Offshore decommissioning sector set for huge growth

As was the case just a few years ago, the offshore decommissioning sector stands out as the offshore sector set for rapid growth according to Rystad Energy.

The Covid-19 pandemic and low oil prices will see operators increase spending on decommissioning, having already slashed exploration and production budgets, with Rystad predicting decommissioning projects to total around $42bn through to 2024. Last year, the sector was valued at around $6.2bn in 2019.

“Only about 15% of North Sea assets have been decommissioned to date, but in the coming five years we expect an average of 23 assets to cease production annually. The UK is poised to lead the way with nearly 80% of total estimated expenditure on Northwest European decommissioning in the next five years, followed by Norway with 14% and Denmark with 4%,” Rystad predicts.

It is estimated the pool of removal projects in the region to total around $17bn, compared to the US at around $5.7bn.

Rystad predicts plugging and abandonment of wells to make up about 45% of decommissioning costs for the period, followed by platform removals at almost 20%.

Overall, more than 2,500 oil and gas wells are expected to be decommissioned across the North Sea in the coming decade, Rystad says, of which 1,500 are in the UK.

“While decommissioning is becoming a pressing concern for North Sea operators, the prevailing low-price environment presents an opportunity for driving down costs. For instance, after the oil price slump of 2014, rig and vessel rates declined by 30% to 40%. We expect rig and vessel rates to exhibit a downward trend this time as well, with declines likely lasting until 2022,” Sumit Yadev, energy service analyst at Rystad Energy, predicts.

In further bad news for the offshore drilling sector, Rystad says the increased spending on decommissioning may limit the room for operators to invest in exploration, development and enhanced oil recovery projects.

Grant Rowles

Grant spent nine years at Informa Group based in London, Sydney, Hong Kong and Singapore. He gained strong management experience in publishing, conferences and awards schemes in the shipping and legal areas, working on a number of titles including Lloyd's List. In 2009 Grant joined Seatrade responsible for the commercial development of Seatrade’s Asia products. In 2012, with Sam Chambers, he co-founded Asia Shipping Media.


  1. Removing these old structures is expensive work. All of that capital deployed toward dismantling nonproductive sites, vs. reinvesting in production and distribution of oil? If I were a shareholder, I would not be at all pleased.

    1. You can try to change international conventions and the law. But it is not cheap.

Back to top button