Economic Report 2000 Index

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Meeting the Challenge The Challenge of Decommissioning The recovery in the oil and gas price and improving confidence in the industry have produced an encouraging response from operators who are now predicting a significant extension to the production life of a number of North Sea fields. Data from the UKOOA membership, indicate that whilst estimates of overall decommissioning costs have increased by some £1 billion, over the last year actual decommissioning expenditure has fallen. Figure 25 indicates that by 2010 the estimated cumulative expenditure on decommissioning costs is now expected to be less than half the amount predicted in 1999. Whilst part of this deferral can be attributable to recent price recovery (and could therefore be reversible on a future fall in prices), we confidently expect that the application of new technology to increase recovery, lower extraction costs and secure new third party business will continue to extend the lifetime of many North Sea installations. This is of profound significance. Extending the longevity of the early generation of North Sea fields which encapsulate the majority of existing infrastructure is critical to ensuring optimum exploitation of the remaining basin potential, acting as a catalyst for new exploration and providing a quick and economic way of developing further oil and gas reserves. Figure 25 - Cumulative remaining UKCS decommissioning costs Figure 26 - UK projectd gas supply/demand 2000-2010