Cost estimate- Decommissioning and Repurposing

The North Sea Transition Authority (NSTA) published its UKCS Decommissioning Cost and Performance Update on 16 July 2024. It shows that operators are expected to spend about £24bn on decommissioning between 2023 and 2032, up £3bn on the forecast for the same period in last year’s report. The overall estimate for decommissioning remaining oil and gas infrastructure is £40bn, in constant 2021 prices.

The cost estimate was reduced by 25%, or £15 billion, between 2017 and 2022. These savings free up money which companies can invest in new production and emissions reduction projects. The cost of decommissioning tax reliefs to the Exchequer is also reduced.

This impressive progress was due to industry’s ability to learn from experience, share lessons and execute projects more efficiently, aided by the deployment of new technologies and techniques. Operators also improved the accuracy of their forecasts. However, further improvements have been difficult to achieve as much of the low-hanging fruit has been picked.

With more than half of the overall cost estimate to be spent between 2023 and 2032, industry’s near-term actions will set the direction for the sector. Embedding good practice now and striking a balance between supply chain capacity and demand for its services is crucial. Industry must maintain its focus on performance, collaborate effectively and urgently commit to timely decommissioning planning to achieve further cost-efficiencies.

The NSTA is using its regulatory powers to hold operators to account on their well decommissioning obligations. Repeated delays to well decommissioning work, competition for rigs from overseas and cost pressures are pushing up the estimate. Operators can keep their costs under control and meet their regulatory obligations by engaging early with the UK’s world-leading supply chain, providing details of their inactive wells and, most importantly, placing contracts to get the work done.

The NSTA is also spearheading a project to identify which UKCS wells will be ready for decommissioning between 2026 to 2030 and assess the supply chain capacity required to undertake the work in a timely and cost-effective manner. These insights will guide our efforts to promote and facilitate well decommissioning campaigns involving multiple operators and fields, an approach which can save time and money.

Furthermore, we have introduced new key performance indicators and benchmarks – developed with industry and underpinned by the collection of new datasets, including the length of time taken to complete specific tasks, the number of crew members employed, and the types of vessels used.

With spending to peak at £2.5bn per year in the current decade, decommissioning can ensure that the UK’s world-leading supply chain is equipped to help operators clean up their oil and gas infrastructure over the next 50 years. This will reinforce the UK supply chain’s reputation as the world leader in decommissioning. The same supply chain will support the carbon storage sector, which will rely on many of the same resources.