Offshore staff
OSLO, Norway – Decommissioning expenditure could increase with few profitable investment alternatives in prospect at current oil prices, according to Rystad Energy.
The consultant estimates the value of global decommissioning projects between now and 2024 at potentially $42 billion.
Offshore Northwest Europe, where the average age of production facilities is said to be 25 years, the market could grow by 20% annually through 2022 if oil prices do not pick up substantially, Rystad claimed, helped by presently favorable service contract prices.
Around 15% of North Sea assets have been decommissioned to date, it adds, but over the coming five years 23 assets on average could cease production each year.
The UK will likely lead with nearly 80% of total Northwest European decommissioning in the next five years, followed by Norway with 14% and Denmark with 4%, with the total bill for removal projects in the region for that period estimated at around $17 billion.
Rystad assesses decommissioning costs in the US for the same period at $5.7 billion.
The UK’s dominance of the market is due to its rapidly maturing production, with close to 80% of the oil and gas assets having produced more than 75% of their resources.
Those driving the market in the region include the Brent, Ninian and Thistle fields in the UK northern North Sea and Gyda in the Norwegian southern sector.
Shell’s Brent project could be the single largest complex ever decommissioned globally, Rystad suggested, incurring an outlay of nearly $3 billion over the coming decade. Ninian and Gyda present contracting opportunities worth nearly $2 billion in total.
If decommissioning spend does rise, that may limit operators’ prospects for investing in exploration, development and enhanced oil recovery projects. According to the consultant, Shell, Total, Repsol and Premier Oil are set to assign 10% or more of their North Sea spend in the next five years to decommissioning.
P&A of wells will likely account for 45% of total decommissioning costs over this period, with platform wells representing around 65% of the total wells to be abandoned, the rest being subsea wells.
But subsea wells will be the most expensive, as these cost on average $11 million each to abandon, Rystad said, compared with $5 million for an average platform well.
Overall, the consultant expects more than 2,500 oil and gas wells to be decommissioned in North Sea over the coming decade, of which 1,500 will be in UK waters.
And nearly 300,000 metric tons (330,693 tons) of topsides look set to be removed from UK fields in the next five years, with around 50 topsides decommissioned, at an average cost of $5,300 per metric ton.
In additionally, almost 100,000 metric tons (110,231 tons) of substructures will likely be removed in UK waters.
05/25/2020
