Decommissioning Insight 2018

DECOMMISSIONING INSIGHT 2018

3.3 Forecast Expenditure Overview In previous Decommissioning Insight reports, forecast expenditure has been relatively consistent, as outlined in Figure 1 below. This year’s forecast indicates a much slower rate of decommissioning expenditure, with an average annual spend of circa £1.5 billion per year. This compares to previous years which typically showed a trend rate of circa £1.8 billion per year. The main drivers of this change and the ‘push to the right’ are the re-phasing of projects over a longer timeframe, leading to a reduction in the expected workload over the ten-year period. Improved investment conditions, a relentless focus on efficient operations and improved commodity prices are helping to improve the ongoing economic viability and productive life of assets. Cessation of production (CoP) dates and decommissioning projects are, therefore, being pushed into the future.

Figure 1: Forecast Comparisons for Cumulative Decommissioning Expenditure

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2014 Forecast

2015 Forecast

2016 Forecast

2017 Forecast

2018 Forecast

Actual Expenditure

20

15

10

(£ Billion - 2017 Money)

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Cumulative Decommissioning Expenditure

0

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Source: Oil & Gas UK, OGA

The reduction in expected decommissioning expenditure is in part the result of action taken by industry, the government and regulators to create a more attractive investment proposition in support of the aim of MER on the UKCS. A new wave of companies has been attracted to the basin, acquiring later life assets and revitalising them through new investment (see section 3.4). The improved investment conditions have encouraged a number of asset transfers, often frommajor operators to smaller companies who are better positioned to increase investment and maximise recovery from later-life fields. Examples of this include Chrysaor’s acquisition of the Armada, Everest and Lomond fields and EnQuest taking ownership of the Magnus field, both from super-majors. Transactions like this help boost operational efficiencies, investment levels and future production volumes within these assets.

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