Edinburgh based energy analysts, Wood Mackenzie, have released research showing that as many as 140 UK offshore oil fields could close over the next 5 years alone.
The report comes as part of a presentation at the ‘Offshore Europe’ exhibition, being held this week in Europe’s oil capital Aberdeen.
The report claims that many of the offshore oil fields currently operating on the UK’s continental shelf (UKCS), are well passed their life expectancy, and were only kept open due to the high pice of oil over the last 5 years. The report says the ‘high oil price has enabled operators to extend field life and delay decommissioning time and time again.’
Wood Mackenzie have said they now believe that as many as 140 UKCS offshore oil fields will close over the next five years, no matter what the price of oil does.
UK Offshore Decommissioning
UK upstream research analyst for Wood Mackenzie, Ms. Fiona Legate said, “17 fields are expected to be sanctioned over the next 5 years. In the current price environment there is a risk projects may be cancelled or delayed. We could start to see a shift away from work in new developments to decommissioning projects,”
Ms Legate went further saying “We expect around £54 billion (in nominal terms) will be spent on decommissioning on the UKCS and anticipate it to be completed in the early 2060’s. Decommissioning spend is expected to increase by over 50% by 2019 and will overtake development spend in the same year.
As the world’s developed economies continue to move into a phase of decommissioning, global offshore oil and gas producers are looking for ways to decrease the huge liabilities involved in dealing with the infrastructure created through decades of good times.
Offshore Batch Decommissioning
One such way Wood Mackenzie feels operators would be able to do this is to ‘Batch Decommission’.
Wood Mackenzie analyst Ms. Legate explains: “Batch decommissioning involves a group of fields being abandoned together. These are selected by geographical proximity, operator or play. Our analysis takes a group of geographically close fields in three sectors (the central north sea, northern north sea and southern gas basin) and applies reductions to get an indicative view of the benefits of batch decommissioning. By our estimations this could yield an average cost reduction of around 20% for small batches in the three sectors. “