UK Oil and Gas Sector faces 24 Billion Pounds Bill to Plug Old Wells – report

(CTN News) – Over the next ten years, British North Sea oil and gas companies will invest almost 20 billion pounds ($24 billion) in demolishing more than 2,000 inactive wells and structures in the ageing basin.

Offshore Energies UK (OEUK) warned in research that as more fields cease production, the financial burden of decommissioning—the process of plugging wells and dismantling platforms—is expected to increase significantly over the next three to four years.

The rising cost is related to British Finance Minister Jeremy Hunt’s decision last week to raise the North Sea producers’ windfall tax from 25% to 35%, making the sector’s overall levies one of the highest in the world at 75%.

According to OEUK, 2,100 North Sea wells will be decommissioned over the next ten years at an estimated cost of 7.8 million pounds ($19.7 billion) per well.

In business budgets, decommissioning expenses are expected to increase from 14% in 2022 to 19% by 2031.

The middle and northern North Sea will get more than 75% of the decommissioning budget.

The North Sea has been a significant centre for deepwater production since the 1970s, but since reaching a high of around 4.4 million barrels of oil equivalent per day in the 1990s, output has been steadily declining.

Some taxes offset decommissioning expenses, but not the most recent windfall tax.

OEUK has cautioned that a scarcity of trained people for decommissioning might result from oil and gas workers migrating to the region’s quickly expanding offshore wind sector.

According to OEUK Decommissioning Manager Ricky Thomson, in a statement, “The UK’s decommissioning industry is snowballing and will continue developing for years to come.”

“But this presents both a problem and a chance. The need for decommissioning services and knowledge will rise in response to expanding renewable energy sources.”

($1 = 0.8469 pounds)

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