Offshore decommissioning forecast reduced by £4bn

The costs of offshore decommissioning have dropped by around 20 per cent as the oil and gas industry becomes 'more efficient', says a new report.

Decommissioning is now predicted to cost around £1.5bn per year over the next decade, almost one-fifth lower than forecasts made last year. Picture: Contributed

Decommissioning expenditure is now predicted to cost around £1.5 billion per annum over the next decade, almost one-fifth lower than forecasts made last year would have suggested, according to the 2018 Decommissioning Insight Report from Oil & Gas UK.

It estimates that the UK will spend £15.3bn on decommissioning over the coming ten years, representing a £4bn reduction in cumulative expenditure up to 2027 in comparison with previous estimates.

The report expects some 1,465 wells, around one-fifth of total well stock in the UK Continental Shelf (UKCS), to be decommissioned during that time.

It attributed the estimated savings to improved productivity measures, including cost reduction, efficiency improvement and deflation, as it continues to aim for the overall reduction target of 35 per cent set by the Oil and Gas Authority.

Speaking at a decommissioning conference held yesterday in St Andrews, Joe Leask, decommissioning manager at Oil & Gas UK and author of the report, said: “As the decommissioning sector matures, we’re becoming more efficient and our growing expertise is enabling us to plan projects more cost-effectively.

“Our knowledge is continuously expanding and contributing to competitive decommissioning delivery.”

He added that forecast unit well decommissioning costs had decreased by an average of 26 per cent and are dropping across all areas of the North Sea.

Leask said the UK supply chain should capitalise on this progress by exporting its knowledge overseas.

The UK is the largest market for decommissioning spend between 2017 and 2027, representing one-third of expenditure across the top 12 markets, according to data from Wood Mackenzie.

Leask said:“The sector’s cost leadership demonstrates we have the capacity and capability to deliver the 35 percent cost reduction target set by the Oil and Gas Authority.

“Meeting and then beating this target will be key to unlocking the global market, allowing the UK to reinforce its position as world-leading.

“Our focus now needs to be on identifying the areas we excel in, strengthening the share of our local market and then exporting those skills and capabilities into the global market.”

Offshore decommissioning of oil and gas facilities has previously been described as a new beginning for the North Sea industry, with the potential to create hundreds of jobs.