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Oil industry will spend £20bn on decommissioning over next decade, say chiefs

More than 2,000 oil and gas wells are expected to be decommissioned in the North Sea over the next decade at a cost of about £20 billion, according to the industry.

A number of decommissioning projects have been brought forward, meaning the cost has increased from an estimated £16.6 billion last year.

Offshore Energies UK (OEUK) has published its annual Decommissioning Insight report, saying an upsurge in decommissioning activity has begun this year and is expected to continue over the next three or four years.

It is estimated roughly 2,100 North Sea wells will be decommissioned over the next decade – about 200 per year – at an average cost of £7.8m per well.

Oil rigs – Cromarty Firth
Decommissioning work is required by law (Jane Barlow/PA)

Ricky Thomson, OEUK’s decommissioning manager, said much of the “notable” increase in expected spending was due to work being brought forward.

In a briefing to journalists, he said the industry had achieved “fantastic” savings of 25% on its expected decommissioning bill, saying the UK is a world leader in the sector.

The regulator, the North Sea Transition Authority (NSTA), has challenged offshore energy companies to bring down costs by a further 10% by carrying out projects more efficiently.

Mr Thomson said: “The UK’s decommissioning sector is snowballing and will continue growing for years to come.

“But this poses a challenge as well as an opportunity. The growth of renewables and demand for decommissioning services and expertise will create increasing pressure for resources.

“This is a great problem to have and it’s vital this opportunity is properly managed across the sector so that UK firms can capture the lion’s share of this £20 billion opportunity.

“With the right support from Government and action from the industry, the UK could make major gains from decommissioning, as well as retain thousands of jobs for this growing sector.”

Decommissioning work is required by law and work to remove oil and gas infrastructure from the North Sea is expected to continue until about 2070.

The NSTA said the industry should expand on its progress in lowering the cost estimates for decommissioning work.

It wants to see the total bill for all decommissioning work reduced to £33.3 billion.

Pauline Innes, the NSTA’s head of decommissioning, said: “We have rightly praised industry for the work it has already done to save billions of pounds on decommissioning, but now is the time to press home the advantage.

“This new target will help keep up momentum and strengthen our industry’s reputation for safe, efficient and economical offshore project execution.”