As the oil and gas sector continues to deal with the effects of COVID-19 and the collapse of commodity prices, OGUK’s 2020 Decommissioning Insight report reveals the decommissioning industry though resilient has not escaped the impact of such unprecedented conditions.
Given the major disruptions and challenges of 2020, OGUK conducted an additional interim survey of operators in June 2020 to provide deeper insight of the impact of COVID-19 on decommissioning activity. This showed that continuing market uncertainty has led to around £500 million of decommissioning expenditure previously scheduled for 2020-22 being deferred into the future.
OGUK’s supply chain and operations director, Katy Heidenreich said:
“All parts of the oil and gas business are experiencing reductions in cash flow and decommissioning is no different. We’ve seen a 30 per cent reduction in expenditure from £1.47 billion in early 2020, to around £1.08 billion but despite these pressures, the sector is in no rush to decommission.
While many projects have been able to continue, we are also expecting to see reduced activity across all areas of decommissioning over the next three years.
During 2020, our hard-pressed supply chain has demonstrated both resilience in delivering the roster of projects that have gone ahead this year, but also continual performance improvement in terms of cost and efficiency.
We remain focused on supporting our supply chain through, for example, ensuring visibility of work so that when conditions change, our industry remains competitive. The specialist skills now being developed will also help us make the most of the opportunities presented by the energy transition which include low emission decommissioning, supporting the circular economy, re-purposing facilities and contributing to CCS, hydrogen and offshore wind developments.”
The report can be found here and the findings show:
- Estimated total spend on decommissioning in 2020 is £1.1 bn still consistently around 10% of overall industry expenditure
- Decommissioning of a record two northern North Sea platforms in one year
- Forecast for 2020 shrank by 30% from £1.47 bn to £1.08 bn
- 116 wells, 260km of pipelines and 15 topsides have been decommissioned in 2020
- Well decommissioning activity at lowest level since 2016
OGUK’s annual Decommissioning Insight also provides an analysis for the wider North Sea market including Norway, the Netherlands and Denmark and the scope of this year’s report has broadened to reflect the industry’s efforts to accelerate the energy transition and embrace opportunities to support a low-carbon future.