Cost of UKCS oil and gas decommissioning continues to fall

Oil & Gas Division
,
3 Jul 2019

The estimated cost of decommissioning the UKCS’s remaining oil and gas infrastructure is continuing to reduce, according to the latest analysis by the Oil and Gas Authority (OGA).

Insights from the forthcoming ‘UKCS Decommissioning Cost Estimate 2019’ report, demonstrating the progressive downward trend, were shared by the OGA’s Head of Decommissioning, Nils Cohrs, at an Oil & Gas UK business breakfast on decommissioning.

The latest analysis shows strong progress towards the shared objective of industry and government to reduce decommissioning costs by at least 35%. The findings include:

2019 Decommissioning Cost Estimate (2019 inventory, 2018 prices):

  • Estimated (P50) decommissioning costs have reduced to £51 billion in 2019, compared to £59.7 billion in 2017, despite including more assets and infrastructure than in the 2017 inventory.

2019 “Like-for-like” Decommissioning Cost Estimate (2017 inventory and prices). The cost reduction target is based on this ‘Like-for-Like number.

  • Comparing the same inventory as 2017, estimated costs have reduced significantly by 17% to £49 billion.

The reduction has been primarily driven by continued improvement in planning and execution practices, leading to reductions in the estimated cost of:

  • Well plug and abandonment (P&A) in the Northern North Sea (NNS) and Central North Sea (CNS)
  • Platform running costs in the NNS
  • Platform and subsea infrastructure removals in the NNS and CNS
  • Reduced contingency associated with improved estimating definition

Nils Cohrs explained: “It’s really good news that industry is now half way towards the collective target in just two years. Better capability and experience is providing greater certainty of actual UK decommissioning costs with several operators already achieving significant cost savings through adopting different approaches, learning and sharing with others, and challenging previous norms. The supply chain is also bringing new solutions to the market in terms of pricing structures, business models and technology.”

The full analysis will be available in the UKCS Decommissioning Cost Estimate 2019 Report, which will be published in July 2019.

The interactive learning microsite continues to promote late life and decommissioning learnings and provides a great snapshot of some of this innovative thinking.