LONDON: Dismantling equipment used to pump oil and gas in the North Sea region could cost up to $76 billion (47.8 billion pounds) over the next 30 years, a study published on Tuesday showed, highlighting the opportunity for oil service firms engaged in decommissioning.
The UK will be on the hook for $48 billion of the total bill for taking down and making safe North Sea structures, said the study, published by professional services firm Deloitte and oil research business Douglas-Westwood.The report looked for the first time at decommissioning as oil production declines across the North Sea region including Norway, the Netherlands, Denmark and Britain.Norway will have the second-largest costs behind the UK at $26 billion, it found.
With an average of $2.5 billion per year due to be spent on removing almost 500 offshore platforms, the report said dismantling equipment and plugging the wells represented a big opportunity for oil service firms and regional economies.Andrew Moorfield, Lloyd’s head of oil and gas, said in an interview that decommissioning would become an important part of the industry.”The industry of decommissioning really will become almost a sub-sector of the oil and gas industry itself.”One of the authors of the report said countries would have to fight for their share of the job creation from decommissioning.
“All this activity will create a lot of jobs. The question is physically where will all these jobs be created?” the chairman of Douglas-Westwood, John Westwood, said in an interview.”It will come down to where the actual deconstruction yards are placed and how suitable they are for the job.”The forecast $48 billion UK bill is at the top end of estimates of $39 billion to $48 billion made by the oil and gas industry and UK government’s joint project Decom North Sea.”These studies are very important. The number in itself, whether it’s $30 billion or $50 billion, is a significant number. These reports highlight the scale of the projects required,” said Moorfield.
“Only when we have experience of decommissioning starting to occur will we really understand how much it costs.”Evolution Securities analyst Keith Morris said companies such as Italy’s Saipem and privately held Netherlands-based firm Hareema Group were most likely to benefit from decommissioning due to their presence in the installation vessels and the heavy-lift vessels markets.
Those companies may have some time to wait before decommissioning kicks off in earnest, however, as a sustained high oil price makes it economic to keep pumping from older facilities.”As the oil price remains at a high level, these platforms can actually last longer than people originally thought,” Morris said.The Deloitte and Douglas-Westwood study also warned that the industry faced constraints on the infrastructure available to carry out the work, noting that oil firms would have to compete against offshore wind projects to use the heavy lift vessels on which both activities rely. ($1 = 0.622 British Pounds). – Yahoonews