Decommissioning North Sea wells could cost £20bn

The North Sea has witnessed an increase in decommissioning projects within the last year, a trend that is expected to significantly accelerate in the next decade, according to a new industry report. 

Offshore Energies UK (OEUK)’s annual Decommissioning Insight report has found that a number of decommissioning projects in the North Sea have been brought forward in an upsurge in decommissioning activity that is expected to continue over the next three or four years.

The report estimated that 2,100 North Sea wells will be decommissioned over the next decade – about 200 per year – at an average cost of £7.8m per well.

This would bring the total cost to £20bn, an increase from last year’s estimated £16.6bn.

“The UK’s decommissioning sector is snowballing and will continue growing for years to come,” said Ricky Thomson, OEUK’s decommissioning manager. “But this poses a challenge as well as an opportunity. The growth of renewables and demand for decommissioning services and expertise will create increasing pressure for resources.

“This is a great problem to have and it’s vital this opportunity is properly managed across the sector so that UK firms can capture the lion’s share of this £20 billion opportunity.

“With the right support from Government and action from the industry, the UK could make major gains from decommissioning, as well as retain thousands of jobs for this growing sector.”

In 2021 a tenth of UKCS oil and gas expenditure went into decommissioning projects. Within a year, this proportion has risen to 14 per cent in 2022 and is set to rise to 19 per cent by 2031, according to the OEUK. 

In a press briefing, Thomson explained much of the “notable” increase in expected spending was due to work being brought forward, and added that the industry had achieved “fantastic” savings of 25 per cent on its expected decommissioning bill, saying the UK is a world leader in the sector.

The majority (over 75 per cent) of total decommissioning spending is expected to be within the central North Sea, and the northern North Sea, with the surge in work potentially benefiting industrial communities on adjacent coastlines especially around Teesside, Humber, Aberdeen and Inverness.

Decommissioning in the Irish Sea will generate more economic benefits in places like Merseyside. 

However, the growth in other renewable energies, such as offshore wind, could cause bottlenecks in demand for decommissioning services, the report says. 

The regulator, the North Sea Transition Authority (NSTA), has challenged offshore energy companies to bring down costs by a further 10 per cent by carrying out projects more efficiently.

“We have rightly praised industry for the work it has already done to save billions of pounds on decommissioning, but now is the time to press home the advantage,” said Pauline Innes, the NSTA’s head of decommissioning. 

“This new target will help keep up momentum and strengthen our industry’s reputation for safe, efficient and economical offshore project execution.”

In February 2021, an investigation revealed that North Sea oil and gas firms produce annual carbon emissions equivalent to a coal plant through flaring and venting activities. This week, the NSTA also announced it was opening an investigation into an oil and gas company for flaring and venting in the North Sea without consent.

Decommissioning work is required by law and work to remove oil and gas infrastructure from the North Sea is expected to continue until about 2070.

Earlier this month, the NSTA issued more than 100 new oil and gas drilling licences to “boost” the UK’s energy sector, despite the UN’ warnings that any plans to expand fossil fuel projects over the next decade would be severely out of line with ambitions to cut greenhouse gas emissions and limit temperature rises to 1.5°C.