The pace of North Sea oilfield shutdowns is picking up as the impact of the market slump is compounded by the uncertain investment environment created by Brexit.
Projected spending on decommissioning in the British sector in the decade to 2024 has risen to £16.9 billion ($22.4 billion), according to Oil & Gas UK, an industry group. That is 16% higher than a 10-year forecast in 2014 as more sites are targeted for closing, it said, Bloomberg reported.
The rout in crude to less than $50 a barrel has left about 30% of fields in the UK North Sea, one of the world’s highest-cost regions, operating at a loss, according to consulting firm Wood Mackenzie Ltd.
The collapse was pushing more producers to hasten plugging wells on the sea floor even before the UK decision to leave the European Union.
“This has increased the number of fields we expect to cease in the near term, which has increased decommissioning costs,” said Fiona Legate, an analyst with Wood Mackenzie in Edinburgh. “There is a lot of political uncertainty in the UK following Brexit and this adds another complexity in investment decisions.”
About a third of operating platforms in the UK are more than 30 years old, which is beyond their original design life, Legate said. While $100 oil justified technological upgrades to keep them running, that is changing.
Oil production in the region averaged 965,000 barrels a day last year, down from a peak of 2.9 million in 1999, according to BP Plc data.
Wood Mackenzie expects spending on decommissioning, including removing steel structures offshore, to top £23 billion in the decade to 2025. The estimate is so much higher than that of Oil & Gas UK because the costs are uncertain at this point, given how little decommissioning has taken place, the firm said.
Royal Dutch Shell Plc, one of the biggest North Sea operators, is shutting down the Brent field, which since the 1970s has produced crude that helps set the global benchmark. Decommissioning has been going on for a decade and is likely to continue for another 10 years.
