Economic lifetime

The economic lifetime was introduced in Section 13.3, and was defined as the point at which the annual cashflow turned permanently negative. This is the time at which income from production no longer exceeds the costs of production, and marks the point when decommissioning should occur, since it does not make economic sense to continue to run a loss-making venture. Technically, the production of hydrocarbons could continue beyond this point but only by accepting financial losses. There are two ways to defer decommissioning  

Of course the operator will strive to use both of these means of deferring abandonment. 

In some cases, where production is subject to high taxation, tax concessions may be negotiated, but generally host governments will expect all other means to have been investigated first. 

Operating costs represent the major expenditure late in field life. These costs will be closely related to the number of staff required to run a facility and the amount of hardware they operate to keep production going. The specifications for product quality and plant up-time can also have a significant impact on running costs. 

As decommissioning approaches and all well intervention opportunities to increase productivity have been exploited, enhanced recovery processes may be considered as a means of recovering a proportion of the remaining hydrocarbons. However, such techniques are generally very sensitive to the oil price, and whilst some are common in onshore developments they can rarely be justified offshore. 

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This method attempts to relate the capital allowance to the total life of the assets (i.e. the field s economic lifetime) by linking the annual capital allowance to the fraction of the remaining reserves produced during the year. The capital allowance is calculated from the unrecovered assets at the end of the previous year times the ratio of the current year s production to the reserves at the beginning of the year. As long as the ultimate recovery of the field remains the same, the capital allowance per barrel of production is constant. However, this is rarely the case, making this method more complex in practice. 

From the cash flow and cumulative cashflow some basic economic indicators can be determined. The cashflow determines the economic lifetime of the field. When the cashflow turns permanently negative due to decreasing revenues (e.g. revenues are... 

The cumulative cash surplus accrues to the investor at the end of the economic lifetime of the project, and may be termed the field life net cashflow. 

Introduction and Commercial Application Eventually every field development will reach the end of its economic lifetime. If options for extending the field life have been exhausted, then decommissioning will be necessary. Decommissioning is the process which the operator of an oil or natural gas installations will plan, gain approval and implement the removal, disposal or re-use of an installation when it is no longer needed for its current purpose. 

BE-3044 Extending the economic lifetime of aging plants by systematic engineering Mr Reunanen VTT... 

Revenues are summed from an initial period thronghont the economic lifetime of the investment. The business decision rule is that an investment is profitable when its net present value is positive. If revenues accrue at a constant rate, continuously and forever, the equation becomes simpler. In the inequality I < R/r, an investment is profitable il aimiial revenue, R, divided by the discount rate, r. 

Although the energy cost is continuous and the capital costs are one time, it is common to spread out (or amortize) the capital cost over a period of Y years i.e., over the economic lifetime of the pipeline. The reciprocal of this (X = 1/ Y) is the fraction of the total capital cost written off per year. Taking 1 year as the time basis, we can combine the capital cost per year and the energy cost per year to get the total cost (there are other costs, such as maintenance, but these are minor and do not materially influence the result). 

You must design a pipeline to carry crude oil at a rate of 1 million barrels per day. If the viscosity of the oil is 25 cP and its SG is 0.9, what is the most economic diameter for the pipeline if the pipe cost is 3 per foot of length and per inch of diameter, if the power cost 0.05/kWh, and the cost of the pipeline is to be written off over a 3 year period The oil enters and leaves the pipeline at atmospheric pressure. What would the answer be if the economic lifetime of the pipeline were 30 years ... 

It is unlikely that an IRR of 15% or less will be of much interest to a company, certainly for a new development, while it is also unlikely that a rate of over 35% is feasible, unless it is for a very exotic and expensive product. The discount rates used in appraisal calculations, therefore, usually lie in the 15-35% range. In this range, the DFs for 11 years or more are so large as to make any calculation beyond 10 years rather pointless, so confirming the choice of 10 years as an economic lifetime. 

Extensive removal of sulfur from the reacting gases was necessary in order to obtain economic lifetime of the catalysts. With increasing catalyst activity it was necessary to increase the purity of the synthesis gas. The limit for industrial purposes was 0.2 g. sulfur per 100 m.3. A smaller amount of sulfur was more favorable. The removal of H2S was performed in the normal manner with iron oxide (Luxmasse). The organic sulfur was converted in a second step in the presence of alkalized iron oxide (200-300°C.) to hydrogen sulfide, which reacts with iron forming iron sulfide (15). 

Depreciation lifetimes required by tax and accounting practices often do not match economic lifetimes. Economie lifetimes will vary from process to process and by type of asset. What if an asset is fully depreciated Does that mean it is now free Is the mandated 30-year life for a particular asset even relevant Is not the eeonomie life of an investment in a fast-changing market more like five years — or even three years ... 

Jodejko-Pietruczuk, A., Mlynczak, M. Zajac, M. (2010) Assessment of economical lifetime of heavy-duty machines, Case study. Reliability, Risk and Safety Theory and Applications. Taylor Francis Group, London. 1 3, 531 534. 

Will it possess the adhesive forces and chemical ineitness to resist, within an economical lifetime, the effects of cathodic protection systems in soils or seawater of low resistivity ... 

Good stability of a solar absorber over an economical lifetime at operating temperatures is important. The Ti- and Zr-type films show no change in their optical properties after several years in an industrially polluted atmosphere at ambient temperatures. At elevated temperatures, changes in optical properties result from two causes oxidation of the absorptive film and deterioration of the silver film (17). Oxidation of the absorptive film causes it to approach the composition of the stable oxide Ti02 or Zr02. Because these oxides are relatively transparent to solar... 

Machines become faster, which in turn increases wear on machine parts this makes it ever more important to calculate optimum machine settings in order to reduce the stresses on the machine and its components, thus expanding their economic lifetime. 

Capital costs 7 percent real interest rate, 20 years economic lifetime... 

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