Page 13 - EurOil Week 25

EurOil PERFORMANCE EurOil

Oil crisis hits decommissioning

spending: OGA

UK THE Oil and Gas Authority (OGA) has warned decommissioning between 2020 and 2025, ris-
that UK decommissioning spending will fall ing to GBP2.5bn in the second half of the decade.
The spending cuts will short of expectations this year, resulting in a Innes did not provide a revised estimate, but said
hit the supply industry slowdown in work that will hurt suppliers. some operators had shelved plans, while others
hard. In a webinar on June 17, OGA head Pauline were seeing them through.
Innes warned that around GBP1.5bn ($1.85bn) Operators are legally responsible for
of decommissioning spending had been forecast decommissioning their oil and gas structures,
annually in 2020 and 2021. But the coronavirus but the timing of the work is “the GBP59.7bn
(COVID-19) pandemic has overturned opera- question,” she said. Innes added that the OGA
tors’ plans. was looking to improve the “visibility” of
Innes said it was an “understandable and rea- work available to help the supply chain func-
sonable” approach for operators given the cir- tion better.
cumstances, but warned that some companies The regulator said last year it was halfway
were relying on this decommissioning work towards cutting the UK’s forecasted GBP59.7bn
continuing. decommissioning bill by 35%, helping to curb
“I have to say I do have concerns that the operators’ costs and benefitting taxpayers. But
reduction in decommissioning work over the this cost-cutting “mantra” could be making
next couple of years could have a significant and things worse, Jon Clark of accounting group EY
long-term detrimental impact on the supply said on the same webinar.
chain,” she said, “not only impacting on our abil- “If the whole mantra of the industry is to keep
ity to reduce decommissioning costs; it might cutting costs and get to a smaller number, that
also impact our ability to place the UK as being disincentivises anyone from wanting to invest,”
a world-class leader in decommissioning, and he explained. “Why would you want to invest
therefore limiting export opportunities.” into an industry when all of your customers are
Innes pointed to the risk of losing skills in the trying to cut what they spend?”
sector that would be needed to deliver the energy He went on to say that “encouraging cost cer-
transition, “not to mention the loss of jobs at a tainty and commercial models that allow that
difficult time in the market.” certainty, and control of the timing of activity to
OGA predicted last year that GBP1.5bn possibly sit more in the supply chain, could make
would be spent annually on North Sea a real difference.” ™

Week 25 25•June•2020 www. NEWSBASE .com P13