A new report forecasts a gradual but steady rise in offshore oil and gas decommissioning in the UK and Norway over the next 10 years, with activity growing from a market worth over £2 billion in 2015.
Decommissioning Insight 2016, is launched today by Oil & Gas UK, the Aberdeen-based trade association for the UK offshore oil and gas industry,
It confirms that decommissioning is a growing, if still emerging, market, despite low oil prices continuing to challenge the economics of the more mature offshore assets around the North Sea.
Total decommissioning expenditure in the UK and Norway last year was £2.1 billion, compared with just under £1.6 billion in 2014, and represented 5% of total industry expenditure.
The total amount forecast to be spent on decommissioning North Sea assets between now and 2025 is £17.6 billion up from £16.9 billion for 2015-2024.
An Oil and Gas UK spokesman said: “With low oil prices continuing, you might expect decommissioning to be a key focus for the sector in the years ahead, however we are not witnessing a rush to decommission.
“Different factors are at play and the picture is much more complex. 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.”
While 52 new projects appear for the first time in this year’s report, most of these have been a long time in the planning.
Over the next decade, there are more than 100 platforms forecast for complete or partial removal from both the UK and Norwegian continental shelves.
Over 1,800 wells are scheduled to be plugged and abandoned and around 5,000 miles of pipeline is forecast to be decommissioned.
Since the 2015 survey, unit costs of decommissioning appear to be falling, particularly for well plugging, abandonment and making safe. This is partly due to a market-driven response to the downturn as associated costs (such as rig rates) have fallen. The industry is also increasingly applying past experience to new decommissioning projects to positive effect.
Oil & Gas UK is meanwhile working on the MER UK Decommissioning Board with the Oil and Gas Authority (OGA) and the Department for Business Energy and Industrial Strategy to develop new fit-for-purpose technical, commercial and operational solutions to lower the cost of decommissioning while maintaining high safety and environmental standards.
But see also: N.Sea oil sector faces ‘rapid and premature’ decline and fall