Oil & Gas UK Activity Survey 2016

ACTIVITY SURVEY 2016

5.5 Decommissioning Although decommissioning on the UKCS is still in its infancy, it is becoming an increasingly significant area of the business as many fields are now approaching maturity to the point of cessation of production. Through to 2055, total expected decommissioning spend on sanctioned assets is in the region of £50 billion. This demonstrates the scale of the opportunity for the UK supply chain to further diversify into this expanding market. In 2015, 21 fields ceased production on the UKCS compared with 14 anticipated at the start of the year. A further 80 fields are expected to cease production over the next five years, reflecting the worsening expectations around market conditions over the remainder of the decade. In total, this is equal to almost 30 per cent of the total number of fields currently in production and is a 20 per cent increase on the number forecast 12 months ago. It is possible that this number could rise as companies continue to review their business plans in light of the current market environment. The production capacity of these fields is relatively low, with most having long since fallen off peak production (three quarters produced less than onemillion boe in 2015). However, a number are considered to be infrastructure ‘hubs’, and fields upstream depend on these hubs to export the hydrocarbons they produce. The interdependence of certain high value pieces of infrastructure is a consistent theme throughout every region of the UKCS and their decommissioning risks triggering a ‘domino effect’, where one field’s closure could have a knock-on effect on fields in the same area that rely on its infrastructure as an export route. Although the number of fields that ceased production last year was greater than anticipated, there were also a number of fields where cessation of production was originally planned for 2015 but has been deferred into 2016 and 2017. Again, this reflects the capital constraints on the UKCS where some companies would prefer to operate assets at a loss in the short term rather than bear the major capital expense of decommissioning. This situation potentially increases the opportunity to open up a new market for enhanced late-life field management to maximise economic recovery in the years leading up to cessation of production.

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