UK Offshore Group Issues Decommissioning Analysis
A report published November 15 by industry group Oil & Gas UK (OGUK) Decommissioning Insight shows that UK and Norwegian decommissioning is still an emerging market, despite low oil prices continuing to challenge the economics of the more mature offshore assets around the North Sea.
Decommissioning Insight forecasts a gradual but steady rise in offshore oil and gas decommissioning in the UK and Norway over the next ten years. Last year the total for the two was £2.1bn ($2.62bn), compared with just under £1.6bn in 2014.
OGUK’s upstream policy director Mike Tholen said: “With low oil prices continuing, you might expect decommissioning to be a key focus for the sector in the years ahead, however we are not witnessing a rush to decommission.”
There is no uniform pattern of behaviour. The report finds that: “Some companies are deferring cessation of production as field life has been extended by sustained efficiency improvements; others are delaying activity due to cash-flow constraints; while elsewhere, companies may be expediting decommissioning to take advantage of falling costs in the current downturn.”
The total amount forecast to be spent on decommissioning on the UK Continental Shelf (UKCS) between now and 2025 is £17.6bn, up from £16.9bn for 2015-2024. That will involve taking ashore 1.1mn metric tons of materials for recycling over the period.
Mike Tholen
(Source: OGUK)
OGUK is also lobbying government for lower tax rates in the upcoming Autumn Statement, a mini-Budget, which will be the first one from Conservative finance minister Philip Hammond.
OGUK sees another 20bn barrels of oil equivalent still out there under the UK sector and maximising the economic recovery – the UK goal, as set out in the influential Wood Report of 2014 – means ideally decommissioning an asset only when there is nothing more that it can recover. Pipelines will be among the last things to go, with operators having to keep them serviceable for third parties even if the fields they were built to serve are depleted.
William Powell