Decommissioning costs could overtake oil and gas capex in the UK by 2040

The costs of decommissioning oil and gas platforms in the UK’s North Sea could overtake capital expenditure in the industry by 2040, a new report from Offshore Energies UK has suggested.

At the moment, decommissioning costs represent a relatively small part of oil and gas companies’ total spending. Last year saw decommissioning costs accounted for some 12% of total spending in the industry. This could rise to 25% in 2032 and keep rising to top capital expenditure by 2040.

Over the next five years, more than 1,000 oil and gas wells in the North Sea are set to be plugged, according to the report, which also added that this would constitute “a considerable infrastructure and workforce challenge,” per Bloomberg.

Over the next ten years, decommissioning costs would hit 20 billion pounds, which is equal to a bit over $25 billion. This year alone will see spending on decommissioning top 2 billion pounds, or $2.5 billion.

“This is a £20 billion business opportunity for our world-class decommissioning industry, and it is vital it is handled properly so we do not lose the work to overseas competitors,” the author of the report and head of OEUK’s decommissioning unit, Ricky Thomson, said as quoted by Bloomberg.

In 2026 alone, the OEUK estimates that more than 100,000 tons of oil and gas platforms and substructures would need to be decommissioned. In the same year, more than 200 offshore wind turbines are expected to be installed in the area, creating something of a race for the necessary heavy equipment, and specifically heavy lift vessels, Energy Voice reported, citing the OEUK paper.

“We’re going to have to look at the supply chain capabilities and capacity in those areas, both onshore for dismantling, reuse and repurposing, and offshore for installation,” Thomson said, as quoted by Energy Voice.