Political and fiscal uncertainty has impacted investor confidence in the UK which is accelerating the decline of domestic production, as a result, $26bn could be spent on decommissioning in the next decade, with well plug and abandonment alone accounting for almost 50% of the cost.
An analysis by consultancy firm Westwood reveals that timing uncertainty is driving financial and operational risks for operators, as the decommissioning workload increases but contract awards are lagging, particularly for rigs. Deferring work scopes could strain the supply chain’s limited capacity to execute the work.
Westwood believes that if these delays persist and rig availability tightens, well P&A costs could climb by $5.5bn, due to higher offshore rig dayrates, increasing financial liabilities for both operators and the UK government, which provides tax relief on decommissioning costs.
“As the UK North Sea enters a new phase where decommissioning becomes the dominant industry driver, the supply chain faces significant demand and major financial risk. Based on current investment plans, up to 40% of UK fields could cease production before 2030,” said Yvonne Telford, research director at Westwood.
