UK decommissioning costs too high: regulator
The Oil & Gas Authority’s (OGA) report on decommissioning costs show estimates falling from the original £59.7bn ($82bn) to £46bn. But reductions have begun to slow and the target of £39bn, which the OGA set in 2017, will be missed unless the pace picks up, it said July 7.
This year’s 4% reduction contributes to a total cut of 23%, in line with what is needed to cut the total cost by 35%. The next 20 years is when most decommissioning will take place and when the reductions must be made, it said.
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The paper reduction has been matched by a 20% cut in the costs of completed decommissioning projects. Actual decommissioning expenditure in 2020 was £409mn lower than estimated the previous year, in comparison to a £170mn reduction in 2019 and £432mn in 2018. The 2020 reductions were largely due to deferral of activity as a result of COVID-19 and the low commodity price.
The OGA’s recently-published Decommissioning Strategy warns that the industry must change its commercial practices to prevent higher costs, focusing on four main strands to achieve savings: planning for decommissioning; commercial transformation; supporting energy transition from late life into decommissioning; and technology, processes and guidance.
Well decommissioning alone represents 45% of the total cost estimate and removals for a further 25%; and these two categories account for more than £10bn of the overall savings to date.