Shutting down obsolete North Sea energy installations is a business opportunity worth more than £20 billion over the next decade, according to calculations by Offshore Energies UK (OEUK).
OEUK’s Decommissioning Insight 2023 report launched today [Tuesday, November 21, 2023] offers a unique overview of the challenges and market opportunities in the sector which involve some of the biggest and most complex engineering projects ever faced in the North Sea.
Its authoritative analysis provides a focal point of discussions at OEUK’s Offshore Decommissioning Conference being held in St Andrews, Scotland, this week.
The report gives a detailed overview of requirements for decommissioning and recycling hundreds of oil and gas platforms in UK, Norwegian, Danish and Dutch waters.
Even with the latest round of new licences issued this Autumn, North Sea oil and gas production is declining by 7% a year. There are currently 283 active oil and gas fields in the North Sea. By 2030, 180 will have ceased production. Closing them without ongoing management of decline through new licensed production will mean a loss of homegrown energy which provides security and adds value to the economy.
Decommissioning accounted for 12% of total oil and gas expenditure in the UK continental shelf in 2022, but in the right fiscal environment this could increase to 25% in 2032 and overtake capital expenditure by 2040, the report claims.
Specialist UK organisations are well positioned to provide a global centre of expertise in this sector as demand for decommissioning services grows around the world, but innovation and resilience will be vital.
The Insight report also points out that more than 1,000 North Sea wells will be sealed between now and 2027 – with 100,000 tons of surface and seabed structures removed in 2026 alone. At the same time, around 200 new large scale wind turbines are scheduled to be installed, representing a considerable infrastructure and workforce challenge.
“This is a £20 billion business opportunity for our world-class decommissioning industry, and it is vital it is handled properly so we do not lose the work to overseas competitors,” says Ricky Thomson, OEUK decommissioning manager and author of the report.
“There are dramatic opportunities for growth, but we need proper planning, and not just of hugely complex individual projects, but also of the specialised equipment and the efficient deployment of our highly skilled workforce.
“For the UK supply chain to work with maximum efficiency, it needs to be able to accurately forecast demand for its services, in both oil and gas and across low carbon technologies, such as offshore wind and carbon capture.
“Government support will be needed to maintain the UK’s involvement in the sector. Thousands of jobs and contracts for billions of pounds’ worth of highly skilled work are at stake.”
The Insight report also highlights the knock-on damaging impact of the Energy Profits Levy and other economic factors. The tax has led to North Sea oil and gas operators paying a 75% headline tax rate and affected decommissioning progress as the cost of shutting down old installations is not treated as an allowable expense.
OEUK is engaged in continuing discussions with the Treasury to highlight the impact of the Levy on North Sea investment, the uncertainty it has created about final production dates for various oil and gas fields, and the funding of the decommissioning process.
Conference delegates will share global insights into the handling of decommissioning projects from Britain and elsewhere about how specific engineering problems and other challenges have been overcome.