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North Sea decommissioning costs could exceed GBP47.5 billion

November 17 - A GBP47.5 billion (USD74.7) business opportunity is opening up for companies in decommissioning the North Sea's huge infrastructure of offshore oil and gas fields according to new research to be published by Deloitte and Douglas-Westwood.

The next 30 years will see enormous demand building for the services of supply chain players which will generate a large number of much-needed of jobs in the regions under consideration in the report - UK, Denmark, The Netherlands, Norway, and Ireland.

The new North Sea Offshore Decommissioning Market Report highlights that the majority of decommissioning activity and related spend will occur between 2016 and 2031. The projected workload is expected to exceed the capacities of the existing heavy lift vessel fleet and onshore deconstruction facilities. The delivery of new specialised vessels is urgent and more onshore yards are likely to be needed in order to meet the demand.

Coincidentally the forecast peak period is also due to see a major increase in offshore wind projects, putting even more pressure upon the offshore industries supply chains, explains Angela MacCormack, report lead author atDouglas-Westwood.

Speaking at the 8th Annual North Sea Decommissioning Conference in Aberdeen, Andrew Reid, DW CEO, said: "If the supply chain fails to rapidly prepare, our research clearly shows that the huge amount of decommissioning activity in the North Sea could be dramatically delayed and consequently be more costly.

"An average GBP1.58 billion (USD2.4) per annum price tag over the next thirty years highlights the potential for the oil services industry - most importantly it could significantly boost the regional economies involved. And these expenditure forecasts are low-case estimates - the final cost could be significantly higher."

The report considers two scenarios which account for developing offshore lift technologies and the associated variable onshore costs; the first scenario presents a 'business as usual' situation whereby existing heavy lift vessels are used to carry out decommissioning using an 'offshore deconstruction' process.

The second scenario assumes a step change in offshore lifting technology and the development of Super Heavy Lift Vessels (SLVs) that are capable of lifting upwards of 13,600 tonnes. The bottom-up Douglas-Westwood cost forecast is generated using these scenarios and covers all decommissioning aspects from the plugging and abandonment of subsea wells to onshore deconstruction and recycling.

Attention is also paid to specialist equipment requirements and the yards to which decommissioned infrastructure can be sent for disposal, re-use and/or recycling.

"Decommissioning itself is not a new phenomenon - indeed, over 100 small platforms a year have been removed from the Gulf of Mexico using well developed procedures. However, the challenge posed by the North Sea structures - because of their heavier weight and the local climate - represents a major challenge on a totally different scale," concludes Graham Sadler, managing director, Deloitte's Petroleum Services Group.

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