North Sea decommissioning costs set at $100bn, but could double or triple due to inconsistencies among operators

 
Courtney Goldsmith
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Costs of decommissioning in the North Sea could skyrocket (Source: Getty)

Decommissioning oil and gas wells in the North Sea is set to cost $100bn (£79.97bn) across the UK, Norway, the Netherlands and Denmark, and new research warns that figure could double or even triple.

"While it is still early days, operators are exhibiting big differences in approach and cost," said a report by the Boston Consulting Group (BCG).

In Britain, midpoint costs for decommissioning through 2050 are estimated at £47bn, with an uncertainty range of plus or minus 40 per cent, according to the UK Oil and Gas Authority.

The BCG's analysis of eight decommissioning projects by North Sea operators found some are two to three times more cost efficient than others.

"Extrapolate that level of difference across the North Sea and the numbers get big in a hurry."

Some areas the group identified as having the potential to affect costs and timelines include: creating a comprehensive decommissioning strategy, establishing a central database for all governments and operators with information on wells and facilities and improving poor cost estimate track records.

Read more: North Sea oil projects are rife with delays and overspending

BCG said operators, contractors and government agencies need to focus on these areas to make the process as effective and cost efficient as possible.

"Operators face the greatest costs and risk, but there are ramifications for everyone," the report said, pointing out tax payers are on the hook for 50 to 80 per cent of decommissioning costs, depending on the country, the report said.

BCG said:

Forward-looking CEOs and COOs will champion their decommissioning campaigns and their importance to the organisation. They will insist that their companies start now to set out the strategy, collect the necessary data, and build the required teams. They will personally monitor progress against the plan. It will be time well spent.

For larger players, the prize is cost savings that could run into the billions—with a direct impact on the company’s bottom line—and a dramatic improvement in their risk and liability exposure.

Read more: The UK has awarded 25 oil exploration licenses in untapped North Sea areas

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