UK to spend £20bn closing off 2,000 oil and gas wells in next decade, report says

Offshore Energies UK estimates 200 wells will be decommissioned every year at a cost of £7.8m each

Taqa completes the topside removal of Brae Bravo in one of the North Sea’s largest decommissioning projects. Photo: Taqa

More than 2,000 oil and gas wells are expected to be shut down in the North Sea in the next decade at a total cost of about £20 billion ($23.75 billion), an industry report has said.

In its annual Decommissioning Insight report, Offshore Energies UK says an upsurge in decommissioning activity has begun and is expected to continue over the next three years.

It estimates about 2,100 North Sea wells will be deactivated over the next decade.

OEUK says a number of decommissioning projects have been brought forward, meaning the cost has increased from an estimated £16.6 billion last year.

Ricky Thomson, OEUK’s decommissioning manager, said the sector was "snowballing" and this surge in deactivation was expected to continue for years.

“But this poses a challenge as well as an opportunity," he added. "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 £20 billion 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.”

The report says decommissioning work in the North Sea is expected to continue until about 2070.

The regulator, the North Sea Transition Authority, said the industry should expand on its progress in lowering the cost estimates for decommissioning work.

It wants the bill for all decommissioning work reduced to £33.3 billion.

“We have rightly praised industry for the work it has already done to save billions of pounds on decommissioning but now is the time to press home the advantage," said Pauline Innes, the NSTA’s head of decommissioning.

“This new target will help keep up momentum and strengthen our industry’s reputation for safe, efficient and economical offshore project execution.”

The proportion of spending on decommissioning in companies' budgets is set to rise from 14 per cent this year to 19 per cent by 2031.

More than 75 per cent of Britain's total decommissioning spending will be on wells in the central and northern North Sea.

UK Chancellor Jeremy Hunt last week announced an increase in windfall tax on North Sea oil and gas producers from 25 per cent to 35 per cent, bringing total taxes on the sector to 75 per cent, among the highest in the world.

OEUK has also warned that the growing number of oil and gas workers turning to the fast-growing offshore wind industry could create a shortage of skilled workers for decommissioning.

Oil and gas production in the North Sea, a major deepwater production hub since the 1970s, has been in steady decline since peaking at about 4.4 million barrels per day in the 1990s.