Oil fields clear-up to cost £47bn By Douglas Fraser

Business and economy editor, Scotland Published duration 15 November 2011

The cost of clearing up after the oil and gas industry in the seas around Britain and its neighbours could reach more than £47bn, it has been claimed.

Industry consultants warned there was a need for companies to prepare for the work ahead.

Consultants Douglas Westwood and Deloitte's last year estimated work in the UK waters could cost about £19bn.

They have increased that estimate and added equipment in waters off Norway, Denmark, the Netherlands and Ireland.

Lifted by barges

The report reckoned there were 488 platforms to be removed, and 7,888 wells to be capped, and it pointed out that decommissioning was required by law.

It concluded there were about four million tonnes of steel and other materials to be scrapped.

Most of it would be bound for recycled use.

Three-quarters of the cost would be in decommissioning wells.

The other quarter would be required to remove pipelines and large platforms, which would have to be either broken up at sea or lifted by barges for breaking up on shore.

It would be less expensive to ship the platforms to on-shore yards, requiring ships that could lift up to 15,000 tonnes.

The cost of break-up in the UK was estimated by the same consultants last year at £19bn.

They have raised that estimate to £30bn, and added a calculation for installations off Norway, Denmark, the Netherlands and Ireland, with a total estimated cost of £47.5bn.

The report, to be discussed at a decommissioning conference in Aberdeen on Tuesday, said this work would require an average of more than £1.5bn of spending each year for the next 30 years.

While little of this work has been done so far, the demand for decommissioning will rise rapidly from 2016 and remain at a high level past 2030.

The report goes on to warn that the offshore engineering skills and capacity required to meet the demand for decommissioning will also be in demand from the renewable energy sector, and that new yards will be required.

Andrew Reid, chief executive of Douglas-Westwood, 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 £1.58bn per annum price tag over the next 30 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."

According to Graham Sadler, of Deloitte's petroleum services group: "Decommissioning itself is not a new phenomenon.