Environmental Liability Assessment And Accounting In The Upstream Oil And Gas Sector "a Model To Assess Oil And Gas Well Site Abandonment Liability"

Abstract

A trend of rising expenditures related to environmental performance, degradation and abandonment and restoration activities has been observed as a result of increasingly stringent and prescriptive environmental regulations, growing stakeholder scrutiny, and aging assets and infrastructure. Owing to the importance and sheer size of the upstream oil and gas industry, coupled with various high profile environmental events, it is difficult to find another industry whose activities and environmental performance are more highly regulated and scrutinized. Consequently, it can be anticipated that environmental costs will continue to rise moving forward. The maturation of aging oil and gas basins has resulted in a greater number of oil and gas fields being abandoned. Therefore, the abandonment of oil and gas wells represents an important environmental liability, whose cost drivers need to be better understood in order to assist decision making, mitigate environmental risk and improve overall corporate risk management. The objective of this Masters Degree Project is to conduct a review of current literature pertaining to environmental liability assessment and environmental accounting, and develop an actuarial based model to forecast the future cost of well-site abandonment, based on the identification and financial quantification of significant well-site abandonment cost drivers.