The oil and gas sector is poised for growth and renewed merger and acquisition (M&A) activity as the complexities around decommissioning are removed, a new report suggests.
Stabilising oil prices, technological advancements and mitigated risks have contributed to the change in mood around North Sea decommissioning, according to a report by global law firm White & Case.
There are an estimated 20bn barrels of oil remaining in the UK Continental Shelf (UKCS), and with oil prices relatively stable at around $50 a barrel, deal activity is "seeing something of a revival", the report said.
According to the UK Oil and Gas Authority (OGA), 680m to 690m barrels of oil are expected to come on stream from approved projects in 2017 alone. The market is seeing interest from new entrants, including independent firms and private equity, which in turn boosts interest in the North Sea.
"New business models and innovative deal structures thrive on the opportunity of decommissioning," the report by David Baker, Tom Bartlett, Richard Jones and Paul Griffin said.
As more specialist contractors enter the market with advanced technology, decommissioning costs are set to decline.
The authors added:
The UK North Sea will see significant change in the coming years as the decommissioning market develops, not just in terms of technologies and players, but also with regard to insight about costs and risk.
Increased collaboration is likely to lead to standardisation of costs and create a knowledge pool that will lower the barrier of entry for new players and make complex projects more manageable.