Industry experts have said that the next decade could see the closure of around 150 oil platforms across UK waters.
A company that provides consultancy services and market research for the sector, Douglas Westwood, has said that it expects that “146 platforms will be removed from the UK during 2019-2026”, that equal around one quarter of the current number of platforms.
The continuing drop of world oil prices has had a devastating effect on the industry. The industry organisation Oil and Gas UK has guessed that around 65,000 jobs have been cut in the sector since the year 2014.
However, Douglas Westwood have stated that the closure of these oil platforms could signify somewhat of an opportunity for some of the more specialised firms that will be involved in carrying out the task.
By the end of February, Douglas Westwood will release its official predictions for the decommissioning market in the North Sea. This will include forecasts relating to Norway, Germany, Denmark- along with the UK. The forecast will cover its expectations for the time period of 2016 to 2040.
Before that document has been released, the company has posted a paper on their website that states that they believe that the “UK will dominate decommissioning expenditure”.
The company state in the paper that the reason for this is the fact that many of the oil platforms in UK territories are of an older age than the ones owned by other North Sea nations. This means that these platforms will become uneconomical more quickly than those in other countries.
As they put it:
“high number of ageing platforms in the UK, which have an average age of over 20 years and are uneconomic at current commodity prices, as a result of high maintenance costs and the expensive production techniques required for mature fields”.
The company went on to say:
“The oil price collapse has been bad news for nearly every company involved in the industry, but one group that could actually benefit from it are specialist decommissioning companies.”
“For these companies there is an opportunity to be part of removing the huge tonnage of infrastructure that exists in the North Sea. With oil prices forecast to remain low, life extension work that has kept many North Sea platforms producing long past their design life no longer makes commercial sense.”
This report comes as the Scottish Energy minister is set to release a report that will set out the Scottish government’s plan to tackle the growing fears surrounding production in this area.
The report is called “Maximising Value” and it states:
“The industry is at a crucial point, where it must adapt to survive and thrive in a low global oil price scene, a changing commercial and regulatory environment and a maturing North Sea basin with fierce international competition for investment.”
It goes on to say that:
“There have been a significant number of job losses in recent times and unfortunately more are anticipated in the current environment.”
The report does state that the industry in the North Sea can indeed go on to survive, and it say that the supply chain’s value has the potential to increase from £22bn up to as much as £30bn. The report points to foreign markets such as the Middle East and Asia as a way to help increase the level of international trade.
The report goes on to set out its aim to see Scotland become on of the top three countries in the world with regards to its level of technology development and innovation- even after the oil in the North Sea has been used up. Sectors such as asset integrity, digital offshore, decommissioning and subsea have all been earmarked as places in which Scotland should have internationally recognised “centres of excellence”.
However, the report comes with the warning that large cuts are necessary in order to make this a reality. It says: “The investment required for the future can only be achieved by reducing costs and enhancing efficiency”.
Mr Erwing went on to say:
“While it is clear that the oil and gas industry faces severe challenges from a low global oil price, there are still opportunities that Scotland can capture from new discoveries and through our world-class supply chain.”
“This strategy, which we committed to refresh in our most recent Programme for Government, builds on these themes, supporting the industry to maintain its global position and to drive forward the changes required to increase growth in international and supply chain sales and production efficiency.”
A member of the Scottish Green Party, Patrick Harvie, commented saying:
“We have no time to waste if we want our workers and our economy to benefit from the drive to decommission North Sea rigs. Whether our governments like it or not, the future of North Sea oil is more uncertain than ever, and thousands of people will lose their livelihoods unless we secure work in areas like decommissioning and renewables.”
He added: “It would be irresponsible, foolish and extremely short-sighted to let other countries seize the opportunities of decommissioning. The Scottish Government must urgently accelerate its efforts if we’re going to secure jobs in the sector and make sure that Scotland is ready to bid for contracts.”
