OGA bench-marking and improving industry efficiency leads to 7% cut in N. Sea decommissioning bill

The estimated cost of decommissioning North Sea oil and gas infrastructure has fallen by 7% since last year as operators and contractors gradually increase efficiency as a result of operational experience.

The Decommissioning Cost Estimate Report published today by the Oil and Gas Authority, shows the industry’s progress towards the target of safely decommissioning offshore oil and gas infrastructure for less than £39 billion (in 2016 prices).

With a shared objective of industry and government to reduce decommissioning costs by at least 35%, the report also contains benchmarking of operators’ performance in cost reduction.

The updated assessment tracks progress since the OGA estimated a year ago – and total N. SEa decommissioning costs from 2017 onwards would be £59.7 billion (in 2016 prices),

In real terms, despite including more assets and infrastructure than the previous year, estimated costs from 2018 onwards are lower, at £58 billion in 2017 prices.

Comparing the same portfolio as last year (on a like-for-like scope and inflation-adjusted basis) estimated costs from 2017 onwards have reduced significantly – by 7% to £55.7 billion in 2016 prices. 

A key contributor to this reduction is companies’ gaining valuable real practical experience in what is still a relatively immature activity.

Gunther Newcombe, OGA operations director, said: “The tripartite relationship between government, the OGA and industry is working well.

“It’s encouraging to see industry make real progress towards the decommissioning cost reduction target set with them. However, costs still need to reduce further and industry must keep focused.

“The OGA is sharing some of the great examples we’re seeing of individual companies thinking differently to save time and cost.

“Companies executing decommissioning programmes have made significant efficiencies in well plug and abandonment costs. In the Northern North Sea, platform running costs have substantially reduced through better optimisation of late-life and warm and cold phases.

Terri King, president of ConocoPhillips UK and chairman of the MER UK Decommissioning Task Force, said: “This report demonstrates a clear downward trend in expenditure and gives us greater certainty of our actual UK decommissioning costs.

“The OGA benchmarks and dashboards are now providing good challenging cost forecast information and, with the insights gained from the Asset Stewardship data, there is now the opportunity to identify further savings.”

Get the full OGA Decommissioning Report here: https://tinyurl.com/y7342cbc 

27 Jun 2018