Political and fiscal uncertainty have been blamed for a failure to meet decommissioning targets in the North Sea.

The 2024 Decommissioning Report shows operators need to plug 200 abandoned North Sea oil and gas wells a year to stay on top of targets. Only 126 wells were dismantled in 2023. 

Trade group Offshore Energies UK said companies had been cautious about undertaking large-scale projects amid volatile costs and a changing tax regime.

It said homegrown oil and gas producers face yet another move of the goalposts following the Chancellor’s Autumn statement later this month.

Decommissioning Expenditure was up 6% in 2023 compared with 2022, though spending was about 35% lower than had been forecast.

OEUK decommissioning manager Ricky Thomson said because of rising costs “we spent more in 2023 than 2022 doing less work”.

Despite these setbacks, he said 2024 will likely see the sector smash through the £2 billion spend mark for the first time ever, with expectations of hitting $2.3bn.

“However, to do this we will need a step change in activity levels. Specifically in the wells space where we hope to average over 200 wells decommissioned each year for the next decade.

“If we have more stability I see us hitting the forecasts.”

The full report will be released today as hundreds of decommissioning business leaders gather in St Andrews for OEUK’s two-day 2024 Decommissioning Conference, the biggest industry event of the year.

The Insight report and the conference will showcase the expertise and capabilities of the UK decommissioning industry “which continues to be the envy of the world”.

It shows that stable government policy can keep the decommissioning industry in the UK and prevent multi-million pound decom contracts being won by European rivals. A successful approach would secure the future of thousands of skilled UK jobs for decades to come.

Mr Thomson added: “Operators must continue to sanction projects and the supply chain must remain resilient and competitive.

“The energy transition has decommissioning at its heart and sharing cross-sector information and expertise is crucial. I have no doubt we can make this happen.” 

Companies are legally obliged to dismantle the infrastructure but can use financial losses made during that process to offset profits recorded during the site’s operational lifespan.

THREE60 Energy secures North Sea deal

THREE60 Energy, an independent energy service company, has been awarded a multi-million-pound contract by a major North Sea operator to support decommissioning for a number of assets in the region.

The contract was awarded to THREE60 following a competitive tender process and initially includes three offshore assets with the option to include a further three over the six-year period.

Walter Thain, CEO, said: “Decommissioning is a key enabler of the energy transition within the UK and a huge export opportunity as other basins globally reach late life.”

THREE60’s scope of work will commence immediately and will span a period of six years, all elements of the project will be delivered by the Aberdeen-based team.