Cost estimate

In July 2019, the OGA published a new cost estimate for offshore oil and gas decommissioning in the UK Continental Shelf (UKCS).

With a shared objective of industry and government to reduce decommissioning costs by at least 35%, the report shows industry’s progress towards the target of safely decommissioning all current and currently planned future offshore oil and gas infrastructure for less than £39 billion (in 2016 prices), and contains benchmarking of operators’ cost performance.

Better capability and experience in the sector is providing greater certainty of actual UK decommissioning costs with several operators already achieving significant cost savings through adopting different approaches, learning and sharing with others, and challenging previous norms. The supply chain is also bringing new solutions to the market in terms of pricing structures, business models and technology.

The findings include:

2019 Decommissioning Cost Estimate (2019 inventory, 2018 prices):

  • Estimated costs reduced to £51 billion in 2019 (compared to £59.7 billion in 2017) despite including more assets and infrastructure than the 2017 inventory.

2019 “Like-for-like” Decommissioning Cost Estimate (2017 inventory and 2016 prices).

  • Comparing the same inventory as 2017, estimated costs have reduced significantly, by 17% to £49 billion.

The reduction has been primarily driven by continued improvement in planning and execution practices, leading to reductions in the estimated cost of:

  • Well plug and abandonment in the Northern North Sea (NNS) and Central North Sea (CNS)
  • Platform running costs in the NNS
  • Platform and subsea infrastructure removals in the NNS and CNS
  • Reduced contingency associated with improved estimating definition

The analysis also reveals that actual decommissioning expenditure in 2018 was reported to be £400million lower than estimated the previous year, of which around 90% is actual total project cost reduction.

Earlier cost esimates were also provided in the UKCS Decommissioning 2017 Cost Estimate Report, published in June 2017 and the UKCS Decommissioning 2018 Cost Estimate Report, published in June 2018.