UK fossil fuel industry to spend £16bn decommissioning ageing projects

A new report from Industry body Oil and Gas UK (OGUK) estimates that the total overall cost of the industry’s decommissioning bill for all future projects had fallen by 23 per cent from £59.7bn in 2017 compared with £46bn this year.

This has been largely achieved through improved efficiency and cost reduction, although the report said the overall target was to reduce the cost by 35 per cent by 2022.

It also found the UK was increasingly exporting its decommissioning expertise, with regulation and guidance exported to other countries such as Australia, which has based much of its own decommissioning strategy on the UK’s experience.

“We’re focusing on greener ways to decommission and identify circular economy opportunities,” it reads. “That means re-purposing offshore infrastructure for hydrogen and carbon capture and storage projects, encouraging industries to re-use components and promoting creative solutions for recycling decommissioned materials.”

Joe Leask, OGUK’s decommissioning manager, said: “Decommissioning is more than a great challenge. It’s also a huge opportunity for UK companies to show their engineering skills, powers of innovation and ability to compete on a global scale.

“If operators work together to create larger projects where we get economies of scale, then we can safely drive costs down even more.”

He continued: “Decommissioning is also a key part of the UK’s transition to low-carbon energy and its aim of reaching net zero by 2050. This is partly because the installations being removed tend to be older and so generate more emissions relative to the oil and gas they produce.

“It is also because of the growing opportunities for reuse, repurposing and recycling. Reuse is when infrastructure or equipment is taken away and used again elsewhere. This is already becoming common with forgings, pipeline valves, turbines and electrical kit.

“In the future, some assets could be repurposed for new uses such as offshore wind and permanent storage of carbon dioxide by pumping it deep under the seabed.”

Despite calls at climate conference COP26 to try and reduce fossil fuel usage, OGUK said that blocking long-planned oil and gas projects would risk leaving UK consumers more exposed to the kind of global energy shortages that have sent bills soaring this winter.

With the UK already importing around half its gas, OGUK has warned against blocking new projects such as the Cambo oil fields off the coast of Scotland, which Nicola Sturgeon - the First Minister of Scotland - and environmental groups have already said should no longer go ahead.

Deirdre Michie, chief executive of OGUK, said: “The UK’s offshore oil and gas industry is committed to helping the UK government meet its ambitious net zero goals. We accept all the science around climate change and the need to cut emissions, but this transition must be managed.

“If we cut our own supplies of gas and oil faster than we can reduce demand, then we will have to import more of what we need. Our import bills will go up without any reduction in emissions.