North Sea operators must act on well decommissioning to support the UK’s supply chain and clean up their oil and gas legacy, the industry regulator warned in a statement on Tuesday.
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.
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The NSTA revealed the information in its latest Decommissioning Cost and Performance Update, with the aim to get “tough on operators who do not meet their regulatory obligations on well decommissioning”.
Pauline Innes, supply chain and decommissioning director, NSTA, wrote to licensees in November 2023 urging them to make headway on well P&A, warning that those failing to comply will be held to account.
Members of the NSTA’s Directorate of Regulation have now commenced investigations relating to alleged failures to complete timely P&A in line with approved plans.
The NSTA said operators must “leave the marine environment clean and safe once they stop producing and are legally required to decommission their platforms, pipelines and wells”.
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By GlobalDataThe NSTA said this is a “complex and expensive process which requires thorough preparation and planning”.
The regulator added that “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.”
The statement said operators expect to spend about £24bn ($31.12bn) on decommissioning between 2023 and 2032, up £3bn on the forecast for the same period in last year’s report.
Operators “can keep their costs under control and meet their regulatory obligations by engaging early with the UK’s world-leading supply chain, providing details of their inactive wells and, most importantly, placing contracts to get the work done”.
Hundreds of North Sea 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.
In addition to exploring the use of sanctions, the NSTA is spearheading a project to identify which Continental Shelf wells will be ready for decommissioning between 2026 to 2030 and assess the supply chain capacity required to undertake the work in a timely and cost-effective manner.
Innes added: “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,” Innes added.
