£20bn to be spent on decommissioning North Sea oil and gas installations in the next decade, predicts Offshore Energies UK
22 November 2022
Offshore Energies UK (OEUK), a representative body for the UK’s offshore energy industry, published its latest Decommissioning Insight report on November 22 in which it forecasts that over two thousand North Sea wells involved in oil and gas extraction are to be decommissioned at a cost of around £20bn over the next decade.
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The report finds UK decommissioning is expanding fast and predicts a surge in activity over the next 3-4 years. It says the sector will continue growing as other emerging offshore energy technologies, like offshore wind farms, also require the service.
It is estimated around 2,100 North Sea wells will be decommissioned over the next decade – around 200 per year – at an average cost of £7.8m per well.
In 2021 a tenth of UKCS oil and gas expenditure went into decommissioning. This proportion has risen to 14% in 2022 and is set to rise to 19% by 2031. Over the next ten years, expenditure on decommissioning is predicted to total £19.7 billion, with well decommissioning comprising nearly half of this spend.
Over 75% of total decommissioning spend will be within the central North Sea, (stretching from Yorkshire to the northern tip of Scotland), and the northern North Sea, (covering an area north of Scotland and east of Shetland and Orkney). The surge in work could particularly benefit industrial communities on adjacent coastlines, especially around Teesside, Humber, Aberdeen and Inverness. Decommissioning in the Irish Sea will generate more economic benefits in places like Merseyside.
However, the growth in other renewable energies, such as offshore wind, could cause bottlenecks in demand for decommissioning services, the report says.
It means the offshore wind, carbon capture and storage, and oil and gas sectors will need to work together and be transparent about planned projects to make sure the opportunity is properly managed.
New cost efficiency target for redundant oil and gas infrastructure
On the same day as the report’s publication, the North Sea Transition Authority (NSTA) set a new cost efficiency target for redundant oil and gas infrastructure that the regulator said would not only benefit the Treasury but will also free up money to be invested in energy security and the transition to net zero.
The North Sea industry has made great strides cutting the overall cost estimate for decommissioning, by 25%, or £15 billion, since the start of 2017, but it can go further, the NSTA said in a statement. The regulator is challenging the sector to build on its strong progress by lowering the total estimate for decommissioning redundant platforms, wells and pipelines by an additional 10%, from £37 billion to £33.3 billion, between 2023 and end-2028.
The 10% target, agreed following consultation with industry, is based on NSTA decommissioning benchmarking and actual cost savings secured by the sector’s top quartile performers in recent years.