Forecast total oil and gas infrastructure decommissioning spending on the UK Continental Shelf (UKCS) will reach £16.9 billion over the next decade, according to new industry estimates.
The latest figure, for the period to 2024, is an increase of £2.3 billion on the 2014 estimate, mostly due to an extra 47 projects being listed for decommissioning by UKCS operators, according to Oil & Gas UK's Decommissioning Insight survey report released today.
Some of these fields have become no-longer economically viable due to the fall in oil prices from US$83/bbl this time last year to $45-65 since January 2015. But, some operators are also deferring decommissioning projects as a result of short-term cash flow management, the Offshore Decommissioning Conference in St Andrews heard this morning.
Over the next decade, 79 platforms are forecast for removal across the UKCS, representing almost 17% of the some 470 installations that will require decommissioning over the next 30-40 years, according to the Insight report, which was presented at the event.
Fifty per cent of the total forecast expenditure will be concentrated in the central North Sea (£8.4 billion), with 32 of the new projects are in this region. The largest category of expenditure is well plugging and abandonment (P&A) at 46% of the total forecast expenditure.
According to the report, the majority of new projects appear towards the end of the 2015 to 2024 timeframe, with nearly two-thirds of the associated expenditure occurring post-2020. But, it also suggests that technological advances and improved production cost efficiency could defer the timing of decommissioning for these projects.
The projections follow £800 million of spending on decommissioning on the UKCS in 2014, a figure lower than the <£1 billion which had been forecast for last year.
The report was launched at the Offshore Decommissioning Conference in St Andrews, which is running today and tomorrow. During the event, industry bodies Oil & Gas UK and Decom North Sea announced plans to work together more on decommissioning in a partnership expected to start to take effect early next year.
Oonagh Werngren, Oil & Gas UK’s operations director, said: “The survey confirms there are a small number of major decommissioning projects under way with well plugging and abandonment activities representing the largest category of expenditure with over 1200 wells scheduled for work over the next decade."
This year’s survey has been expanded to include analysis of the oil price impact on decommissioning and information about the cost per tonne for activities involved in making sure facilities are safe for removal such as cleaning, freeing equipment of hydrocarbons, disconnection and physical isolation.
This year's Insight report also includes a deeper analysis of floating, production, storage and offloading vessels (FPSO) decommissioning projects.
Last week, guidance to improve the efficiency of inspection and maintenance activities in late-life asset management and decommissioning was published, as well as a joint Oil & Gas UK and Decom North Sea report outlining good practice in bringing into the UK market new solutions which have the potential to deliver cost reductions and manage activity more effectively.
Meanwhile, Decom North Sea's AGM last night saw five new board directors elected and five directors re-elected from across a range of sectors within the oil and gas industry.
New directors have been named as Alistair Hope, Alan Edwards, Sebastiaan Pauwels, Robert McCaig and Gerard Lubbinge, whilst those who have been re-elected as directors to the board are Pamela Ogilvie, Tom Leeson, Murdo MacIver, Roy Aspden and David Dent.
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