Oil and Gas Authority sets cost of North Sea decommissioning at £60bn with an aim to reduce costs to £39bn

Courtney Goldsmith
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OGA has set a further target to reduce decommissioning costs in the UK (Source: Getty)

The cost of decommissioning oil and gas infrastructure in the North Sea has been reduced to a "starting point" of £59.7bn, with the aim of a further 35 per cent reduction, according to a new report.

The Oil and Gas Authority's (OGA) new report develops a "probablistic" cost estimate, which takes into account the broad range of uncertainties and uses data submitted by oil and gas operators. Using this approach, it has produced a cost estimate of £59.7bn in 2016 prices.

The OGA has set a further target to reduce decommissioning costs in the UK Continental Shelf (UKCS) by at least 35 per cent, resulting in a price tag of less than £39bn.

Read more: North Sea decommissioning costs set at $100bn, but could rise even higher

The OGA said it will monitor the industry's performance towards the target and support their efforts to cut costs to save the industry and the tax payer money.

"To achieve this target there will be a need for significant change in the way decommissioning is approached and behavioural change will be a critical component," said Gunther Newcombe, the OGA’s operations director.

"There is a clear and sizeable opportunity for the supply chain to develop an efficient, low cost and exportable industry capability."

Technology will be a key contributor to improving decommissioning costs, said ​Colette Cohen, chief executive of the Oil & Gas Technology Centre (OGTC).

Nathan Swankie, principal of environmental consultancy Ramboll Environ said it is likely the current "rules" on offshore decommissioning will come under further scrutiny.

"If the decommissioning rules were more flexible, the adoption of a science-first approach, using an ecosystem services framework to assess each decommissioning case on its own merits, could offer robust and balanced decision-making that could go some way to mitigating the final bill," Swankie said.

"This would not only maximise cost savings and deliver on the government’s aims to do so, but also provide tangible environmental benefits."

Read more: Shell received a $142m tax credit from the UK government last year

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