North Sea operators 'must take action' on well decommissioning, operator warns

North Sea operators must take action on well decommissioning to support the UK’s supply chain, clean up their oil and gas legacy and stop costs spiralling, the industry regulator has warned.

Repeated delays to well plugging and abandonment (P&A) work, competition for rigs from overseas and cost pressures are pushing up the estimated bill for decommissioning on the UK Continental Shelf.

The issues are laid out in the latest Decommissioning Cost and Performance Update from the North Sea Transition Authority (NSTA), which is getting tough on operators who do not meet their regulatory obligations on well decommissioning.

Pauline Innes, the NSTA’s supply chain and decommissioning director, wrote to licensees in November 2023 urging them to make headway on the plugging and abandonment of wells and warning that those failing to comply will be held to account.

Innes said: “With spending forecast to peak at £2.5bn per year in the current decade, decommissioning can ensure that the UK’s world-leading supply chain is equipped to help operators clean up their oil and gas infrastructure over the next 50 years and support the carbon storage sector, which will rely on many of the same resources.

“I am concerned that this huge opportunity to safeguard highly-skilled jobs and support the transition will be wasted if operators fail to tackle their well decommissioning backlogs.

“The supply chain wants to do this work, but it is not physically tied to the UK. Its skills and resources are in demand in other regions, and we are starting to see companies marketing their rigs elsewhere. Operators need to use the supply chain, now, or risk losing it.”

Members of the NSTA’s Directorate of Regulation have now commenced investigations relating to alleged failures to complete timely plugging and abandonment in line with approved plans.

Operators must leave the marine environment clean and safe once they stop producing, and are legally required to decommission their platforms, pipelines and wells, a complex and expensive process which requires thorough preparation and planning.

Taking too long, or deferring work, adds to the cost and can mean that platforms continue to use power and release emissions even though they are no longer producing oil and gas.

Operators expect to spend about £24bn on decommissioning between 2023 and 2032, up £3bn on the forecast for the same period in last year’s report.

Hundreds of wells will need to be decommissioned every year as more oil and gas fields shut down. However, operators only achieved 70% of planned well decommissioning activities last year.

Some operators are deferring in hope that prices will go down in the coming years. However, failing to award contracts reduces the supply chain’s revenues and ability to invest in capacity and resources.