Douglas-Westwood’s new North Sea Decommissioning Market Forecast 2016-2040 predicts that between 2016 and 2040 $70-$82 billion will be spent on decommissioning activity in Denmark, Germany, Norway and the UK.
DW anticipates growth in decommissioning activity over the next few years, driven by the sustained low oil price, the maturity of North Sea fields and the age of infrastructure that has pushed maintenance costs up, leading to a high breakeven price.
Two different scenarios
Namely, one assumes that decommissioning methods will remain the same, with reverse installations utilising Heavy Lift Vessels (HLVs) as the most common method. The other scenario considers the impact the Single Lift Vessel (SLV) Pioneering Spirit and others that follow it could have on the market. Reportedly, ‘scenario 2’ will see cost reductions of around $12bn on ‘scenario 1’, demonstrating this impact. DW stressed however, that this is contingent on E&P operators embracing this method of removal over the more established method.
A huge amount will depend on the success of early removal projects Yme and Brent.
High levels of decommissioning activity in the UK
As the country with the largest amount of installed infrastructure, as well as the oldest platforms, the UK will make up over half of all expenditure, with a total cost of over $50bn in ‘scenario 1’ or $43bn in ‘scenario 2’. Unlike the other countries in the report, the UK will see reasonably high levels of activity throughout the forecast period. From 2030 onwards, however, Norway will grow to become an incredibly important part of the decommissioning market. It is expected to account for 32% of the total spend 2016-2040, with 79% of this coming in the last ten years, as the large hubs finally begin to lose commerciality.