Efficiency drive could hit dismantling

Higher oil prices and industry’s “relentless focus” on efficiency have pushed decommissioning projects further into the future.

An Oil and Gas UK (OGUK) report concluded the pace of UK North Sea dismantling will be slower over the next decade than previously forecast.

In its 2018 Decommissioning Insight, the industry body estimated North Sea dismantling expenditure would hit £15.3 billion over the coming decade.

The figure represents a reduction of 20%, or £4bn, compared with predictions made in last year’s study.

The report, presented to industry leaders at the Offshore Decommissioning Conference at Fairmont St Andrews, added savings identified over the last 12 months suggested the industry was capable of achieving its cost reduction goals.

In June 2017, the Oil and Gas Authority revealed £59.7bn would have to be spent on decom, but said it would strive to trim the bill to £39.9bn or less.

Realising that objective will be key to unlocking global markets, OGUK said.

The UK continental shelf is the world’s most mature oil province, giving the domestic supply chain a “first-mover advantage” over rival basins.

The global decommissioning market is worth more than £60bn over the next decade and companies which show “mastery” will be well positioned to capitalise, OGUK said.

The organisation said £1.5bn per year would be spent on dismantling over the coming decade in the UK, down from previous forecasts of £1.8bn.

Better investment conditions and the sector’s efficiency drive have attracted a wave of fresh interest from privateequity-backed newcomers, it said.

That is spurring the deferral of dismantling work.

OGUK decom manager Joe Leask said the UK was continuously expanding its knowledge and getting more efficient.

“The efficiency improvements we see in decommissioning reflect what is being achieved across the oil and gas life cycle and attracting fresh investment in the basin, to extend the life of many assets and increase economic recovery,” Mr Leask said.

“The sector’s cost leadership demonstrates we have the capacity and capability to deliver the 35% cost reduction target set by the OGA.

“Meeting and then beating this target will be key to unlocking the global market, allowing the UK to reinforce its position as world-leading.”

Picture: Kim Cessford. From left: Paul Wheelhouse, Minister for Energy; Deirdre Michie, chief executive of Oil and Gas UK and John Warrender, chief executive of Decom North Sea at the Fairmont, St Andrews.