Cost of oil and gas decommissioning drops

The estimated cost of decommissioning the oil and gas infrastructure in the UK Continental Shelf has decreased by £4 billion in the last year, new figures show.

The 2018 estimated decommissioning cost from 2017 onwards has dropped to £55.7 billion in 2016 prices, according to the latest Oil and Gas Authority (OGA) report.

This is 7% down from a 2017 estimate of total decommissioning costs from 2017 onwards of £59.7 billion in 2016 prices.

Industry experts said the report shows industry's progress towards the target of safely decommissioning offshore oil and gas infrastructure for less than £39 billion (in 2016 prices).

Estimated decommissioning costs from 2018 onwards are also lower, at £58 billion in 2017 prices, despite including more assets and infrastructure than the previous year.

Gunther Newcombe, OGA director of operations, said: “The tripartite relationship between government, the OGA and industry is working well together. It's very pleasing to see industry make real progress towards the decommissioning cost reduction target set with them. However, costs still need to reduce further and industry must keep focused.

“The OGA is sharing some of the great examples we're seeing of individual companies thinking differently to save time and cost.

“Companies executing decommissioning programmes have made significant efficiencies in well plug and abandonment costs. In the Northern North Sea, platform running costs have substantially reduced through better optimisation of late-life and warm and cold phases.”

The report said a key contributor to the decrease is that companies are gaining valuable real practical experience in what is still a relatively immature activity.

Alongside the 2018 Decommissioning Cost Estimate Report, the OGA has launched an interactive learning platform to continue to promote learning about decommissioning.

Terri King, ConocoPhillips UK president and chair of the MER UK Decommissioning Task Force, said: “This report demonstrates a clear downward trend in expenditure and gives us greater certainty of our actual UK decommissioning costs.

“The OGA benchmarks and dashboards are now providing good challenging cost forecast information and, with the insights gained from the Asset Stewardship data, there is now the opportunity to identify further savings.

“One of the priorities of the Decommissioning Task Force is to enhance industry understanding of current policies, legislation and related guidance and to share examples of good practice and cost-effective compliance.

“Over the past year, we have seen a significant amount of transparency, collaboration and sharing of lessons learned across the industry, which all plays an essential part in the cost drive and the successful delivery of the UK decommissioning strategy."