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Report shows steady growth in UK decommissioning activity

03 December 2015

The UK oil and gas industry’s decommissioning sector is growing at a steady pace, according to Oil & Gas UK’s 2015 Decommissioning Insight, launched on November 18. This forecasts that total decommissioning expenditure on the UK Continental Shelf (UKCS) will reach £16.9 billion over the next decade (2015-2024).

The key findings of the 2015 Decommissioning Insight are as follows:

•  Actual expenditure on decommissioning on the UKCS in 2014 was just over £800 million, with much of the forecast activity completed.

•  Total forecast decommissioning expenditure from 2015 to 2024 is £16.9 billion. This is an increase of £2.3 billion on the 2014 report’s ten-year forecast of £14.6 billion, primarily due to 47 new projects entering this year’s survey.

•  The majority of new projects appear towards the end of the 2015 to 2024 timeframe, with nearly two-thirds of the associated expenditure occurring post-2020. Technological advances and improved production cost efficiency could defer the timing of decommissioning for these projects.

•  Expenditure forecasts for existing projects, included in both the 2014 and 2015 surveys, have remained consistent. Future cost reduction can be anticipated as the low oil price, improved decommissioning experience and the work of Oil & Gas UK’s Efficiency Task Force take full effect.

•  Some 50% of the total forecast expenditure will be concentrated in the central North Sea (£8.4 billion). Thirty-two of the new projects are in this region. Since the 2014 report, total forecast expenditure in the central North Sea and northern North Sea/west of Shetland regions has increased by £3 billion to £14.1 billion, and decreased by nearly £750 million to £2.8 billion in the southern North Sea and Irish Sea.

•  Over the next decade, 79 platforms are forecast for removal across the UKCS. This represents almost 17% of the some 470 installations that will require decommissioning over the next 30 to 40 years.

•  The largest category of expenditure is well plugging and abandonment (P&A) at 46% of the total forecast expenditure.

The trade organisation shared the results of its annual decommissioning survey at the sell-out Offshore Decommissioning Conference in St Andrews, an event organised jointly with Decom North Sea and sponsored by Babcock International Group.

Oonagh Werngren, Oil & Gas UK’s operations director, said: “This year 28 operator companies responded to the survey. While they forecast an increase in expenditure compared with the £14.6 billion recorded in 2014, the increase is primarily due to new projects entering the 10-year survey timeframe rather than increased cost estimates from existing projects.

“The survey confirms there are a small number of major decommissioning projects under way with well plugging and abandonment activities representing the largest category of expenditure with over 1,200 wells scheduled for work over the next decade.

“While the industry recognises decommissioning activities are steadily growing, its focus is to maintain offshore production in the North Sea for as long as it’s safe and economically possible to do. The key to sustaining the health of the sector is to take the initiative now to help an efficient decommissioning market emerge as part of, and alongside the industry’s continued and sustained programme of capital investment in new developments.”

The Decommissioning Insight is the latest in a series of documents Oil & Gas UK has published to help the industry prepare for forthcoming decommissioning projects and increase the efficiency of activities. It follows the publication of guidance to improve the efficiency of inspection and maintenance activities in late-life asset management and decommissioning, as well as, a report Oil & Gas UK and Decom North Sea published jointly to outline good practice in bringing into the UK market new solutions which have the potential to deliver cost reductions and manage activity more effectively.

Decommissioning Insight 2015 was compiled from the responses of 28 companies operating on the UKCS to an Oil & Gas UK survey carried out between June and September 2015. The survey asked operators to provide data on their actual decommissioning spend and activity on the UKCS in 2014 and forecasts for the period 2015 to 2024.

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