Initiation, start/stop and termination

The flexibility described so far is confined to the respective phases. In addition, two decisions that provide flexibility are available in all phases. First, the operator is allowed to abandon the project at all stages (termination flexibility). Abandonment implies a cost, which is dependent upon the phase the project has reached and the number of production wells that must be plugged.

Second, the operator may always choose to just wait (i.e., temporarily stop the development) and not pick a certain action (initiation flexibility and start/stop flexibility). This can be favourable if the oil price fluctuates heavily, since by waiting the operator might get a higher price. There is no direct cost associated with the decision to wait, but if the platform has been constructed the fixed operating cost accrues.

Based on the preceding discussion of the options available to the operator as the project develops, the decision space can now be summarised by figure 2. As pointed out the decision making freedom of the operator depends on the phase of the project, and except for the start/stop flexibility and the termination flexibility the other flexibility types are phase dependent.