U.K. Oil & Gas Decommissioning a $26 Billion 'Opportunity'

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Decommissioning work in the U.K.'s offshore oil and gas sector will be worth £21 billion (US$26.6 billion) in the coming decade.

There is "significant opportunity" ahead for decommissioning in the U.K. Continental Shelf (UKCS) according to the country's North Sea Transition Authority (NSTA). Last year, the offshore oil and gas industry spent £1.6 billion ($2.03 billion) on decommissioning and over the five year of 2017-22, it spent £8 billion (US$10.2 billion) on decommissioning projects, according to its latest report "Decommissioning Cost and Performance Report." It noted that U.K. suppliers are in line to secure about 70% of the work associated with U.K. North Sea decommissioning projects listed in Supply Chain Action Plans (SCAPs) lodged with the NSTA last year. It found that the sector is "living up to its North Sea Transition Deal pledge to ensure at least half of spending on decommissioning projects goes to the UK supply chain, as well as meeting its legal obligation to clean and remove infrastructure once fields stop producing".

However, the NSTA noted that despite the fact that the industry has built an impressive track record of carrying out decommissioning projects "cost-efficiently and safely" due to its willingness to share learnings and data, as well as embracing new technologies and innovative commercial models, "achieving further improvements will be challenging." This is attributed to heightened demand for equipment, vessels and services from other regions and sectors, such as offshore wind--which have pushed up prices, taking the total cost estimate for decommissioning to £40 billion (US$50.7 billion).

Pauline Innes, NSTA Director of Supply Chain and Decommissioning, said: "The North Sea decommissioning sector is highly active and productive, and the industry is ideally placed to realize the massive £21 billion (US$26.6 billion) opportunity which will come its way over the next 10 years. However, operators must redouble their commitment to collaborate with the supply chain and plan even more effectively if they are to overcome challenging market conditions and remain competitive on cost. The NSTA will continue to use its powers and influence to support the industry as it strives for continuous improvement, including through the development of new benchmarks."

The findings were supported by Bob Fennell, DaRT co-chair and North Sea executive vice president at Harbour Energy (London, England), the U.K.'s largest independent oil and gas producer. "It is critical that North Sea operators work together to ensure that oil and gas assets which, at the end of their production life, cannot be repurposed to support new technologies like carbon capture and storage, are decommissioned safely and in the most cost-effective manner. Collaborating and sharing data is an important first step to providing the supply chain with the visibility and confidence they require to meet U.K. demand for such works in a timely and cost-competitive way."

Last week, the U.K. government revealed ambitious plans to rejuvenate exploration in the North Sea by committing to offer hundreds of new oil and gas licenses as part of a drive to make the country more energy-independent. The NSTA will grant the first license in the coming weeks, with more than 100 set to be approved in total. For additional information, see August 16, 2023, article--U.K. to Offer 'Hundreds' of Oil & Gas Licenses.

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