Part 1 of 2 Series: Asset Preservation, Re-Activation and Stacking

Since 1998, Athens Group has worked on over 300 high specification drilling and production projects worldwide for major oil companies, drilling contractors and shipyards. During this period of time we have been part of two major oil price cycles: 2008 – the OPEC barrel of oil price was $12.28 USD and 2016 – the barrel is $26.25 USD. In between these cycles, oil prices hit highs of $94.10 USD and $109.45 USD. Our most dramatic fall is the one we are living through today.

Athens Group has supported our clients through these high and low times; both of which have their unique challenges. For today’s challenges, it centers on “stacking” of assets. Athens Group uses industry leading Proven PracticesSM and SmartListSM tools to reduce the risks of asset preservation. This two-part series on asset preservation will first look at the terminology, economics and risks of stacking. The second part will focus on the Marine Class Society view of “idle time” and how to ensure a smooth re-activation.

To learn more about Athens Group’s Asset Preservation, Re-Activation & Stacking Services or discuss a customized topic with our engineers about your asset(s), call us directly toll free 877-499-8393 or email us at info@athensgroup.com.

What are the Economics of  Preservation vs. Scrapping?

Here’s an example of an algorithm that is used when making a decision about an asset.

(1) Is the asset within 5 years of end of life? 

  • Yes: scrap it! The asset is old and new assets such as drillships are being stacked.Old assets will not return to service for 3 to 5 years. 
  • No: go to item 2

(2) Is the asset less than 5 years old? 

  • Yes: warm stack it
  • No: go to item 3

(3) Do you have 90% confidence the asset will come under contract within 12 months?

  • Yes: warm stack it
  • No: cold stack it

4 Risks to Avoid : Asset Preservation, Re-Activation & Stacking

RISK #1Not having overall fleet preservation plans that include:

  1. Regulatory regime governing the asset’s lay up location, with required standards
  2. Specific international standards
  3. Athens Group Proven Practices
  4. Asset restart timeline risks
  5. OEM recommended maintenance practice

RISK #2: Not having individual asset preservation plans that include:

  1. Environmental and Safety integrity
  2. Industry best practices
  3. Classification credit
  4. Regulatory requirements
  5. OEM recommendations

RISK #3: Not having a current (within 6 months), baseline condition assessment of the asset and all equipment to include:

  1. Update the Asset Registry that includes all systems (i.e. power management, vessel management, dynamic positioning, jacking, drilling), subsystems (i.e. fire and gas, subsea, cranes) and individual pieces of equipment (i.e. drawworks, top drive, BOP).
  2. Document equipment status; noting issues or problems that must be addressed prior to preservation.
  3. Complete as built and as is drawings noting all electrical, communication, mechanical and hydraulic lines.
  4. Identify areas of potential restart risk due to timing, cost and future asset acceptance.

RISK #4: Failing to have competent onsite management and verification of the preservation activity to include the following:

  1. Conduct audit of asset preservation against plan and procedures, documenting with photos and noting deviations, areas of concern and identified and unidentified risks.
  2. Review and analyze all system, subsystem and individual equipment maintenance schedules, plans, and records against industry best practices, classification requirements and OEM recommendations; noting findings and recommendations.
  3. Verify if any item or area, due to its current preservation status, has a risk of not performing both its primary function and secondary function considering:
  • Environmental and Safety integrity
  • Control, containment, comfort
  • Appearance
  • Protection

To learn more about Athens Group’s Risk and Operation & Maintenance Services or to discuss a customized topic with our engineers about your asset(s), call us directly toll free 877-499-8393 or email us at info@athensgroup.com.

Frequently Asked Questions:

Asset Preservation, Re-Activation & Stacking

What’s the cost per day to warm stack an asset? Routine rig maintenance is continued, and daily costs may be reduced to half of the day rate. If your asset day rate was $100,000 half will be $50,000 or an annual cost of $18.25 Million.

What is the cost per day to cold stack an asset?  Based on the yard used, cold stacking could be as little as $2,000 per day or $.73 Million per year.

What is the difference in re-activation costs? If you have warm stacked an asset and kept within the Class Society’s guidelines for surveys, it will likely take 2 months to be ready to drill the next well.

If you have cold stacked the asset for more than 12 months, you will have to re-classify the vessel then commission, accept and validate all the systems, subsystems and individual equipment. This will likely take anywhere from 6 to 12 months.

Copyright 2016 Athens Group. All Rights Reserved.

About the Author: Don Shafer – As cofounder of Athens Group, chief security, safety, health and environment (SSHE) officer, and technical fellow, Don Shafer leads engineers in delivering software engineering services for our clients. He is a software engineering subject matter expert for the Cockrell School of Engineering’s Advanced Research in Software Engineering Center at the University of Texas at Austin. As a charter member of the FBI Infragard organization, he presented the first Offshore Cybersecurity presentation at the 2005 Homeland Security Regional Infrastructure Security Conference.

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