Scottish ports risk losing out to EU and Nordic rivals in race for share of £70bn N. Sea decommissioning market

Port of Dundee... missed out on N. Sea exploration boom
Port of Dundee… missed out on N. Sea exploration boom

Enhanced government support and following through on Budget promises are needed if UK industry is to cash in on multi-billion-pound decommissioning projects in the North Sea.

Scottish ports are also at risk of losing out to European and Scandinavian competitors who are taking the lead in being ready to handle the massive rigs which will be decommissioned over the next three decades.

Those points will be debated by industry leaders this week at the Offshore Decommissioning Conference in St Andrews to flesh out how the UK capitalises on an industry estimated to be worth up to £70 billion.

A spokesman for Pinsent Masons, the debate organiser, said: “While the Oil and Gas Authority, Treasury and industry leaders have made progress in streamlining the process with fiscal incentives and a move towards a standardised contracting approach, the bottom line is that opaque total costs, compounded by recent oil price volatility, have left producers in limbo on how and when late life assets should be taken offline. 

“It’s a lengthy and expensive process at a time when cost control forms a critical part of boardroom discussions across North Sea businesses. Clear projections and visibility of cost will be the Holy Grail not just for E&P businesses, but for services companies exploring new opportunities in this sector of the oil and gas industry.

“The Chancellor needs to fulfil a commitment made during the Spring Budget to better encourage the transfer of late-life assets through tax reliefs in the upcoming Autumn Statement.

“We need to ramp up efforts and build on the progress already made. While collaboration between Government and industry will play a crucial role in alleviating some of the concerns around decommissioning the question remains – is the UK ready to tackle the late-life process? 

“More needs to be done to adapt ports across the UK to ensure they are equipped to manage an influx of large-scale rigs coming onshore. To put this into context, a number of Norwegian and Dutch ports will be ready as these countries tackle decommissioning in the coming years. 

“We need to take the lead from our Norwegian and Dutch counterparts and garner the necessary investment to ensure our ports are ready and properly equipped to accept the decommissioned assets and also manage the environmental requirements as decommissioning begins to gather pace.”

However, the Aberdeen-based Oil and Gas UK trade association, said that industry is already making progress on cutting costs.

A spokesman said: “Despite facing unprecedented challenges over the past few years, the UK oil & gas industry has demonstrated drive and determination.

“Its efforts to make operations more efficient achieved the first increase in production in 15 years and a 45% drop in the cost of doing business this year.

“However, there is still much work to be done and this will require the joint efforts of industry, governments, the Treasury and the Oil and Gas Authority.

“The most important issues facing the sector are the lack of exploration and little new capital investment.

“Less than £100 million of fresh capital has been committed to the N. Sea basin this year, with only one new field approved –  compared with five greenfield projects sanctioned last year with associated development capital at more than £4.3 billion.

“Urgent action is required if industry is to maximise the economic recovery of the up to 20 billion barrels of oil and gas equivalent still available in the North Sea.”

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