Breaking up wells in the North Sea could cost £20bn

More than 2,000 oil and gas wells are due to be decommissioned in the North Sea over the next decade at a cost of around £20bn.

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

Offshore Energies UK’s (OEUK) annual Decommissioning Insight report has found that a number of decommissioning projects in the North Sea are being anticipated in an increase in decommissioning activity which is expected to continue over the next three to four years.

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

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

“The UK decommissioning sector is snowballing and will continue to grow for years to come,” he said Ricky Thomson, OEUK Decommissioning Manager. “But this presents a challenge as well as an opportunity. The growth of renewable energy and the demand for decommissioning services and expertise will create increasing pressure for resources.

“This is a huge issue to address and it is vital that this opportunity is properly managed across the sector so that UK businesses can capture the lion’s share of this £20bn opportunity.

“With the right support from government and action from industry, the UK could reap huge benefits from the decommissioning, as well as retain thousands of jobs for this growing sector.”

In 2021 one tenth of UKCS oil and gas spending went to decommissioning projects. Within a year, this percentage had risen to 14% in 2022 and is expected to rise to 19% by 2031, according to the OEUK.

In a press conference, Thomson explained that much of the “substantial” increase in projected spending was due to the anticipation of work and added that the industry has achieved “fantastic” savings of 25% on its projected decommissioning bill, saying the UK is a world leader in the sector.

The majority (over 75%) of the total decommissioning expenditure is expected to be within the central North Sea and northern North Sea, with increased work likely to benefit industrial communities on adjacent coasts, particularly around Teesside, Humber, Aberdeen and Inverness.

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

However, the growth of other renewables, such as offshore wind, could cause bottlenecks in the demand for decommissioning services, the report said.

The regulator, the North Sea Transition Authority (NSTA), has challenged offshore energy companies to cut costs by an additional 10% by building projects more efficiently.

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

“This new focus will help maintain momentum and strengthen our industry’s reputation for safe, efficient and cost-effective offshore project execution.”

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

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

Earlier this month, the NSTA released more than 100 new oil and gas drilling licenses to ‘boost’ UK energy sector, despite UN warnings any plans to expand fossil fuel projects over the next decade would fall seriously out of line with ambitions to reduce greenhouse gas emissions and limit temperature rise to 1.5°C.

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