The UK North Sea: How To Manage an Aging Basin
- Stephen Whitfield (JPT Senior Staff Writer)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- July 2018
- Document Type
- Journal Paper
- 27 - 31
- 2018. Copyright is held partially by SPE. Contact SPE for permission to use material from this document.
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The words “UK North Sea” do not engender much more than cautious optimism these days when talking about oil and gas production, with dropping production and high decommissioning costs dominating the conversation.
The reality is more complicated. After 14 years straight of production declines, and particularly sharp production declines from 2010 to 2014, the UK continental shelf (UKCS) saw production increases from 2015 to 2017. While it is a mature basin in the midst of overall decline, the UKCS has shown potential. Production in recent years has been boosted by a number of large projects coming online such as BP’s Schiehallion and Chevron’s Rosebank. Future production numbers may see a boost from discoveries like BP’s Capercaillie and Achmelvich, and Hurricane Energy’s discoveries at Halifax and Lincoln in the West of Shetland area. Companies and government regulators also see opportunities.
Whether those opportunities will lead to anything beyond a temporary reprieve remains a question. Even if the decline resumes next year, as some have forecast, managing the assets still active in a way that avoids doubledigit losses will be a challenge for all the stakeholders in the area.
The Value of Infrastructure
In discussing decommissioning and abandonment’s place in the North Sea conversation, Oil and Gas UK economics and market intelligence manager Adam Davey said he has seen little evidence of a massive pickup in activity, with more stories coming about operators trying to extend field life and defer decommissioning.
However, the massive cost of decommissioning is still the most pressing issue facing companies operating in the region. The North Sea makes up the majority of global offshore decommissioning costs, and while the region is forecast to comprise a smaller share of the global total over the next 4 years, the overall costs of North Sea decommissioning should still rise from 2018 to 2021 (Fig. 1). Wood Mackenzie predicted that decommissioning spend will overtake capital expenditure by 2022.
In the UK, decommissioning costs are expected to remain consistent at $2.3 to $2.7 billion annually over the next 5 years, compared to $532 million to $1 billion on the Norwegian continental shelf and $864 million to $1 billion on the Dutch continental shelf. Oil and Gas UK said it is an indication that there is no need to rush decommissioning efforts.
While decommissioning activity on the UKCS is much greater than in the other sectors on the North Sea, the consultancy said this reflects the total amount of infrastructure in the basin, as well as the fact that an increasing number of mature assets are naturally reaching the end of their productive lives. Wood Mackenzie said it is not necessarily an indicator that the UKCS is entering a steep decline.
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