Oil and Gas Authority looking to cut cost of UK Continental Shelf decommissioning to $39 billion

By James Henderson
The Oil and Gas Authority (OGA) has said it wants to cut the cost of decommissioning the UK Continental Shelf to no more than £39 billion.

The Oil and Gas Authority (OGA) has said it wants to cut the cost of decommissioning the UK Continental Shelf to no more than £39 billion.

In a report, the body said the objective must be shared by the industry and government, with costs thought to split evenly between the two.

The OGA estimates an overall decommissioning cost £59.7 billion in 2016 prices, but if a minimum 35% cost reduction can be applied, the total could come down to less than £39 billion.

“The OGA’s approach has been to develop a probabilistic cost estimate, which takes into account the broad range of uncertainties and uses data submitted by oil and gas operators as part of its 2016 UKCS Stewardship Survey,” said the OGA.

In the future OGA plans to:

• Publish an annual progress update report

• Apply benchmarking, using actual decommissioning costs to assess operators’ estimates

• Work with operators and the wider industry to share lessons learned, develop innovative approaches to contracting strategy, and enhance the capability of the supply chain

• Promote innovative collaboration such as the multi-operator well plugging and abandonment campaign.

“This report provides us with a starting point cost estimate of £59.7 billion to decommission UK oil and gas infrastructure. The challenge now is to save industry and the tax payer money and achieve safe decommissioning for £39 billion or less,” said Gunther Newcombe, the OGA’s Operations Director.

“To achieve this target there will be a need for significant change in the way decommissioning is approached and behavioral change will be a critical component.

“The OGA will continue to work closely with operators and the supply chain to ensure key information and lessons are shared and new approaches to contracting are developed. There is a clear and sizeable opportunity for the supply chain to develop an efficient, low cost, and exportable industry capability.”

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