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Dismantling of Oil & Gas On Shore Treatment Plant 3

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Jorge Parodi

Petroleum
Sep 6, 2016
2

Hi.
Is there a factor that we can apply to estimate the dismantling cost of an installation (Oil & Gas On Shore Treatment Plant) based on the original cost erection?
Thanks
George
 
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Even without knowing a thing about the project and not having any involvement in the oil and gas industry, I can tell you that the answer is No.

Was the original construction cost in 2016 dollars, or in 1929 dollars?

How much contaminated earth are you dealing with? Has anyone ever spilled anything at the plant? If someone answers "no" ... are you sure you believe them?

You need to get an environmental assessment done by specialists who do that sort of thing. The demolition cost will surely be dwarfed by the environmental remediation cost.

This has the potential to be one of those projects where you try to stay as far away as possible with as little involvement as possible if you have any possible chance of doing so.
 
BrianPeterson covered the important bases.

Even without those important issues, think about the time required to make up a flange with all new studs and nuts as compared to breaking the flange with 50 years of paint and corrosion products. Multiply that times thousands of flanges. What toxic liquids and sludges are going to ooze from the pipes when you break the flanges? How many of the components will have to be treated as hazardous waste or cleaned in place and the cleaning fluids disposed of as hazardous waste? Basically there is no relationship between construction cost and reclamation costs.

[bold]David Simpson, PE[/bold]
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
 
It also depends on the following:
- Can you re-utilize the equipment and piping elsewhere or it all goes to a scrap yard?
- 100% internal work or 3rd Party involvement?
- Disposal of hazardous materials?
- Soil remediation requirements?
- Special equipment requirements (e.g. high load lifting equipment)?
- Special transport requirements?
- Obligations to the nearby communities (employment, community programs etc.)?
- Any remaining permits that require regular fees?

We had a decommissioning project two years ago in eastern part of Europe and the actual cost came out almost 100% higher than the estimated cost, due to many unforeseen (and unforeseeable) issues.

I' suggest you create a detailed execution schedule of decommissioning works, then talk through each step with a subject matter expert (i.e. Construction manager, Environmental specialist etc.) and get their inputs. A workshop with all stakeholders can sometimes be very beneficial in identifying possible gaps and traps. Good luck.

Dejan IVANOVIC
Process Engineer, MSChE
 
Dejan,
Your example was 100% over the estimate, but do you have any idea what it cost to build the plant originally (compared to the cost to take it down)?

[bold]David Simpson, PE[/bold]
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
 
I think that's a very hard task to perform and, as you pointed above, it does not yield a reliable rule of thumb that can be used for estimating decommissioning costs for other plants in the future (except maybe for identical or very similar plants and located in the same area). The cost of designing and constructing the same plant varies by time so this adds another dimension to the unknown.

In addition, the plants with same configuration and size but very different metallurgy (due to process conditions and stream properties) may have similar decommissioning costs, however their construction costs would be tremendously different so again applying any kind of ratio or percentage between plant decommissioning and EPC contract for a new plant value would be highly unreliable.


Dejan IVANOVIC
Process Engineer, MSChE
 
Dejan,
I thought that was the answer, but I wanted to confirm. Thanks.

[bold]David Simpson, PE[/bold]
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist
 
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