UK North Sea decommissioning costs fall 25% to $54bn

The cost of decommissioning oil and gas infrastructure in the UK North Sea has fallen by 25% in the past five years, according to the industry regulator.

The North Sea Transition Authority (NSTA), formerly known as the Oil and Gas Authority, said the industry had managed to slash around £15bn ($18.2bn) to £44.5bn ($54bn) from the total cost since 2017.

The NSTA’s initial aim, based on 2016 prices, was for a 35% reduction by the end of 2022 compared with 2017 levels. Industry made swift progress in the first two years of the target, cutting the estimate by 17%.

However, NSTA said that the pace of decline has slowed in the past two years owing to the logistical and economic pressures of the covid pandemic. Total spending on decommissioning work last year was just £1.2bn ($1.46bn), or 2%, down from the forecast of £1.4bn ($1.7bn).

“The highly ambitious 35% target was always intended to be challenging, and the significant savings already delivered greatly benefit companies, which can invest more in production and emissions reduction projects, and taxpayers by reducing the cost of decommissioning tax reliefs to the Exchequer,” NTSA said.

The regulator noted that decommissioning spend is expected to ramp up to a peak of more than £2.5bn per year over the next two decades, but improving performance on costs is likely to be challenging in the short term due to market inflation and competition for resources from other energy sectors.

Pauline Innes, NSTA head of decommissioning, stated: “Delivering potential savings of £15bn during a short period marked by extremely turbulent economic conditions should give the sector confidence as it looks to the future.  

“The decommissioning market is worth tens of billions of pounds in the UK alone. Our industry is demonstrating that it can complete projects safely, efficiently and economically in the North Sea, and that places it in a strong position to compete for what is a big international prize. 

“The sector must not lose focus and allow inflation to drive up prices. Now is the time to build on the progress already made.”

Adis Ajdin

Adis is an experienced news reporter with a background in finance, media and education. He has written across the spectrum of offshore energy and ocean industries for many years and is a member of International Federation of Journalists. Previously he had written for Navingo media group titles including Offshore Energy, Subsea World News and Marine Energy.

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