Regulators have warned UK oil and gas operators to speed up decommissioning activities in the North Sea.
The North Sea Transition Authority (NSTA) has called on the companies to clean up their oil and gas legacy and stop costs spiralling, and said it was “getting tough” on operators who do not meet their regulatory obligations.
Repeated delays to well plugging and abandonment (P&A) work, competition for rigs from overseas, and cost pressures are pushing up the estimated bill for decommissioning on the UK Continental Shelf, the NSTA said.
The facts have been laid out in its latest decommissioning cost and performance update and follow last November’s warning to operators to make headway on the plugging and abandonment of wells or be held to account.
The NSTA has launched investigations of alleged failures to complete timely plugging and abandonment in line with approved plans.
Operators are legally required to decommission their platforms, pipelines and wells. The regulator noted that taking too long, or deferring work, adds to the cost and can mean that platforms continue to use power and release emissions even though they are no longer producing oil and gas.
North Sea decommissioning is expected to cost about £24bn between 2023 and 2032. Operators spent around £2bn last year, which was in line with forecasts, but they achieved 70% of planned well decommissioning activities.
The NSTA said some companies were deferring in the hope that prices would go down in the coming years, but that failing to award contracts reduces the supply chain’s revenues and ability to invest in capacity and resources.
“Rig contractors are actively seeking opportunities in other regions where operators offer longer, more secure contracts. If this trend continues, prices will increase, as reflected in market forecasts.”
Pauline Innes, the NSTA’s supply chain and decommissioning director, said: “With spending forecast to peak at £2.5bn per year in the current decade, decommissioning can ensure that the UK’s world-leading supply chain is equipped to help operators clean up their oil and gas infrastructure over the next 50 years and support the carbon storage sector, which will rely on many of the same resources.
“I am concerned that this huge opportunity to safeguard highly skilled jobs and support the transition will be wasted if operators fail to tackle their well decommissioning backlogs,” she said, adding that the sector is starting to see companies marketing their rigs elsewhere and that operators “need to use the supply chain, now, or risk losing it”.
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