Decommissioning Insight 2018

Exploring these expenditure proportions in depth, we can begin to see the nuances of the various decommissioning projects in different sectors of the UKCS. For example, well decommissioning amounts to the largest expenditure in all areas, however, there is a significant regional difference, with the central North Sea anticipating 53 per cent and the southern North Sea estimating only 43 per cent. This is due to the complexity of the wells in each area, with the central North Sea hosting a larger number of subsea wells — typically more expensive to decommission — than the southern North Sea. Operator costs account for greater levels of expenditure in the central North Sea (21 per cent) and the northern North Sea (14 per cent) than in the southern North Sea (10 per cent). Again, this is due to the complexity of the assets, with central and northern North Sea assets typically costing more to operate due to their size. Project management costs in these areas are also more significant, owing to the size of projects, level of engineering and therefore the teams required. The southern North Sea has a greater proportion of cost assigned to the removals scope (23 per cent) when compared with the central North Sea (7 per cent) and northern North Sea (18 per cent). Even though the topsides and substructures tend to be smaller in this region, because the complexity of well decommissioning is lower and operator costs are less, a greater proportion of cost is assigned to removals. The proportion of spend on subsea infrastructure is relatively consistent across the regions, with the central North Sea forecasting 10 per cent, the southern North Sea allotting 11 per cent and the northern North Sea 14 per cent. The proportion is perhaps greater in the northern North Sea due to the depth of water and therefore the complexity of the removals. While these four components have been identified as key drivers, industry must remain vigilant in delivering efficiencies throughout all elements of the work scope to reduce the overall cost of decommissioning. For example, it is clear that facilities de-energising and topsides preparation form a significant cost base in these regions, with 9 per cent of the total forecast to be spent in the southern North Sea, 7 per cent in the central North Sea and 4 per cent in the northern North Sea. Although there is regional variation, in some cases this element alone may represent the same amount of expenditure as the larger components identified above.

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