North Sea decommissioning offers up £20billion opportunity

21/11/2023

THE dismantling of old North Sea oil and gas infrastructure could be worth more than £20billion over the next decade, according to a new report released today.

Offshore Energies UK (OEUK) estimates that annual spending on decommissioning will reach £2.2billion this year – and that another £18.4billion is forecast to be needed between 2024 and 2031.

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However, another report from The North Sea Transition Authority (NSTA), the industry regulator, has warned that over 700 wells in the UKCS urgently need filled with cement and made safe amid a huge decommissioning backlog.

About 1,000 North Sea wells are expected to be sealed between now and 2027 while hundreds of thousands of tonnes of surface and seabed material has to be brought back to shore for processing. There are also more opportunities when activities in Norwegian, Danish and Dutch waters are considered.

In its Decommissioning Insight report for 2023, which is published today, OEUK said it would be important for the health of domestic supply chains to try to keep as much work as possible in the UK.

£20billion opportunity

The report highlights concerns over strains on the workforce and on availability of key equipment, such as specialised heavy lifting vessels, particularly as many large offshore wind projects are also scheduled to be built in the coming years.

Ricky Thomson, the decommissioning manager at OEUK, said fiscal uncertainty caused by government policy, such as the energy profit levy, made the forecasting of decommissioning projects more difficult.

He said: “This is a £20billion business opportunity for our world-class decommissioning industry and it is vital it is handled properly so we do not lose the work to overseas competitors.

“There are dramatic opportunities for growth, but we need proper planning, and not just of hugely complex individual projects, but also of the specialised equipment and the efficient deployment of our highly skilled workforce.

“We have a lot of work coming and the UK is a centre of excellence in this area. We need to make sure it stays like that and we can attract and retain talent in the sector.”

Meanwhile, hundreds of disused North Sea oil and gas wells must be urgently filled with cement and made safe, the regulator has told offshore energy companies.

The NSTA has written to the UK’s offshore oil and gas producers after finding they have left more than 740 disused wells without decommissioning them properly.

According to The Telegraph, Pauline Innes, the NSTA’s director of decommissioning, wrote: “I am concerned at the number of deferrals … it is apparent that a considerable number of well decommissioning activities – most of which have been deferred previously and which licensees had committed to execute in 2023 – may not be undertaken before the end of this year, and I note that more deferrals are already being sought.”

However, plugging old wells typically costs £8million a time, money many oil and gas companies are increasingly reluctant to spend. The growing backlog has prompted fears that some operators will quit the UK or go out of business, with taxpayers forced to pick up the final bill.

The NSTA’s latest Wells Insight report said the number of inactive wells needing to be properly decommissioned was at an “historical high” of 30%, three times higher than the limit set by the regulator.

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