Asset Retirement Technical Standard

Timing
ARM-ST-101009
Rev.

Date

Description

Author

Technology Leader

09/13

Initial release

T. Beckner

D. Adkins

This document is the confidential property of Chevron U.S.A. Inc. Neither the whole nor any part of this
document may be disclosed to any third party without the prior written consent of Chevron U.S.A. Inc.
Neither the whole nor any part of this document may be reproduced, stored in any retrieval system, or
transmitted in any form or by any means (electronic, mechanical, reprographic, recording, or otherwise)
without the prior written consent of Chevron U.S.A. Inc.

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Asset Retirement Technical Standard

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Table of Contents
1.0

Purpose, Objectives, and Scope .................................................................................................. 3

1.1
1.2

Purpose and Objectives ...................................................................................................... 3

Scope .................................................................................................................................. 3

2.0

Acronyms ........................................................................................................................................ 4

3.0

Asset Retirement Timing Requireme nts..................................................................................... 5

4.0

References ...................................................................................................................................... 7

Appendix A

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Recommended Application of Timing Criteria by Life Cycle Stage ............................ 8

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Asset Retirement Technical Standard

Timing

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Purpose, Objectives, and Scope

The Asset Retirement (AR) Timing Standard defines the requirements for determining timing
for the retirement of assets and environmental aspects, both for asset retirement obligation
(ARO) liability calculation and AR project execution purposes.
The Asset Retirement Timing Standard is based on the Upstream Asset Retirement Strategic
Framework (UARSF). Deviations from this standard require implementing the Asset
Retirement Technical Standards Exception Procedure.

1.1

Purpose and Objectives

The purpose of the AR Timing Standard is to provide consistency, repeatability, and
transparency in establishing AR timing for estimating ARO liabilities and
AR execution projects.
The objectives of the AR Timing Standard are as follows:

1.2

Develop a common methodology for Chevron Upstream strategic business units (SBUs)
and Chevron Gas and Midstream (CGM) companies to establish AR timing that balances
risk, value, and reputation.

Understand and consistently estimate the timing of asset retirement. AR timing estimates
are aligned and integrated into asset development plans (ADPs), integrated facility
management plans (IFMPs), and business and strategic plans.

Consistently review and adjust timing estimates, in conjunction with the inventory and cost
estimate, to avoid significant financial adjustments during AR execution.

Proactively retire assets (and evaluate environmental aspects) based on risk assessment
methodologies to reduce idle asset (and environmental aspect) inventories over time and
reduce risk.

Scope
The AR Timing Standard applies across the full asset lifecycle to all active, inactive, and idle
assets, as well as environmental aspects (including assessment and remediation) within
Chevron Upstream and CGM, unless otherwise specified herein. This includes all assets and
environmental aspects under the operational control of Company and non-operated joint
ventures (NOJVs) and equity affiliates, unless otherwise specified herein.

1.2.1

In Scope
The following Chevron Upstream and CGM assets shall be in scope for the
AR Timing Standard:

Assets that require the development of an ARO, including sites that require environmental
remediation as a result of normal operation as defined in the UARSF.

Offshore and onshore wells, including but not limited to exploration, appraisal, production,
injection, storage, disposal, observation, and monitoring.

Offshore facilities, including but not limited to conventional structures, floating facilities,
artificial islands, subsea facilities, and subsea pipelines, including shore crossings.

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Onshore facilities, including but not limited to tank batteries, gathering stations, production
sites, gas plants, power generation and distribution systems, and pipelines.

Onshore infrastructure, including but not limited to roads, buildings, warehouses, shore
bases, laydown/storage yards, well pads, plant sites, facility sites, and pits.

Coastal or near-shore facilities and restoration sites, including but not limited to shore
bases, construction and fabrication yards, roads, buildings, warehouses, docks, wharfs,
piers, trestles, and jetties.

Third-party assets located on Company property and used in Company operations, such as
rental compressors, chemical injection skids, etc. For these items, the Company is
responsible for timing decisions regarding removal of the third-party assets.

Environmental aspects and remediation projects at known legacy sites from historical
operations in areas within Company operational control.

Divested, expired, or otherwise exited assets (i.e., concessions or leases formerly held by
Company) in which liabilities were contractually retained.

Chevron Pipeline Company (CPL) assets as part of CGM are in scope for the
AR Timing Standard.
Chevron Global Power Company (CGP) assets as part of CGM are in scope for the AR Timing
Standard if they are operationally connected to traditional upstream assets.
1.2.2

Out of Scope
The following assets shall be out of scope for the AR Timing Standard:

2.0

Assets outside of Chevron Upstream and CGM, such as those in Downstream and
Chemicals, Chevron Business and Real Estate Services (CBRES), and Mining.

Chevron Shipping Company (CSC) assets as part of CGM.

CGP assets as part of CGM, if they are not operationally connected to traditional upstream
assets.

Third-party assets located on Company property but outside of Company operational

control, such as common-carrier pipeline systems.

Legacy sites or assets that have been divested, expired, or otherwise exited
(i.e., concessions or leases formerly held by Company or a predecessor company) in which
liabilities were not contractually retained.

Acronyms
ADP

Asset Development Plan

AR

Asset Retirement

ARO

Asset Retirement Obligation

CBRES

Chevron Business and Real Estate Services

CGM

Chevron Gas and Midstream

CGP

Chevron Global Power Company

CPL

Chevron Pipeline Company

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Asset Retirement Technical Standard

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CSC

Chevron Shipping Company

HES

Health, Environment, and Safety

IFMP

Integrated Facility Management Plan

NOJV

Non-Operated Joint Venture

SBU

Strategic Business Unit

UARSF

Upstream Asset Retirement Strategic Framework

Asset Retirement Timing Requirements

1. SBUs shall be responsible for establishing timing for ARO liability calculations and for AR
execution projects. Timing decisions shall incorporate the UARSF framework target of
reducing idle asset inventories over a reasonable time frame with due consideration for, and
balancing of, Chevron risk, value and reputation.
2. AR timing should be considered and decisions made across the asset lifecycle, starting at
the acquisition stage and up to the retirement/divestment/ exit stages. Timing decisions
shall include an appropriate combination of the following criteria as deemed appropriate by
the SBU (see Table 1).
Table 1: Timing Decision Criteria
Impacts Risk, Value, or Reputation
Timing Criteria

Risk

Value

Reputation

Concession terms, conditions, and regulatory

obligations

Risk of regulatory changes

Potential resource development

Health, environment, and safety (HES) risk

assessments

Low probability/high consequence risks (e.g., seismic

events, storm toppling, significant HES incident,
marine collision risk, sabotage, community
disturbance, and proximity to population)

Public perception issues

Design life of facilities and infrastructure

Asset condition and degradation

(e.g., mechanical failure or accelerated corrosion)

Risk-based 6P (Contingent Resources High Estimate)

reserves life
Proactive retirement of idle assets and
environmental sites

X
X

Risk-based P1 (Proved) reserves life

Annual condition monitoring, maintenance, and
compliance costs

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Impacts Risk, Value, or Reputation

Timing Criteria

Value

Reputation

Increase in retirement costs due to asset and

condition degradation

Tax relief and cost recovery

Remaining economic value

Infrastructure needs
(e.g., upgrades, expansions, and additions)

Alternative use opportunities

Length of time spent idle

Risk

3. Appendix A Recommended Application of Timing Criteria by Life Cycle Stage provides

general guidance as to which criteria should be considered for each lifecycle stage.
Note:

Many criteria apply throughout all life cycle stages, while others apply in the
early stages but not later. As an example, Risk-based 6P reserves life should
be applied to timing decisions early in life, based on the SBUs history of asset
reserves additions. However, at some point as field life matures towards the end
of life, Risk-based Proved reserves life should become the criteria for the
retirement timing decision.
Nevertheless, 6P reserves life may be a valid criterion for assessing value during
divestment or exit decision-making.

4. The evaluation and establishment of AR timing is not an exact science, and requires SBUs
to use logically correct reasoning.
a. SBUs should develop a timing philosophy or methodology that accounts for the specific
circumstances of their SBU, e.g., agreement terms and conditions, government or local
regulations, asset particulars, and tax relief and cost recovery.
b. SBUs shall consider other criteria pertinent to their circumstances in considering and
establishing timing estimates and decisions.
5. SBUs may consider grouping assets by similar timing criteria to simplify timing estimates
and decisions, e.g., in conjunction with similar inventory and similar cost
estimating groupings.
6. SBUs shall ensure that AR timing estimate decisions are aligned with and integrated into
local plans, including ADPs and IFMPs, business plans, and strategic plans.
7. After AR timing has been determined for assets within a lease, block, or field, the
remaining life shall be used to develop the timing of environmental assessment and
remediation activities. Assessment and remediation projects that are not regulatory-driven
shall use a combination of risk, value, and reputation to develop a timing plan within that
AR timeframe that aligns with the ADPs, IFMPs, strategic plans, and business plans.

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8. Events or circumstances provide business drivers for proactive asset retirement.

a. Concession terms and conditions that provide cost recovery should be considered in
planning idle AR timing. That is, idle AR expenditures should occur during the life of
the concession when cost recovery is applicable or when there is revenue to offset
the expense.
b. Some regions have regulatory requirements that limit the amount of time a well can sit
idle. For example, in the Gulf of Mexico, the Bureau of Safety and Environmental
Enforcement requires an idle well to be evaluated and either returned to production or
plugged and abandoned within five years.
9. Examples of events or circumstances that would cause a well or facility to go immediately
to the retirement queue and be prioritized for abandonment include the following:
a. Idle assets that are in poor mechanical condition in combination with other risk factors
(e.g., sour gas, near populated areas, near environmentally sensitive areas, within area
of subsurface secondary recovery [i.e., water/steam injection] or tertiary recovery
[i.e., CO2/gas/chemical injection] projects).
b. Idle assets with a high consequence risk assessment.
c. Idle assets that are past their design life, unless there is economic future utility and a
condition monitoring program is in place with an appropriate mitigation plan that
extends the design life.
d. Long-term idle assets (i.e., greater than five years idle) with no future utility.
10. If SBU business needs, constraints, or agreements impact or limit timing decisions, details
to support those decisions shall be fully documented, and shall specifically include
supporting documentation about risk identification and mitigation actions.

4.0

References
The following documents may be referenced for additional information.
Table 2: Additional References
Title

File Link

None available at initial release

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Asset Retirement Technical Standard

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Appendix A

ARM-ST-101009

Recommended Application of Timing Criteria by Life

Cycle Stage

Operations:
early life

Operations:
late life

Idling

Potential resource development

HES risk assessments

Low probability/high consequence risks (e.g., seismic

events, storm toppling, significant HES incident, marine
collision risk, sabotage, community disturbance, or proximity
to population)

Public perception issues

Design life of facilities and infrastructure

Asset condition and degradation (e.g., mechanical failure or

accelerated corrosion)

Risk-based 6P (Contingent Resources High Estimate)

reserves life

Divestment/
exit

Development

Risk of regulatory changes

Timing Criteria

Retirement

Acquisition

Asset Life Cycle Stage

Concession terms, conditions, and regulatory obligations

Proactive retirement of idle assets and environmental sites

Risk-based P1 (Proved) reserves life

Annual condition monitoring, maintenance, and

compliance costs

Increase in retirement costs due to asset and

condition degradation

Tax relief and cost recovery

Remaining economic value

Infrastructure needs
(e.g., upgrades, expansions, or additions)

Alternative use opportunities

Length of time spent idle

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