July 17, 2018

Alongside an uptick in production, increase in M&A activity and a successful 30th exploration licensing round, the decommissioning market in the North Sea is now a steady feature of the UKCS landscape.

Over the next decade, decommissioning activity in the UKCS is predicted to evolve into a regular £1.5-2.0 billion per annum market, presenting the UK supply chain with a major opportunity to develop world-class decommissioning capabilities.

Last month’s London Business Breakfast, the latest in a series of decommissioning focused events organised by Oil & Gas UK, provided an opportunity to further discuss how the market is evolving.

As Alan Burke, Partner in the White & Case Global Oil & Gas Group, host of the event, said: “The discussions among the panel members further highlighted the opportunities a growing decommissioning sector in the North Sea presents to the UK supply chain.

“It’s exciting to see how the market is evolving with specialists coming in to seize the decommissioning opportunity. However, it’s important to remember that the industry remains focused on maximising economic recovery of the basin. Companies are becoming more efficient in the decommissioning process, are better able to manage costs and, in some cases, are divesting parts of their portfolio to new owners defering decommissioning, which will all help to maximise the recovery of the estimated 10-20 billion barrels of oil that remain in the North Sea.”

“The innovation in technical and operational matters is being accompanied by increasingly sophisticated approaches to the ways in which deals are done.  Traditional approaches to liabilities, security and operations are being revised so as to allow the separation and allocation of different elements to the parties over time, with compensating financial arrangements as part of the overall deal.  The government is also joining in with its initiatives towards fiscal revision in the form of new regulations permitting the transfer of tax histories within asset transactions.  As decommissioning is becoming part of the life-cycle of the North Sea, so the practices of deal-doing in the North Sea are adapting to reflect this.  We are pleased to have been in the vanguard of many of these moves.”

By Mike Tholen, Upstream Policy Director, Oil & Gas UK