Offshore vs. Onshore Development Models
Executive Summary
Key Takeaways
- ✓ Offshore developments are shaped by facility type choice, fixed platform, FPSO, or subsea tieback, materially higher per-unit capital cost, and weather-driven downtime with no onshore equivalent.
- ✓ Onshore developments are shaped by land access and surface rights, well pad economics across a typically larger well count, and takeaway logistics between pipeline and truck transport.
- ✓ Offshore decommissioning cost is typically materially higher per unit than onshore, reflecting subsea infrastructure and platform removal complexity.
- ✓ A model built for one development type cannot be directly repurposed for the other without restructuring its facility, logistics and decommissioning cost assumptions.
Overview¶
Offshore and onshore oil and gas developments, addressed individually in Offshore Project Models and Onshore Project Models, require structurally different financial models, driven by fundamentally different facility, logistics and cost structures.
Side-by-Side Comparison¶
| Dimension | Offshore | Onshore |
|---|---|---|
| Primary structural driver | Facility type choice (fixed platform, FPSO, subsea tieback) | Land access and surface rights |
| Typical well count | Lower well count, higher per-well cost | Higher well count, lower per-well cost |
| Logistics | Helicopter and supply vessel costs, no onshore equivalent | Pipeline or truck takeaway to market |
| Downtime driver | Weather-driven availability reduction | Primarily equipment and maintenance downtime |
| Decommissioning cost | Materially higher, subsea and platform removal | Lower, well plugging and site restoration |
| Schedule constraint | Facility construction and marine logistics lead time | Rig availability and land access pace |
Why the Two Require Distinct Models¶
Offshore capital intensity and risk are concentrated in facility choice and marine logistics, while onshore capital intensity and risk are concentrated in land access and well count. A model built for one cannot be directly repurposed for the other: the facility cost categories, logistics cost lines, weather downtime treatment, and decommissioning cost basis addressed in each respective guide have no direct equivalent on the other side of this comparison, requiring a rebuilt structure rather than a parameter adjustment to an existing template.
Continue Reading¶
Related Technical Guides¶
Related Pillars¶
How OXXON tests thisRun a free structural check with FMAE
Frequently Asked Questions
What is the main structural difference between offshore and onshore development models?
Offshore models are built around facility type choice, fixed platform, FPSO, or subsea tieback, and weather-driven logistics, while onshore models are built around land access, well pad economics across a larger well count, and pipeline versus truck takeaway.
Which typically has higher per-unit development cost, offshore or onshore?
Offshore typically carries materially higher per-well or per-unit development cost, reflecting facility construction and marine logistics, while onshore per-well cost is typically lower but often requires a larger well count to develop an equivalent resource.
Why is decommissioning cost different between the two?
Offshore decommissioning involves removing subsea infrastructure and, where applicable, platform structures, a materially more complex and costly undertaking than onshore well plugging and site restoration.
Can an onshore financial model template be adapted directly for an offshore project?
No, not without restructuring. The facility type economics, logistics cost categories, weather downtime, and decommissioning cost basis are all specific to offshore and have no direct onshore equivalent to adapt from.
Related Articles
Offshore Project Models
Offshore project models must account for the specific cost and risk drivers of developing hydrocarbons at sea, fixed platforms, floating production storage and offloading (FPSO) vessels, and subsea tiebacks, each with materially different capital cost and operating profiles, alongside weather-driven downtime and logistics costs that do not arise onshore. This guide sets out how offshore models are structured around these facility choices and risk factors.
Onshore Project Models
Onshore project models are shaped by land access and surface rights, well pad-level economics across a typically larger well count than offshore developments, and the choice between pipeline and trucking takeaway for produced volumes ahead of pipeline connection. This guide sets out how onshore models are structured around these drivers, and how they differ from the facility-centric economics of offshore development.
Decommissioning Cost Models
Decommissioning cost models estimate and provision the mandatory end-of-life obligation to plug wells and remove oil and gas infrastructure, an obligation that should be funded progressively across the production life rather than treated as a single terminal-year cost. This guide sets out how decommissioning cost is estimated, the funding mechanisms, sinking funds, parent company guarantees, and letters of credit, regulators typically require, and why timing and discounting of the liability matter to how it is represented in a financial model.