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UK Oil Trade Faces Steep Decommissioning Invoice






The UK North Sea, one of many world’s most mature oil and fuel producing basins, will see spending on decommissioning of wells and infrastructure whole practically $24 billion (20 billion British kilos) over the following decade to 2031.

The decommissioning sector will outlast oil and fuel manufacturing and can proceed rising for years to return, Offshore Energies UK (OEUK), the main consultant physique for the UK’s offshore power business, mentioned in a brand new report this week.

Decommissioning of end-of-life oil and fuel property is an enormous alternative for the provision chain operators, however new challenges have not too long ago emerged within the sector because of excessive volatility in oil and fuel costs and the UK’s windfall tax on North Sea operators, which may impression the tempo and spending of decommissioning within the coming years, in keeping with OEUK.

One other problem is the rising competitors for companies and gear from the offshore wind power sector, which may trigger bottlenecks in demand for oil and fuel decommissioning companies, the report says.

Present estimates present that decommissioning expenditure rose by virtually a fifth to $1.5 billion (£1.273 billion) in 2021. This yr, the spending may cross the $2.4 billion (£2 billion) mark for the primary time. Over the following 4 years, spending on decommissioning is ready to surge and certain vary between £1.7 billion and £2 billion every year, OEUK mentioned.

The business physique predicts an upsurge in exercise as there are 612 wells, 59 topsides, 58 substructures, 1,820 kilometers (1,130 miles) of pipelines, and 14,029 tons of subsea infrastructure set to be decommissioned between now and 2024 alone.

“The decommissioning alternative is snowballing and could possibly be price round £20bn to the provision chain between now and 2031,” OEUK mentioned within the report.

Over the following decade, greater than 2,100 North Sea wells are set to be decommissioned, it added, greater than the 1,782 wells poised for decommissioning in final yr’s forecast of OEUK.

Wells proceed to dominate the decommissioning market with an general 48% share of the spending, with topsides and subsea infrastructure elimination additionally accounting for a good portion.

Nicely decommissioning exercise is ready to develop till 2028 when it’s anticipated to peak with 313 wells forecast, near the 2019 whole of 288, OEUK mentioned.

The common UKCS subsea properly prices $9.3 million (£7.8 million) to decommission now, in contrast with $8.3 million (£7 million) over the past three years, probably reflecting rising inflation and extra complicated decommissioning operations but to be accomplished, OEUK mentioned.

As increasingly more wells, platforms, and subsea installations and pipelines are decommissioned, expenditure on this phase as a share of all spending within the UK oil and fuel business is rising and can proceed to rise within the foreseeable future. Round 10% of UK oil and fuel expenditure went on decommissioning in 2021. This share is ready to rise to 13.7% this yr and to 19% by 2031. Total, decommissioning will account for 15% of UK offshore expenditure over the following ten years, the business affiliation mentioned.

“This alerts an upturn in actions all through the UKCS, which can pose a problem for the UK provide chain. Continued strain from new energies additionally provides to this problem because the UKCS battles to satisfy growing demand for labour and supplies,” the OEUK famous within the report.

“The expansion of renewables and demand for decommissioning companies and experience will create growing strain for sources,” mentioned OEUK Decommissioning Supervisor Ricky Thomson.

“This can be a nice drawback to have and it’s important this chance is correctly managed throughout the sector in order that UK companies can seize the lion’s share of this £20bn alternative.”

By Tsvetana Paraskova for Oilprice.com

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