A £47.5billion business opportunity is opening up for companies in decommissioning North Sea oil and gas fields, according to new research.
Deloitte and Douglas-Westwood said the next 30 years would see enormous demand building for the services of supply-chain players which would generate a large number of jobs in the UK, Denmark, the Netherlands, Norway, and Ireland.
The latest North Sea offshore decommissioning market report highlights that the majority of activity and related spending will occur between 2016 and 2031.
Projected workload is expected to exceed the capacities of the heavy-lift vessel fleet and onshore deconstruction facilities. As a result, the delivery of new specialised vessels was urgent and more onshore yards were likely to be needed to meet demand.
Coincidentally, a major increase in offshore wind projects is expected during the forecast peak period, putting even more pressure upon the offshore industries’ supply chains, according to Angela MacCormack, report lead author at energy consultant Douglas-Westwood.
The group’s managing director, Andrew Reid, is speaking today at the eighth annual North Sea Decommissioning Conference in Aberdeen. He 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 £1.58billion per annum price tag over the next 30 years highlights the potential for the oil service 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.”
Graham Sadler, managing director of professional service firm Deloitte’s petroleum service group, said: “Decommissioning itself is not a new phenomenon. Indeed, over 100 small platforms a year have been removed from the Gulf of Mexico using well developed procedures.
“However, the challenge posed by the North Sea structures – because of their heavier weight and the local climate – represents a major challenge on a different scale.”
Brian Nixon, chief executive of offshore oil and gas decommissioning forum Decom North Sea, said the ramp-up in decom activity forecast in this latest report was not unexpected, but it did add a further view on what the sector could expect.
He added: “Decom North Sea was established almost two years ago to address the very capacity issues highlighted in this report and it is encouraging for us to note the significant increase in supply-chain preparation and investment. We see ongoing development by offshore and onshore specialists, including the onshore yards that will receive the infrastructure for final disposal, recycling, re-use and waste treatment.”
Mr Nixon said Lerwick was well placed to capture onshore disposal work from the central and northern North Sea, while Peterhead had invested in developments at the Smith Embankment in support of subsea and smaller infrastructure projects. He added that Kishorn on the west coast was also keen to participate.