Engineering news
Oil and gas installations in the North Sea are at increasing risk of being decommissioned “prematurely”, Oil and Gas UK has warned, while production rates from the region continue to drop this year.
According to the trade association’s 2010 activity survey, which covers the spending of over 70 companies in the sector, production of oil and gas from the North Sea declined 6% in 2009 and will drop another 6% this year. The region will produce around 2.3 million barrels of oil equivalent (boe) per day, “the lowest for many years” admitted Mike Tholen, economic director at Oil and Gas UK.
While operating costs have fallen 5% to £6.6bn, the estimated cost of decommissioning all the plant in the North Sea has risen a massive 18% since 2008.
Tholen said: “The costs of decommissioning have continued to grow, from £10bn to £26bn. People are slowing down their investment plans and thinking about how to turn their lights off, not keep them on.”
The rise has been caused by a combination of inflation, the prospect of the third phase of the European Union’s Emissions Trading Scheme, high tax rates on new investment and uncertainty over the planned introduction of a decommissioning tax relief, said the association.
Malcolm Webb, chief executive of Oil and Gas UK, said: “The government needs to do more on the taxation system, particularly for existing fields and on the decommissioning phase, or we could get premature decommissioning.
“The decommissioning issue is pressing. There is doubt if a new government would honour the decommissioning tax relief. The industry needs assurance.”
“Our indigenous supply of oil and gas could drop from 70 to 20% by 2020 if we get this wrong.”