Abstract
As the 1500 plus oil & gas structures in the US Gulf of Mexico (GOM) reach the end of their oil & gas phase, these structures as well as the thousands of miles of pipelines have the potential to be repurposed. One potential mechanism to encourage this is to incentivize it through an initiative, known as Repurposing Offshore Infrastructure for Clean Energy (ROICE) projects, which was formerly known as Project SHOWPLACE. This initiative has the potential to create a revenue stream from clean energy or other energy transition activities. Studies on the feasibility of ROICE projects have been underway at the University of Houston UH Energy program since June 2021. An Industry-Government-Public-Academia advisory team – the ROICE Project Collaborative (RPC) – has been formed to leverage the support of 40+ entities who provide subject matter expertise, resources, and learnings from similar global projects. A major component of ROICE has been the development of a comprehensive model for estimating levelized costs (LC) for such projects. The ROICE-LC Model can estimate LC's for wind power and hydrogen generation for both new build projects and projects that repurpose some of the existing oil & gas infrastructure. Using this model, Geospatial Levelized Cost Maps (GSLC Maps) have been generated that show LC distributions for different project scenarios across the GOM. These GSLC Maps have been analyzed to identify favorable locations for ROICE projects, how they compare with onshore and other alternatives, and to understand the impact of various key variables and cost elements on LC.
Key conclusions from Phase 1 of this study are as follows:
LC's for repurposed wind projects in the GOM range from $82 to $231 per MWh. Equivalent new build projects have LC's ranging from $82 to $437. LC's for repurposed hydrogen projects in the GOM range from $4.76 to $8.44 per kg of hydrogen. Equivalent new build projects have LC's ranging from $4.77 to $19.64.
While noting that the above LC's do not include any federal or state incentives, these are higher than equivalent low-carbon renewables-based onshore projects, and even more challenged versus high-carbon alternatives.
However, projects at the lower end of the range of LC's across the GOM have the potential to be competitive with onshore projects through efficient design, cost reductions and use of all available federal and state incentives.
Of the different components of the oil & gas structure to be repurposed, it is probably most cost-effective to reuse the jacket (main support structure) and the deck (flooring above the structure) for ROICE projects. Pipelines can also be re-used to bring hydrogen back to shore. The remaining equipment will need to be decommissioned as per normal practice - removal of oil & gas topsides, abandonment of all wells and any pipelines that will not be used to transport hydrogen.
Repurposing reduces Capital Cost (CAPEX) and shortens the schedule of implementation of ROICE projects. and has a positive impact on LC for most projects. This improvement is more pronounced for deeper water projects and for smaller scale projects where the savings from reused infrastructure form a significant portion of the total project CAPEX - 5 - 10% for near shore locations and 25 – 60% for deepwater projects.
It is advantageous to consider repurposing options for deeper water / further from shore projects. Of course, these projects are challenged with high LC's even after repurposing, so further optimization and greater production incentives are needed to make these projects attractive.
CAPEX for hydrogen projects is in the range of +/- 10% of power project CAPEX. The incremental economics on the additional CAPEX for hydrogen generation is therefore likely to look quite promising in all cases, especially considering the healthier federal incentives for hydrogen production vs wind power generation.
