Decommissioning industry body Decom North Sea has welcomed Chancellor George Osborne’s 2012 Budget saying it would bring new jobs and investment.
With annual decommissioning expenditure in the North Sea forecast to top £1billion within a few years and a total of around £35billion due to be spent over the next 20 to 30 years, Decom North Nea (DNS) had called for the Budget to provide long-term certainty.
Today’s Budget included a proposals to create a contractual approach to decommissioning tax relief – this would see the Government sign contracts with oil and gas producers agreeing how much tax relief the Government would offer on decommissioning costs.
DNS chief executive Brian Nixon said: “The announcement has provided a set level of relief for operators which will assist the whole industry – and particularly the smaller breed of operators working in the North Sea – and will encourage more asset sales with prospective buyers now being assured of Government support when the assets reach the decommissioning phase.
“We believe the Budget will lead to operators being able to move forward with their decommissioning plans, which will in turn help to reassure the hundreds of supply chain companiesand encourage them to consider investment in new equipment or tooling or to attract new staff.
“We are not trying to accelerate the pace of decommissioning by any means but we are trying to increase the pace of innovation and efficiency in the industry and this needs a more steady flow of projects than seen to date.”
Spending levels are forecast to rise steadily from a current level of about £500million to more than £1billion a year within the next two to three years, perhaps reaching as many as 10 decommissioning projects each year.
This is an increase on initial projections, which put the cost of decommissioning North Sea oil and gas facilities at between £24-30 billion within the same period to 2040 – and there is every chance the figure could rise again in future, according to DNS.
When Norwegian, Danish and Dutch oil and gas facilities are included, the figure is expected to double.
The sector is at an early stage of its development, with only a small percentage of the infrastructure in the UK sector of the North Sea having been decommissioned to date.
Activity will ramp up in the coming years, requiring significant investment by the supply chain, and significant expenditure by operators and the Government, to ultimately remove more than 600 installations and associated infrastructure, around 5,000 wells and close to 6,300 miles of pipelines.
Mr Nixon added: “There are huge business opportunities for contractors, service specialists, equipment providers, technology developers, consultants and professional service companies from around the North Sea.
“We welcome today’s announcement in the Budget and look forward to working with our members and the wider industry to maximise potential opportunities over the coming years.”
DNS has about 200 members drawn from across the full spectrum of the industry including operators and contractors.