According to industry analysts, over 140 oil platforms in the UK North Sea are expected to be scrapped over the next 10 years, with more than half likely to take place between 2019 and 2026.
Douglas-Westwood’s new North Sea Decommissioning Market Forecast 2016-2040 estimates the fall in the price of oil, suggesting it will result in many oil fields in UK waters, including the North Sea, becoming uneconomic.
Wood Mackenzie, another consultancy, has reported that at recent prices, one in seven barrels of oil being produced in UK waters is at a cash loss saying the UK is the country third most likely to see oil fields permanently shut down as a result of low prices; with Canada and Venezuela having more production at a cash loss.
Costs could exceed $50bn using current removal methods or $43bn if ‘Super-heavy lift vessels’ (SLVs) are utilised. This $7bn saving is due to SLVs being able to complete lifts much quicker, lowering offshore costs substantially. The most common decommissioning method is reverse installation and while this is well established and safe, it is time consuming, resulting in high costs. This will only happen however, if the Pioneering Spirit (the world’s largest platform installation/decommissioning and pipelay vessel) is a success and embraced by the industry, something that will be required before other SLVs are commissioned.
China’s economic slowdown has curbed appetite for commodities in general, while Saudi Arabia, which produces a third of the Opec cartel’s output, is keener on preserving its market share than it is on cutting production to boost prices. However, at the same time, the rise of the US as a shale gas producer means it now imports less oil, adding to the glut on world markets.