Current projections indicate around £27 billion will be spent on UK offshore decommissioning over the next 40 years, of which £9.2 billion will be spent over this next decade, according to a 2010 Decommissioning Insight brochure presented at the conference by Robert Harris-Deans, an economic analyst with Oil & Gas UK.
Decommissioning expenditure is expected to rise from around £0.5 billion in 2011 through to £1 billion by 2015 and continue at that level through the remainder of this decade. Some £3.8 billion is to be spent in the next five years and £5.4 billion 2016-2020.
Over this decade the number of installations commencing decommissioning will peak 2015-17, however the associated expenditure will be phased over the next decade, representing a more gradual growth in activity. Of the 259 field clusters currently in production across the UKCS, it is expected 144 fields may commence decommissioning by 2020. In contrast it is anticipated that new investment could result in an additional 73 new developments coming onstream over the next decade, demonstrating the future potential of the basin.
According to Harris-Deans, decommissioning dates will remain uncertain. For many fields they have moved out over the last decade in response to higher oil prices, increased recovery and the tieback of nearby developments. However, the latest signs are that this trend is slowing down, particularly for fields scheduled to cease production within the next five years.
‘Total costs of [UK offshore] decommissioning have more than doubled over the last five years from £11 billion to £27 billion.’ Robert Harris-Deans, Oil & GasUK ‘Total costs of decommissioning have more than doubled over the last five years from £11 billion to £27 billion,’ he explained. ‘Whilst this reflects the general cost trend over the period, the total cost has also risen through the addition of new fields coming onstream over the last five years and is compounded by the immaturity of the decommissioning market.’
Decommissioning costs and imings vary widely depending on factors such as water depth, type, size and weight of structure, complexity, age of the installation and the number of wells, he added. Large platforms with extensive topsides and concrete or steel jackets in deep water will involve substantially more work and expense than a steel gas platform found in shallow water. Consequently the average cost of decommissioning an installation in the central and northern North Sea is around £65 million, in comparison to subsea and southern North Sea installations which average £30 million and £15 million respectively.
According to Harris-Deans’ estimates, the largest market disciplines over the next decade will be jacket removal (£1.4 billion), topside removal (£1.5 billion), wells plugging and abandonment or P&A £1.5 billion) and operations (£1.3 billion). Combined, these four market segments will account for over 65% of forecast decommissioning expenditure prior to 2020. It is expected that 284 installations, subsea structures and interfield pipelines from 144 fields may be ready to be decommissioned over the next decade. Similarly, up to 940 wells could be decommissioned over the same period.
Over the next decade there will be a significant amount of decommissioning activity in the southern North Sea, with around 122 installations (around 43% of all installations to be decommissioned in this period) potentially being decommissioned by 2020. Decommissioning projects are typically smaller and less complex than those found in the central and northern North Sea, therefore the cumulative spend of these projects is only £1.8 billion contrasting with the 82 installations which account for just over £5 billion of costs in the central and northern North Sea. Subsea and pipelines will make up £1.7 billion from 65 installations being decommissioned across the North Sea.
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