed estimates require more detailed inventories. Only elements installed or
actively being installed should be included. Planned elements only become inventory once installed.
Live
A live asset is one connected to a source of hydrocarbons.
LSA
Low specific activity (LSA) scale containing radium-226 (226Ra) and its radioactive decay products
can naturally accumulate inside facilities used to process hydrocarbons11. Similar to NORM,
specialist handling is required during decommissioning if LSA is present.
Metocean
Metocean conditions refer to the combined wind, wave, and climate conditions in an offshore location.
11
https://www.hse.gov.uk/waste/radioactive-contamination.htm
53
NORM
Naturally occurring radioactive material. NORM typically contains uranium-238 (238U) and
thorium-232 (232Th) and their associated radioactive decay products12. May be brought from the
reservoir alongside produced hydrocarbons and accumulate in production facilities. Specialist
handling is required during decommissioning if NORM is present.
Phasing
Phasing is how the work is arranged over time.
Piece small
A method for removing an offshore installation, typically a topsides, by chopping it into smaller
chunks to be removed individually.
Pipelines
Pipes exporting stabilized, produced hydrocarbons. They can be offshore or onshore. Offshore, the
term only refers to the section of the line on the seabed. The section connecting the seabed pipeline
to the surface facility is referred to as a ‘riser’.
Post-CoP running costs

Asset operational costs after termination of production.
Pre-project
In the context of a pre-project estimate for decommissioning, pre-project refers to an estimate
carried out during the period from sanction of the asset development project to the establishment of
a project team to decommission the asset.
Pre-project estimates are therefore distinct from:
The decommissioning consideration included in the project economics when initial asset
development is sanctioned.
The project estimate for the decommissioning project.
Project management
Operator’s core project management team. Also includes overhead costs such as insurance,
tendering, paid studies, and assurance activities.
Provisions
See Asset Retirement Obligations (ARO).
Reclamation
See restoration.
Restoration
Also sometimes referred to as reclamation, the process of returning a disturbed site to its former,
or otherwise agreed, state and land use.
12
54
Remediation
For WBS element named ‘site remediation’, remediation refers to the removal of debris from a site,
transportation and disposal of all removed materials, site decontamination as required along with
restoration of a disturbed site to its former or otherwise agreed condition.
Remediation can also refer specifically to the removal or neutralization of substances, waste, or
hazardous material to prevent adverse effects on the environment. This is regarded as distinct from
reclamation/restoration.
Reverse installation
Removal of an asset following the reverse procedure of installation. Typically, this refers to a
modular installation being removed module by module.
Rig-less
Wells P&A activities carried out without needing a drilling rig.
Risers
Risers connect seabed flowlines and pipelines to surface facilities.
Simple approach
In this guideline, this refers to the simplest approach detailed for estimating each WBS element.
Typically, this is a simple allowance based on benchmark costs derived from past projects or
studies.
Single lift
A methodology for removal of a topsides or substructure in a single lift using a specialist heavy lift
vessel.
Site remediation
See Remediation.
Spread
The total equipment requirement to execute a task. Offshore this would refer to all the vessels
required, including support vessels, tugs, and barges in addition to the main construction vessel.
Onshore, it similarly refers to the full suite of equipment and vehicles required.
Standard approach
In this guideline, this refers to the most common approach recommended when developing a pre-
project estimate for decommissioning.
Substructure
The part of an offshore facility that supports the topsides such as, jacket, GBS, monopod, ship-
shaped hull, tension leg platform (TLP), semi-submersible hull, or spar.
Tieback
A tieback connects an oil or gas discovery to an existing production facility. The discovery and the
facility may have different owners and/or operators.
55
Topsides
The part of an offshore facility on top of the supporting substructure, typically consisting of
operational elements such as wellheads, processing facilities, utilities, and accommodation.
In the WBS adopted in these guidelines, categories labelled ‘topsides’ may be applied to onshore
plant and facilities (see WBS element descriptions in Section 3).
Work Breakdown Structure

A categorization framework for key project activities.
56
References
AACE International Recommended Practice No. 18R-97, Cost Estimate Classification System –
as applied in Engineering, Procurement, and Construction for the Process Industries, August 2020
https://web.aacei.org/docs/default-source/toc/toc_18r-97.pdf?sfvrsn=4
AACE International Recommended Practice 34R-05, Basis of Estimate, October 2021

https://web.aacei.org/resources/recommended-practices
ASC 410-20 Asset Retirement and Environmental Obligations: Asset Retirement Obligations
https://asc.fasb.org/1943274/2147481663
Health & Safety Executive (UK) Guidance: Radioactive contamination in scrap in metal recycling
OEUK Guidelines on Well Abandonment Cost Estimation, Issue 2, July 2015

http://oeuk.org.uk/product/guidelines-on-well-abandonment-cost-estimation-issue-2/
OEUK Decommissioning Insight 2022, section 3.2

https://oeuk.org.uk/product/oeuk-decommissioning-insight-2022/
OGUK, Decommissioning Work Breakdown Structure Guidelines, October 2019,

https://oeuk.org.uk/product/decommissioning-work-breakdown-structure-guidelines/
Offshore Norge, Decommissioning Work Breakdown Structure Handbook, June 2020,

https://offshorenorge.no/globalassets/dokumenter/drift/plugging-av-bronner/wbs-handbook-v1.pdf
ISO 19008:2016, Standard cost coding system for oil and gas production and processing facilities
https://www.iso.org/standard/63708.html
IFRS, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, 2023, https://www.ifrs.org/
issued-standards/list-of-standards/ias-37-provisions-contingent-liabilities-and-contingent-assets/
57
This Report provides guidance
on the development and
maintenance of pre-project
technical cost estimates for
upstream oil and gas industry
asset decommissioning, with
particular emphasis on estimates
for asset retirement obligations.
IOGP Headquarters www.iogp.org

City Tower, 40 Basinghall St, London EC2V 5DE, United Kingdom
T: +44 (0)20 3763 9700
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Guidelines For Upstream Pre-Project Decommissioning Estimates

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Guidelines For Upstream Pre-Project Decommissioning Estimates

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REPORT SEPTEMBER

Guidelines for upstream pre-project

Front cover photography used with permission courtesy of

IOGP welcomes feedback on our reports: publications@iogp.org

Guidelines for upstream pre-project

VERSION DATE AMENDMENTS

1.0 September 2023 First release

1. Overview of pre-project estimating 7

2. The principles of pre-project decommissioning estimating 10

3. Detailed approaches to estimates supporting ARO 24

3.3 Well decommissioning 29

Appendix A.1 – Pre-project decommissioning estimating- examples of the different

Appendix A.2 – Post CoP running costs estimates - worked examples 46

Appendix A.3 – Well decommissioning

Appendix A.4 – Topsides removal cost estimates - worked examples 48

Appendix A.5 – Pipeline decommissioning cost estimates - worked examples 49

Guidelines are provided for:

1. Overview of pre-project estimating

1.1 What is a pre-project estimate for decommissioning?

A pre-project cost estimate could be used for a number of purposes, including:

1.2 The process of developing a pre-project estimate for

Define the inventory of the asset in alignment with a consistent See

Understand the relevant contractual and regulatory framework, along See

Select the approach to achieve the required end state safely,

Identify sources of cost and schedule information See

Develop an estimate at expected present value for See

1.3 Estimates supporting Asset Retirement Obligations

1.3.1 What is ARO?

1.3.2 The regulations that govern ARO

1.3.3 What is an estimate supporting ARO?

1.4 The structure of this guideline

2. The principles of pre-project

2.1 Making assumptions

Assumptions could include:

In all cases, assumptions should be:

2.2 Defining the inventory

2.2.1 Understanding the inventory

2.2.2 The work breakdown structure

2.2.2.2 Decommissioning WBS ‘11 box model’

Operator’s core project management team. Also

2 Post-CoP running costs Asset operational costs after termination of production.

All activities relating to the permanent isolation

Isolate assets from sources of pressure and ensure

Alterations to the facilities necessary to support

Offshore removal of topsides from their

All activities associated with the removal of

Re-use, recycling, or disposal of removed

Removal or remediation of all subsea elements,

Removal of oil field debris as required, along with the

Post decommissioning Surveys and monitoring programmes for any

Figure 2: Decommissioning WBS ‘11 box model’ (© Offshore Energies UK)

2.2.2.3 Applying the WBS to floating facility projects

2.2.2.4 Applying the WBS to onshore projects

2.2.2.5 Applying the WBS in jurisdictions where less detail is mandated

In some jurisdictions, a different WBS, or level of detail, is mandated for government

2.3 Understanding regulatory, contractual, and other restrictions

Where regulations, contracts, or corporate policies leave uncertainty about requirements

2.4 Establishing the end state

The major assumptions of the end state should be informed by:

2.5 Selecting the approach to achieving the required end state

There may be more than one acceptable methodology, in which case:

When developing the approach to achieving the end state:

2.6 Identifying sources for cost and schedule information