Decommissioning Insight 2017

1. Foreword Oil & Gas UK’s 2017 Decommissioning Insight captures an even broader picture of the decommissioning opportunities across the North Sea in Norway, Denmark and The Netherlands, as well as a focus on what the UK will offer between 2017 and 2025. We hope this further expands the information available to operators planning to decommission assets across the basin and assists supply chain companies in understanding the future demand for their services and expertise within a wider North Sea context. Our report shows the UK Continental Shelf (UKCS) is the largest decommissioning market in the North Sea, with annual decommissioning expenditure in 2016 amounting to £1.2 billion. Over the next five years, the annual expenditure profile is forecast to remain consistent at £1.7-£2 billion per year, indicating that there is not a rush to decommission despite the downturn. Decommissioning will represent around 11 per cent of total expenditure in the basin this year, compared to 2 per cent in 2010. Looking ahead, £17 billion is forecast to be spent on UKCS decommissioning between now and 2025, which is in line with the trends we observed in the 2016 report. The forecast shows that decommissioning activity on the UKCS is greater than for the other three countries in the report, reflecting the total amount of infrastructure in the basin and the fact that an increasing number of mature assets are naturally coming to the end of their productive lives. This does not mean the UKCS is entering its declining years. Indeed, since 2014, production has increased by 16 per cent following a decade of continuous decline and, by the end of the year, one-third of production will come from new fields that have started up since 2016. More generally, there are also signs that development activity on the UKCS could pick up in 2018, with decommissioning expected to take place alongside more productive activities in oil and gas production. The UK’s oil and gas industry has strived to improve its competitiveness in the face of the oil price downturn over the last few years. The increase in operational efficiency has helped to halve operating costs and boost production, as well as extend field life on many mature fields causing decommissioning to be postponed. Our industry’s desire to collaborate to deliver a more sustainable future underpins this step change in performance, and a key vehicle for promoting positive change is the pan-industry Efficiency Task Force. This initiative has promoted sector-wide sharing of guidance, tools and best practice to support efficiency improvement. It is exciting to see how many companies have helped drive progress in this area across their whole business and are now applying the same lessons to control decommissioning costs. This report provides fresh evidence of how this focused approach has benefitted well plugging and abandonment (P&A) activities, where forecast expenditure has reduced on average by 5 per cent across the UKCS with many companies achieving much greater cost reductions. With well P&A predicted to be the largest category of expenditure through to 2025, the industry is concentrating on delivering big improvements in these high cost activities, while maintaining safety and environmental standards at the highest levels. In support of this, industry Guidelines for the Abandonment of Wells are currently being updated to reflect the latest lessons and best practices from around the world. Our collective experience shows we are doing the right things now to deliver an efficient and evolving decommissioning sector, where operators and their contractors work together to drive continuous self-improvement. Industry is committed to working closely with its regulators and the government to reach the shared target of a 35 per cent reduction in the total cost of decommissioning on the UKCS, and good progress is already being achieved.

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