North Sea oil and gas decommissioning to cost £24.6bn

The dismantling of North Sea oil and gas infrastructure will cost £24.6 billion through to 2033, industry research has forecast.
The trade body Offshore Energies UK expects about £2.3 billion to have been spent during 2024, up from £1.7 billion last year and £1.6 billion in 2022.
The organisation’s annual decommissioning report, published on Tuesday to coincide with a conference in St Andrews, notes that costs have risen by 19 per cent compared with last year’s forecast.
That is partly a result of inflation as well as increasing international competition for skills and equipment.
The punishing fiscal regime in the UK, where tax on profit can be as much as 78 per cent, has prompted some oil and gas production businesses to cut investment, pause projects and look to move elsewhere.
Offshore Energies UK (OEUK) warned that the uncertainty over the fiscal outlook in recent years had dented activity but said there was not yet any substantial evidence of companies deciding to prematurely end production in UK waters.
Ricky Thomson, the OEUK decommissioning manager, said any further increase in the amount of work required in the coming years would put additional pressure on the domestic supply chain.
Thomson called for a supportive fiscal regime to give production companies the time to effectively plan decommissioning work and to maximise the contracts on offer for UK support companies.
“Decommissioning in general we see as an opportunity, and so does industry,” he said. “This is about the amount of knowledge that can be gained by the last 50-plus years of work, of innovation, of new technologies, used within the North Sea.
“In order to decommission an asset, you basically have to learn absolutely every last bit of knowledge [about] that asset for the last 50 years.”
The largest decommissioning sum over the 2024 to 2033 period is allocated towards wells, with £11.7 billion to be spent. An average of 200 wells will need to be plugged and abandoned annually if targets are to be hit.
Removing and disposing of oil platforms and other kit is estimated to cost more than £4 billion and taking out subsea infrastructure will be a further £2.9 billion.
Thomson acknowledged that only 126 wells were dealt with in 2023 and said: “We are going to need to have a step change in activity and a step change in spend across the operator and supply chain in order to reach these goals.”
Companies are legally obliged to dismantle the infrastructure but can use financial losses made during that process to offset profits recorded during the site’s operational lifespan.
That can result in them potentially getting a tax rebate and HM Revenue & Customs’ 2023-24 accounts notes a £5.7 billion provision for such activity.