Are the large investments in revitalizing mature fields worth it?

  • 17/09/2020
  • 9 minutes

An oil field also has a life cycle, having its beginning, middle and end. Thus, there comes a time when it reaches a decline in production, but is it worth investing in the revitalization of mature fields to prolong its productivity for a few more years or decades?

To discuss the matter, we spoke with Dr. Lideniro Alegre, director of OPLA Consultoria em O&G (Oil and Gas). He clarified in more detail what is the revitalization of mature fields, the pros and cons of this practice and also explained if it is really worth it.

Keep reading to understand when revitalization should be considered and the aspects that are involved in this process and which point or not to the viability of this strategy.

What is the revitalization of mature fields?

First of all, it is important to understand their difference for marginal fields. Dr. Lideniro explains that “the mature field is defined by its age and its percentage of exhaustion, and a marginal field is defined by its economy, which may be mature or not”.

This means that the mature field is one that falls under Resolution No. 749/2018 of the ANP (National Petroleum Agency), having already produced more than 25 years, or presenting an accumulated production corresponding to at least 70% of the volume that could produce throughout his productive life.

The marginal field may or may not be mature because, in this case, we are talking about the economic viability that it presents. For this definition, the expert explains that it is based on parameters such as operating costs and the taxation existing in each country – among other factors that define whether or not this field is economically valuable.

Therefore, the revitalization of mature fields, as explained by Dr. Lideniro, aims to increase production so that its economy or profitability improves, in addition to extending its productive life time and increasing the oil recovery factor that is underground.

Thus, a field that could soon be decommissioned, that is, abandoned, receives new resources, technologies, adaptations or changes so that it can survive for more than 30 years, thus ensuring the continuity of its economic participation in the region and in the country. .

What are the pros and cons of this practice?

According to the expert, the revitalization of mature fields requires, initially, a technical-economic study to justify or not this interference. Therefore, it is carried out when these actions are really viable and economically profitable for the company that has the concession.

However, if the company comes to the conclusion that, for it, it is not feasible to carry out this revitalization, it has an alternative to sell the field to an organization that can achieve profitability with this intervention, or to abandon it.

Decommissioning is usually postponed to the maximum because the field has a great economic impact in the region where it is located, and still generates wealth for the country. Thus, the revitalization of mature fields has advantages, but it can also have some disadvantages, which we will talk about next.

The pros of revitalizing mature fields

Dr. Lideniro points as the main pro of the revitalization of mature fields the continuity of the generation of wealth. According to him, “a producing field, on land or at sea, generates wealth and develops the region where it is located, generating jobs, government participation in the form of royalties. The region’s education itself develops better because it generates more wealth and jobs.”

Another reason cited by the specialist is the survival of service providers, such as transportation, platform painting, maritime support, general maintenance, drilling, exchange of lines and manufacturers of equipment and parts. After all, when a field is decommissioned, they all lose a share of their market.

“In addition, a country that does not have a lot of oil production, the revitalization pays off and increases its reserves, which keeps oil production levels sufficient for domestic consumption and even for export,” says the expert.

The cons of revitalizing mature fields

“The revitalization itself does not present any disadvantages”, says Dr. Lideniro. How could that be possible? He explains that, as the revitalization of mature fields maintains the regional economy, it also contributes to the national economy, guarantees the survival of companies and ensures the productivity of oil.

However, this interference may not be feasible when the country’s fiscal and tax framework is unfavorable. The expert explains that the regime “must be adequate for the fair collection of taxes for the country, as well as to provide comfort for the investor to continue investing and revitalizing their fields”.

There is yet another factor that needs to be considered if the revitalization of mature fields is indeed feasible and advantageous. As we explained, it is necessary to apply new resources and technologies, thus, the ideal is that they are available for this, being accessible to the country where the field is located.

But after all, is it worth investing in these revitalizations?

According to Dr. Lideniro, in Brazil no company is required to produce a non-economic field. In this case, it can return the concession contract to the ANP, regardless of the age of the field. However, regarding the feasibility of the revitalization, he explains that if it is considered economical, it is certainly worth investing.

Therefore, it is advantageous if:

  • the field still has enough resources for good productivity;
  • the company can count on financial resources to carry out the revitalization;
  • there is access to the technologies needed to revitalize;
  • fiscal and tax framework are favorable, then revitalization is a better alternative than abandonment.

In the expert’s opinion, there are more pros than cons to revitalizing mature fields. In this way, “if it is economical, do it, if it is not economical, pass it on to others or, if there are no interested parties, abandonment remains.” But it is necessary to consider the impacts that this can generate for the economy of the region, as well as that of the country.

Want more details on the revitalization of mature fields and their viability? Contact us and talk to our experts!