By Paul Davies and Simon Tysoe

Sustained investment in offshore platforms and production installations has been critical in securing the UK’s energy supply. Despite ongoing oil price volatility, in 2016 and 2017 £3-4 billion of capital per year is envisioned for new developments in the UK continental shelf (“UKCS”). Such developments are expected to sustain production for decades, not only to meet rising energy demand, but to maximise significant project investment. Falling industry costs and improvements in efficiency have led to a decline in the operating costs of oil and gas installations – the Oil & Gas UK’s Economic Report 2015 anticipates expenditure on existing assets to drop to £2.1 billion by the end of 2016, representing a 22% decrease from the previous year.

Yet, notwithstanding cost optimisation, as oil and gas fields near depletion and therefore become unproductive, installations need to be retired or recycled. Removal requires substantial investment – expenditures of £2 billion are forecast by 2018, up from £1 billion in 2014 – to undertake the decommissioning of approximately 50 fields by 2018. More significantly, current mid-point estimates for UKCS decommissioning to 2050 is £47 billion, with a substantial portion of this being funded through tax-relief. Consequently, on 30 June 2016, the Oil and Gas Authority (OGA) published the UK’s Oil and Gas Decommissioning Strategy. The OGA, tasked with maximising economic recovery of the oil and gas lifecycle, will also issue accompanying delivery programmes to detail how decommissioning will be achieved.