Decommissioning market insight published by Oil & Gas UK

Oil & Gas UK has launches its annual Decommissioning Insight – the leading industry forecast for decommissioning activity and expenditure on the UK Continental Shelf (UKCS).

This year the report focuses on the activity of 28 operators in the UKCS – providing intelligence on their decommissioning plans for the next 10 years.

Oil and Gas UK LogoData was compiled from operators’ responses to an Oil & Gas UK survey conducted this summer on their decommissioning activity and expenditure in 2013 and respective forecasts for 2014 to 2023.

Oonagh Werngren, operations director, said:

“Decommissioning Insight 2014 will be of huge interest to both operators and contractors as they look to the future. Our report provides the industry with the facts and figures it requires in order to be as informed and prepared as possible for when opportunities arise in this growing sector.

“For operators, this might be a case of collaborating on work programmes to reduce cost and gain greater efficiency, and for the broader supply chain it is ensuring the UKCS is geared up to take on this new challenge, ensuring the right technologies are developed and we have the resources in place to handle the  work.”

The offshore oil and gas industry is the UK’s largest industrial investor, and Oil & Gas UK’s Economic Report 2014 – published last week – indicates a strong future for domestic oil and gas production.

The Wood Review – launched earlier this year – outlined the steps the sector should take to maximise economic recovery from the UKCS. It also recommended a decommissioning strategy to support that objective, and help the sector benefit from sufficient early planning and co-ordination that, as decommissioning progresses, gains the UK competitive industrial capability to meet the needs of maturing oil provinces at home and abroad.

Oil & Gas UK’s 2014 Decommissioning Insight aims to help achieve that goal.

Some of its key findings include:

  • In 2013, £470 million was spent on decommissioning.
  • Total forecast expenditure on decommissioning from 2014 to 2023 is £14.6 billion
  • Forecast expenditure has increased since 2013 due to the following factors; £3 billion is attributed to new respondents to the survey, £1.2 billion is attributed to higher forecasts from existing projects.
  • Forty-three per cent of total forecast expenditure will be concentrated in the central North Sea (£6.3 billion). Many of the projects included in the 2014 survey for the first time are in this region.
  • Further to the 2013 Decommissioning Insight report, six projects have been deferred with their expenditure now occurring partially out of the survey timeframe.
  • Most of the decommissioning programmes captured in this survey are considered to be in the early scoping stages. Forecasts are therefore subject to change as projects become more defined.
  • The largest category of expenditure is well plugging and abandonment (P&A) at 44 per cent of the total forecast (£6.4 billion).
  • Operators forecast that decommissioning expenditure in 2014 will reach £1 billion for the first time in a single year and will average £1.5 billion each year over the ten years (2014 to 2023).

Scottish EnterpriseScottish Enterprise international sector head for oil and gas, David Rennie, said:

“Decommissioning is highlighted as a key opportunity for the supply chain in Scotland’s oil & gas strategy.

“With an increasing number of assets approaching end of life, we recognise we need to ensure the supply chain is prepared to meet the challenges this presents.

“This report identifies key capacity constraints and we will continue to work closely with Decom North Sea and industry to help develop capacity and raise awareness of these and other opportunities to meet our decommissioning needs.”

He continues:    

“The report also highlighted the need to shift procurement strategies away from focusing solely on providers with long-term experience within the industry and to include new entrants to the supply chain who can introduce innovative methods, reduce costs, and broaden the supply chain market.”

Decom North Sea chief executive, Nigel Jenkins added:

“A principal role of Decom North Sea is to facilitate supply chain collaboration to reduce the cost of decommissioning. This report provides an invaluable insight into the potential resource constraints, this insight will be a significant benefit to our members and stakeholders.”

Decommissioning Insight 2014 was launched at the Offshore Decommissioning Conference jointly organised by Oil & Gas UK Decom North Sea. The publication is available on the Oil & Gas UK website

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