UK facing rising offshore P&A costs

Decommissioning operations across the UK North Sea region could cost $26 billion over the next decade, according to Westwood Global Energy Group.

Well plug and abandonment (P&A) activity looks set to account for roughly 50% of the overall costs.

However, while the decommissioning workload is increasing, contract awards are lagging, particularly for rigs. Deferring work scopes, the consultants claim, could constrain the supply chain’s capacity to manage programs; if the delays persist and rig availability tightens, well P&A costs could soar by up to $5.5 billion, due to rising offshore rig day rates.

That would increase the financial liabilities for both operators and the UK government, which provides tax relief on decommissioning expenditure.

Yvonne Telford, research director with Westwood, said, “Based on current investment plans, up to 40% of UK fields could cease production before 2030. With the impact of decommissioning tax liabilities on abandonment expenditure, cost-effective P&A must be paramount.

Number of wellbores requiring rig P&A work and associated P&A costs by field economic CoP year

Woodside exec: 'Emerging opportunities in decommissioning'

Meanwhile, Woodside Energy spent more than $800 million last year on decommissioning activities globally, according to Liz Westcott, Woodside's executive vice president and COO, during a speech earlier today at the Energy Exchange Australia Perth Convention and Exhibition Centre.

Much of the cost was incurred at the company’s campaigns offshore the northwest of Western Australia.

“Across our portfolio,” Westcott added, “there are emerging opportunities in decommissioning…

“Annual spend of that magnitude is right up there with what would be spent on a major development. This will see the removal of more than 350 km of rigid pipe, flexible flowlines and umbilicals, the plugging and abandonment of redundant wells and the recovery of a range of other subsea infrastructure. We estimate more than 35,000 mt of equipment will be removed, with the vast majority of this—approximately 95%—being recycled or reused.”

Woodside is sending most of the materials recovered from its decommissioning programs to other countries for handling, but it is looking to develop a recycling industry in Australia with local suppliers and contractors.

“We are working with a small number of international contractors who bring experience, technical expertise and the specialist offshore vessels required for our offshore decommissioning scopes. We have also engaged a range of Australian businesses, many with experience supporting defence, mining and refinery disposal," Westcott said. “Companies such as AusDecom, Birdon, C.D. Dodd, McMahon and RPA are playing leading roles in our onshore disposal scopes, adapting established processes and pathways to support the unique requirements of the oil and gas industry.”