Decommissioning Insight 2016 - Oil & Gas UK

DECOMMISSIONING INSIGHT REPORT 2016

2. Executive Summary

Decommissioning Overview • This report captures data from186 decommissioning projects 1 across theUK (153) andNorwegian (33) Continental Shelves. Fifty-two of these projects are new to this year’s report due to the survey timeframe shifting to 2016 to 2025 2 ; some projects being brought forward in response to the low oil price environment; or estimates only now becoming available. • Seventeen projects have been postponed since last year’s survey to outside the timeframe as operators have successfully extended field life. • Of the 134 existing projects included in both this year’s and last year’s survey, there have been some movements in the timing of specific decommissioning activities within project scopes. For example, one company might accelerate a well plugging and abandonment (P&A) campaign to take advantage of falling rig rates during the current downturn, while another defers this activity due to cash-flow constraints. • On the UK Continental Shelf (UKCS), 94 per cent of the 153 projects in this region do not yet have firm timings and are still in the early planning stages. This involves outlining the scope of the activities to be undertaken and carrying out feasibility studies that will ultimately be influenced by changing market conditions over time. • Sustained efficiency improvements and cost reductions could defer cessation of production (CoP) and therefore push back decommissioning in some cases, while the low oil price environment and access to infrastructure issues might expedite it in other cases. For example, over the last 12 months, 33 assets within the timeframe on the UKCS have deferred CoP, 72 have brought forward CoP, while for 135 CoP remains unchanged. Current Activity • In 2015, £1 billion was spent on decommissioning on the Norwegian Continental Shelf and £1.1 billion on the UKCS, compared with £770 million and £800 million 3 in 2014, respectively 4 . • The decommissioning market has expanded from 2 per cent of total industry expenditure in 2010 in both the UK and Norwegian Continental Shelves to 5 per cent of total expenditure in 2015. • Annual expenditure on decommissioning is expected to reach around £2 billion on the UKCS by 2017 making up 12 per cent of total expenditure, but it is likely to remain close to £1 billion on the Norwegian Continental Shelf and 5 per cent of total expenditure. 1 Project is defined by the operator and can range from a single well for P&A to multi-platforms. 2 The 2015 survey covers the timeframe 2015 to 2024 and the 2016 survey covers the timeframe 2016 to 2025. 3 This survey covers data from end-of-field-life decommissioning projects and does not include expenditure of activity associated with mid-life decommissioning. 4 Figures for Norway are taken from the Norwegian Petroleum Directorate. See www.npd.no/en • Looking across the breadth of activity, there is more evidence of projects being brought forward in the central and northern North Sea than in the southern North Sea, Irish Sea and Norwegian Continental Shelf. • The decommissioning market is an emerging sector across the UK and Norwegian Continental Shelves. • Twelve operators carried out decommissioning activity across these regions in 2015.

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