Projected offshore decommissioning costs fall by 25%

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Image source, Getty Images

The projected overall cost of decommissioning North Sea oil and gas infrastructure has fallen by 25% to £44.5bn over the last five years, according to the industry regulator.

The North Sea Transition Authority (NSTA) said industry had managed to cut £15bn from the total bill since 2017.

However, total spend on decommissioning work last year was just £1.2bn - lower than the forecast of £1.4bn.

The regulator attributed this in part to the impact of coronavirus.

Decommissioning work is expected to continue beyond 2060, with more than £1bn spent each year until 2042.

The NSTA said companies in the sector had been able to make big savings by carrying out projects more efficiently.

In 2017, the NSTA introduced a baseline estimate of £59.7bn and set a target of reducing costs by 35% to £39bn by the end of 2022.

The regulator said: "The highly ambitious 35% target was always intended to be challenging and the significant savings already delivered greatly benefit companies, which can invest more in production and emissions reduction projects, and taxpayers by reducing the cost of decommissioning tax reliefs to the Exchequer."

Decommissioning spend is expected to ramp up to a peak of more than £2.5bn per year over the next two decades.

The regulator is encouraging North Sea operators to continue the progress in reducing costs and prevent inflation from driving up the price.

Image source, Getty Images

Pauline Innes, head of decommissioning at the NSTA, said: "Delivering potential savings of £15bn during a short period marked by extremely turbulent economic conditions should give the sector confidence as it looks to the future.

"Our industry is demonstrating that it can complete projects safely, efficiently and economically in the North Sea, and that places it in a strong position to compete for what is a big international prize.

"The sector must not lose focus and allow inflation to drive up prices. Now is the time to build on the progress already made."

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