Economic Report 2019

ECONOMIC REPORT 2019

Much of this reduction has come from increased understanding of the details involved in these decommissioning work scopes, which has acted to reduce any cost uncertainty. However, some of the additional reductions can be attributed to more effective ways of working and innovative contracting as industry continues to learn, gain greater experience in decommissioning and begin to industrialise some of the processes involved. Industry pays for the full cost of decommissioning in the first instance and, since this expenditure is a normal cost of doing business in the UK, tax relief is provided on this decommissioning expenditure. The OGA estimates that around £16.8 billion may be accessed by industry as tax relief, a reduction from the previous estimate of £24 billion. 28 The fiscal regime’s treatment of decommissioning is important. Continued certainty regarding tax relief reduces investment risk and increases the attractiveness of the UK in a competitive global environment. Recognising this, government has made a permanent commitment to industry that tax relief on decommissioning expenditure will continue to be available on a long-term basis, by putting Decommissioning Relief Deeds (DRDs) in place in 2013. As a result of the DRDs, risk premiums have been reduced and £6 billion of capital has been unlocked for reinvestment which would have not otherwise been available. Well-Safe Solutions is exclusively focused on bringing new solutions to the well decommissioning market, offering the first fully integrated ‘Tier 1’ service provision in this domain. Well-Safe will deliver safe and efficientmulti-operator,multi-well decommissioningoperations usingdedicatedandbespoke assets deployed as part of the ‘P&A club’ concept in collaboration with clients. This innovative commercial approach offers significant benefits through sharing value and risk over an aggregated work scope which enables continuity and leads to continually improving performance with lower and more predictable costs. To enable this model, it became evident that ownership of key assets was necessary to be able to provide that long-term price stability and predictability. Well-Safe has recently acquired the Well-Safe Guardian, a semi-submersible rig, which is currently undergoing conversion into a bespoke well decommissioning asset. With the addition of a saturation dive spread and riserless subsea intervention system, the unit aims to deliver a materially different solution to the decommissioning market. As a part of the Forth and Tay Alliance — which aims to establish Dundee as a hub for North Sea decommissioning — and in conjunction with other service companies, Well-Safe will deliver full scale well decommissioning solutions from design engineering through to execution, whilst simultaneously supporting regulatory reporting and HSE leadership. CASE STUDY

Supply Chain Opportunity Estimates from Wood Mackenzie suggest that $82 billion will be spent globally on decommissioning activity over the next decade. 29 This provides a significant opportunity to use the UK industry’s experience to unlock new global opportunities for the supply chain.

28 www.ogauthority.co.uk/media/5960/exchequer_cost_decommissioning_august_2019.pdf 29 Wood Mackenzie – Upstream decommissioning: where’s next and who pays? July 2018 www.woodmac.com/reports/upstream-oil-and-gas-upstream-decommissioning-wheres-next-and-who-pays-22918

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