The UK offshore oil and gas industry is seeing the pace of decommissioning steadying as the sector becomes more efficient and gains in expertise, reveals a flagship industry report launched on November 27 at a major decommissioning conference organised by Oil & Gas UK and Decom North Sea.
Oil & Gas UK’s 2018 Decommissioning Insight Report, which provides a fresh insight of the market over the next ten years (2018–27), reveals that decommissioning expenditure is expected to run at about £1.5bn per annum over the next decade, 20 per cent lower than forecast in 2017.
The report shows:
- The UK is expected to spend £15.3bn on decommissioning over the next decade
- The rate of decommissioning expenditure is forecast to stabilise at around £1.5bn per year, this is about 20% lower than forecast in 2017
- 1465 wells are expected to be decommissioned over the next ten years, representing 1/5th of total UKCS well stock
- Over 950,000 tonnes of topsides are scheduled for removal across the North Sea – of which just over 605,000 tonnes will be from the UKCS
- UK is the largest market for decommissioning spend over next decade, representing one-third of expenditure across the top 12 markets [Wood Mackenzie];
- Decommissioning on the UKCS offers first-mover advantage, which the UK’s supply chain can capitalise on, with the correct help
Unveiling the report findings to industry experts at the conference in St Andrews today, Joe Leask, Decommissioning manager 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. Data from projects to date reveals the scale of progress achieved in recent years. Forecast unit well decommissioning costs are reducing across all areas of the North Sea, and have fallen by an average of 26%.
“The efficiency improvements we see in decommissioning reflect what is being achieved across the oil and gas lifecycle and attracting fresh investment in the basin, to extend the life of many assets and increase economic recovery.
“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.
“Oil & Gas UK is pleased that these capabilities are recognised by the UK government through its call for evidence in the 2018 Budget. This will, supported by the Scottish Government’s Decommissioning Challenge Fund, help establish the UK as centre for global decommissioning excellence.”
“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.”
The report also notes:
Over the next decade
- The spend over this next decade is almost 20% lower than forecasts made last year would have suggested. Reductions have been driven by improved productivity (including cost reduction, efficiency improvement and deflation) coupled with the movement of activity beyond 2027. This demonstrates that the decommissioning market is maturing and making significant inroads to deliver on its 35% cost reduction target
- Cumulative expenditure up until 2027 has reduced by £4 billion in comparison with previous estimates
- Some individual projects have seen the average amount of days spent on well decommissioning halve throughout the lifecycle of a project
- Forecast costs per tonne for the removal of topsides in the central and northern North Sea have fallen by 13%, while the cost of removal per tonne for a substructure in this area has fallen by just over 16%