Cost of UK oil and gas decommissioning is reducing

The estimated cost of decommissioning oil and gas infrastructure on the UK Continental Shelf (UKCS) has dropped from last year’s baseline, according to the Oil & Gas Authority’s latest Decommissioning cost estimate report.

According to the report, progress has been made on the target of safely decommissioning offshore oil and gas infrastructure for less than £39bn (in 2016 prices), and contains benchmarking of operators’ performance in cost reduction. This has been spurred by a shared objective of industry and government to reduce decommissioning costs by 35%.

The OGA’s assessment tracks progress since it estimated a year ago that total UKCS decommissioning costs from 2017 onwards would be £59.7bn (in 2016 prices), and identifies the following improvements:

●       In real terms, estimated costs from 2018 onwards are lower, at £58bn in 2017 prices, despite including more assets and infrastructure than the previous year.

●       On a like-for-like (scope and inflation-adjusted basis), estimated costs from 2017 have reduced significantly – by 7% to £55.7bn in 2016 prices compared to the same portfolio as last year.

A key driver of this reduction is companies’ gaining valuable real practical experience in what the OGA describes as ‘still a relatively immature activity’.

Alongside the report, the OGA has launched an interactive learning platform to continue to promote late-life and decommissioning learnings.

Speaking of the report findings, Director of Operations Gunther Newcombe at the OGA says: ‘The tripartite relationship between government, the OGA and industry is working well together. It’s very pleasing to see industry make real progress towards the decommissioning cost reduction target set with them.

He adds: ‘However, costs still need to reduce further and industry must keep focused.’