The Press and Journal (Aberdeen and Aberdeenshire)
NSTA still confident of huge cut in cost of decommissioning
The North Sea Transition Authority (NSTA) has set a new cost target for decommissioning in the North Sea – as the original goal looks set to be missed.
Under the new target, the industry’s total bill for cleaning up the North Sea will be £37 billion from next year, which is to be reduced by 10% by the end of 2028 to £33.3bn.
That’s a substantial drop from the previous estimate, but the regulator says it is a more accurate picture.
UK taxpayers provide rebates on oil and gas firms’ huge costs for decommissioning, so a target was set in 2017 to reduce the bill by 35%, from £59.7bn to £39bn, based on 2016 prices, by the end of 2022.
By the end of 2021 the North Sea had managed a
25% cut to £44.5bn, according to NSTA data – a cut of £15bn.
That work has been praised, but latterly the pace has been glacial: the largest yearly reduction
since 2019 being a 4% drop, making the original goal looking exceedingly unlikely to be achieved.
The NSTA said it is still committed to the 35% goal, which it will report results on next year, but has now set the new goal from 2023 to 2028.
The NSTA said the new target has been set by three factors: pricing, inventory, and estimates.
Pricing for contracts is now based on 2021 data, rather than from 2016.
Inventory, similarly, is now more accurate, with a clearer picture on the amount of oil and gas assets still to be removed right now, rather than estimates of what this looked like back in 2017.
Finally, the regulator said it is moving from a “probabilistic” to a “deterministic” estimate: in essence, moving from an unclear cost estimate, with risk involved, to a clearer picture of the situation as it now stands.
Pauline Innes, head of decommissioning at the NSTA, said: “In 2022 we’ve got far greater confidence in the numbers from operators in our stewardship survey, so we’ve changed the calculation methodology and we’re no longer using a probabilistic one, but we’re using what we’re calling our best estimate so that brings us to the start of a new cost target.