UKCS Decommissioning Cost Estimate 2022

In August 2022, the NSTA published a new cost estimate for offshore oil and gas decommissioning in the UK Continental Shelf (UKCS).

The total estimated cost of decommissioning UKCS upstream oil and gas infrastructure fell by £1.5bn (2%) to £44.5bn in 2021 – contributing to a total cut of £15bn (25%) since 2017, when the NSTA introduced a baseline estimate of £59.7bn and set a target of reducing costs by 35% to £39bn by end-2022.

The highly ambitious 35% target was always intended to be challenging and the significant savings already delivered greatly benefit companies, which can invest more in production and emissions reduction projects, and taxpayers by reducing the cost of decommissioning tax reliefs to the Exchequer.

Industry made swift progress in the first two years of the target, cutting the estimate by 17%, and while that has slowed, partly due to the logistical and economic pressures of the Covid-19 pandemic, progress has continued.

Importantly, the scale of reductions to the estimate is reflected in the final costs of completed projects, which are on average 20-25% lower than initially predicted for the period 2017-21.

In 2021, decommissioning expenditure totalled £1.2bn, lower than the forecast £1.4bn, due to improved project execution and Covid-related deferrals of activity. This was a sizeable investment in the face of unprecedented logistical and economic pressures, and points to industry’s determination to carry out planned work and meet its decommissioning obligations.

Decommissioning spend is expected to ramp up to a peak of more than £2.5bn per year over the next two decades, offering a long-term opportunity for the supply chain to develop cost-efficient services and win more work overseas.

The report can be downloaded below