Decommissioning Insight 2019

DECOMMISSIONING INSIGHT 2019

5.1 Background and History Since 2010, OGUK’s Decommissioning Insight has provided a unique picture of the developing North Sea decommissioning sector. The emergence of the first Insight report from OGUK’s 2010 Oil and Gas Activity Survey recognised that the sector was developing, and the reality of the technical and cost challenges was becoming increasingly evident. In 2010, Total was completing its Frigg Cessation Project and BP was in the final stages of the North West Hutton Decommissioning Project. These and other projects and the emerging lessons learned focussed industry’s minds on the decommissioning scope across the basin and with it, an increasing realisation of the actual costs involved. By 2013, the Insight report had established itself as the primary source of forecast decommissioning activity based on actual operator-provided data, using the common language of OGUK’s established Work Breakdown Structure. It became clear from the first Insight surveys that forecasting CoP dates and hence the timeframe for any decommissioning project is difficult and will always be subject to uncertainty and both short and long-term variability. Successive years of survey results have often presented a different picture in terms of timing and scope, owing to a range of factors from oil price fluctuations and M&A activity, to asset-specific operational drivers. Over the years, Decommissioning Insight has charted the changing decommissioning sector and its understanding of the challenge ahead. Early surveys suggested the cost of well decommissioning represented less than 20 per cent of total expenditure, but by 2012, when the true cost of this process had started to become apparent, estimates indicated it was the most significant factor, at around 45 per cent of the total cost. This estimate has remained consistent in all ten-year forecasts since, rising to 49 per cent in the 2018 survey. This clear picture of the significance of well decommissioning and other major cost areas such as post-CoP OPEX, removals and subsea decommissioning has spurred industry to focus its cost-saving activities on these major elements. As decommissioning experience has increased, the consistency of the forecasts has improved, with less dramatic yearly variation seen in latter surveys. Differences can now be attributed justifiably to progress in cost-reduction initiatives brought about by operators sharing experiences and lessons learned, technology and methodology innovation and robust stewardship by the OGA since its formation in 2015. As of 2016, the data in the reports have been provided by the Asset Stewardship Survey conducted annually by the OGA, whose data collection is based on the original OGUK survey structure — a testament to the good work by the industry. This has provided OGUK with a more complete, consistently high-quality data set on which to base forecasts.

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