Risk-Based Cost-Effectiveness Analysis of Waste Handling Practices in the Arctic Drilling Operation

Abstract

As oil and gas companies in the Arctic attempt to maximize the value of each project and optimize their portfolio of investment opportunities, it has become vital to evaluate drilling waste handling practices for their cost-effectiveness in order to support strategic decisions. Identifying cost-effective waste handling practices, which have a minimal environmental footprint, however, is one of the biggest challenges for Arctic offshore industries. The cost and potential risks of drilling waste handling practices in the Arctic offshore operation will differ vastly, depending on the operating environment such as the ice conditions and negative sea temperature. However, in the majority of the available cost-effectiveness and risk analysis literature, the influence of the operating environment on the cost and risk profile has received less attention. Hence, the aim of this paper is to propose a methodology for risk-based cost-effectiveness analysis (RB-CEA) of drilling waste handling practices by considering the complex and fast-changing nature of the Arctic. The central thrust of this paper is to highlight the fact that comparing different alternatives based on the cost elements alone is misleading. The proposed methodology uses risk assessment as a key component for the cost-effectiveness analysis (CEA). The application of the proposed methodology is demonstrated by a case study of the drilling waste handling practices of an oil field in the Barents Sea. The case study results demonstrate that the operating environment causes costs to be between 1.18 and 1.52 times greater, depending on the type of practices and operating season, in the Arctic offshore compared with the North Sea. Further, the risk of undesirable events is between 1.48 and 2.60 times greater during waste handling activities under Arctic operational conditions.