OGUK Decom Insight Report 2021

In line with previous reports, Decommissioning Insight 2021 focuses on expenditure for ten years ahead, highlighting the near-term opportunities for the UK’s decommissioning supply chain. The UK industry should be able to use the information in this report to help position itself as a global leader in the decommissioning market. Industry becoming more cost effective – Figure 2 shows the annual expenditure broken down into the 11 elements of the work breakdown structure (WBS). There are clear peaks in the expenditure profiles in 2022 (£1.87bn), 2026 (£2.00bn) and 2028 (£2.24bn) which lift the average but otherwise expenditure remains around £1.5 billion per year as in previous insight reports. Decommissioning Insight reports for the years 2018, 2019 and 2020 all showed expenditure levels for the next ten years (in each case) of just over £15 billion. Decommissioning Insight 2017 showed a £17 billion anticipated expenditure. This year’s dataset has more wells, more platforms and more subsea removal weight, and is expected to cost over £400 million less.

be why we see an expenditure spike in 2022 with much of the deferred activity displaced to that year. This year, £1.45 billion is forecast to be spent, perhaps marking a return to business as usual. £16.57 billion will be spent on decommissioning in the UK over the next decade – Figure 3 shows the cumulative expenditure curves from recent Decommissioning Insight reports. The forecast cumulative expenditure in 2020 is shown by the purple line. At that point, there was no real certainty on a vaccine programme and the oil price in 2020 averaged $41.88/bbl (compared with $64.30/bbl in 2019) and $69.45/bbl as of the end of October 2021. The 2020 report therefore explored a range of “reduced expenditure scenarios” for decommissioning, with the low end at around £22.1 billion by 2030. The orange line shows the cumulative expenditure using the 2021 data set. The figures show that the industry will have spent just over £26.5 billion on decommissioning by 2030. The industry has effectively managed its offshore activity despite the pandemic, and while the virus means the future is still uncertain, many lessons have been learned and processes are now in place to mitigate many of the known implications to working offshore in this environment. Commodity prices remain volatile, particularly in the case of gas. Brent crude has seen some relative stability since mid-year, trading consistently above $70/bbl, following an increase from $50/bbl at the start of the year. However, gas prices have increased by more than 400 per cent throughout the year, reaching record and prolonged high levels. While this may result in the deferral of some decommissioning activity, the impact will be fully assessed next year. The light blue line shows the cumulative expenditure in 2017. This was the year the OGA introduced the industry target to reduce the total forecast costs of decommissioning by 35 per cent, from an initial 50% probability estimate (P50) of £60 billion to a target of £39 billion. The 2017 forecast would have seen about £32.2 billion spent by 2030. This shows that while there has been a minor increase in expected expenditure over the next decade, this year compared with last, it is significantly less than the 2021 spend forecast in 2017.

Decommissioning Insight 2017 Decommissioning Insight 2021

Wells

1,624

1,782

Platforms

98

125

Subsea Structures Total Expenditure

49,373 tonnes

87,974

£17 billion £16.57 billion Industry withstands the shocks of volatile pricing and COVID – Figure 2 also shows the actual expenditure in the UK decommissioning industry. In 2018 industry spent almost £1.3 billion, rising to almost £1.35 billion in 2019. This trend was expected to continue with Decommissioning Insight 2020 forecasting £1.47 billion in 2020. But like many other sectors, the industry was impacted by the COVID pandemic and the commodity price fluctuations. Still, it spent almost £1.1 billion, only 20 per cent less than it had the year before. While this reduction was partly due to cost efficiencies, much of the expenditure reduction in 2020 was due to activity being pushed to later years in the data set. This may

DECOMMISSIONING INSIGHT 2021

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