Some 140 fields could cease production on the UK Continental Shelf over the next five years, according to research by analysts Wood Mackenzie.
The firm says high oil prices have enabled North Sea operators to extend field life and delay decommissioning time and time again, but that now the sustained low oil price means this cannot continue.
In a report, prepared for SPE Offshore Europe 2015, the firm forecasts that while a small number of decommissioning projects have been completed to date, decommissioning activity and spend are due to ramp up over the next five years, as mature fields become unviable to operate.
Wood Mackenzie forecasts that around 140 UKCS fields will cease over the next five years even if oil prices return to US$85/bbl. Around 50 might cease earlier than expected if the oil price returns to a level around US$70/bbl.
Meanwhile, just 38 new fields are expected to be brought onstream during the same period and 17 fields are expected to be sanctioned over the next five years. The result could mean a shift in spending on decommissioning.
"We expect around £54 billion (in nominal terms) will be spent on decommissioning on the UKCS and anticipate it to be completed in the early 2060s. Decommissioning spend is expected to increase by over 50% by 2019 and will overtake development spend in the same year,” says Fiona Legate, UK upstream research analyst for Wood Mackenzie. "The fields most likely to be decommissioned are uneconomic without high oil prices to justify escalating maintenance costs and declining production which are unable to support the high operating costs.”
To date, 30 fields have been abandoned on the UKCS. Decommissioning cost estimates have risen as the industry gets to grips with a new challenge as well as stricter plugging and abandonment rules have also driven up well abandonment costs," Legate says. High decommissioning costs are also high on the list for those considering buying mature assets. Wood Mackenzie suggests batch decommissioning could be a way forward, based on geographical proximity, operator or play.