North Sea oil and gas decommissioning to soar by 2025
16 Nov 2016
North Sea decommissioning in the UK and Norway will continue to grow over the next decade with more than 1,800 wells due to be plugged or abandoned, says the trade association for Britain’s offshore oil and gas industry.
Oil & Gas UK’s report Decommissioning Insight 2016 – launched today at an industry conference in Aberdeen – provides the first survey of the two countries’ predicted activity in the period to 2025.
The total amount forecast to be spent on decommissioning for the UK Continental Shelf (UKCS) alone is expected to top £17.6 billion, it said. Of this, more than 50% will be located in the central North Sea, said Oil & Gas upstream policy director Mike Tholen.
He predicted the growth would provide both an opportunity and a challenge for the domestic industry: “The UK’s supply chain will need to focus on developing a high-quality, cost-efficient and competitive decommissioning capacity to make the most of the opportunity and provide a range of goods and services that can not only be deployed in the UK but also exported overseas.”
Last year, total decommissioning expenditure in the UK and Norway rose more than 31% to £2.1 billion, from just under £1.6 billion in 2014. This activity represented 5% of total industry expenditure in 2015, compared with 2% in 2010.
The UK’s supply chain will need to focus on developing a high-quality, cost-efficient and competitive decommissioning capacity to make the most of the opportunity
Mike Tholen, Oil & Gas upstream policy director
In all, the report identifies 52 new projects this year, with more than 100 platforms forecast for complete or partial removal, 1,800 wells scheduled to be plugged or abandoned and 7,500 km of pipeline predicted to be decommissioned.
However, Tholen cautioned: “We are not witnessing a rush to decommission. Some companies are deferring cessation of production as field life has been extended by sustained efficiency improvements; others are delaying activity due to cash-flow constraints; while elsewhere, companies may be expediting decommissioning to take advantage of falling costs in the current downturn.”
He said the industry needed to collaborate with the Oil and Gas Authority as well as with HM Treasury to attract fresh investment, and ensure decommissioning was timely and cost-effective.
Oil & Gas UK is also working with HM Treasury to explore the possibility of transferring tax relief on decommissioning costs with the sale of assets, stated Tholen.
