North Sea oil and gas decommissioning to cost £20bn in next decade

Licenses to explore and potentially develop almost 900 new locations opened last month.

North Sea oil and gas decommissioning predicted to cost £20bn in next decade by Offshore Energies UK

More than 2,000 North Sea wells involved in oil and gas extraction are to be decommissioned at a cost of around £20bn over the next decade, according to industry forecasts.  

Offshore Energies UK (OEUK) published its latest Decommissioning Insight report on Tuesday, November 22.

It comes as international oil and gas companies compete to develop almost 900 new locations in the North Sea – the UK’s 33rd offshore oil and gas licensing round opened in October.

Decommissioning is the process of withdrawing offshore energy infrastructure from use once it’s no longer needed or at the end of its lifecycle.

The report finds UK decommissioning is expanding fast and predicts a surge in activity over the next three to four years. 

It said the sector will continue growing as other emerging offshore energy technologies, like offshore wind farms, also require the service.  

It is estimated around 2,100 North Sea wells will be decommissioned over the next decade – around 200 per year – at an average cost of £7.8m per well.    

In 2021, a tenth of UKCS oil and gas expenditure went on decommissioning – a proportion which has risen to 14% in 2022 and is set to rise to 19% by 2031. 

Over the next ten years, expenditure on decommissioning is predicted to total £19.7bn, with well decommissioning comprising nearly half of this spend. 

Over 75% of total decommissioning spend will be within the central and northern parts of the North Sea.

The report added that the growth in other renewable energies, such as offshore wind, could cause bottlenecks in demand for decommissioning services.

It said that it means the offshore wind, carbon capture and storage, and oil and gas sectors will need to work together and be transparent about planned projects to make sure the opportunity is properly managed.  

 OEUK decommissioning manager Ricky Thomson said: “The UK’s decommissioning sector is snowballing and will continue growing for years to come.   

“But this poses a challenge as well as an opportunity. The growth of renewables and demand for decommissioning services and expertise will create increasing pressure for resources. 

“This is a great problem to have and it’s vital this opportunity is properly managed across the sector so that UK firms can capture the lion’s share of this £20bn opportunity. 

“With the right support from government and action from the industry, the UK could make major gains from decommissioning, as well as retain thousands of jobs for this growing sector.”

Last month, climate activists from Just Stop Oil have been carrying out mass disruption events to coincide with the launch of the new oil and gas licensing round which they have called a “genocidal death project”.

The North Sea Transition Authority (NSTA) said all developments undergo environmental and emissions assessments.

Any new oil and gas production resulting from new licences would be “aligned with the UK’s climate objective of reaching Net Zero by 2050”, the Government said.

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