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OGA pitches £100m loan fund for North Sea decommissioning

© Mark LammeyOGA decommissioing loan fund
The drilling derrick on Well-Safe Guardian.

The Oil and Gas Authority (OGA) has pitched a £100m loan fund to the UK Government to stimulate North Sea decommissioning activity.

Head of decommissioning, Pauline Innes, said the OGA is awaiting feedback on the business case, put forward after gathering data over the course of May and June.

She described it as a “win-win” for the Treasury and operators as it could bring down the cost of decom and subsequent tax relief pay-outs.

It would also help protect the supply chain by “incentivising a campaign model” for work across the 190 suspended wells in UK waters.

The OGA’s latest cost estimate report brought warnings over the health of the supply chain as decommissioning work is being pushed back while cash-strapped firms deal with this latest downturn.

A campaign approach, across wells owned by numerous operators, would benefit from economies of scale and provide lucrative work for these companies.

Ms Innes said: “If government could make loan funding available to support well decommissioning it might help operator cash flow issues and in doing so it might help keep the supply chain working.

“We could see that a loan fund could potentially incentivise the campaign model, proving its value to the market and establishing it as the new norm.

“We’ve shared this proposal with government and we’re awaiting feedback.”

OGA decommissioning loan fund
Pauline Innes, head of decommissioning at the Oil and Gas Authority.

Well P&A, which accounts for nearly half of overall decom costs, is being “significantly hit” and “impacted for longer”, Ms Innes said, addressing the Decom Offshore conference on Wednesday.

As the OGA waits to hear back on the decommissioning loan fund plans, it is still working with operators who own the 190 open water wells to build campaigns.

Will Rowley, interim CEO of Decom North Sea, said there is “growing frustration” over a lack of action on these wells, some of are “very old”.

He asked: “Would it be fair to say there’s an expectation to keep ramping up the pressure if there’s not a reasonable response from operators? We should be seeing some activity for next year for these, shouldn’t we? Would that be reasonable?”

Ms Innes said that, in order to keep costs down, operators have in some cases been asking for extensions to the suspension period, but that is now being “brought to an end”.

She said: “It appears to me that there has been a culture of drift in this. That there has been a two-year suspension, followed by another two-year suspension, followed by another two-year suspension. We’re bringing that to an end.

“That’s the messaging that we’re starting to engage with operators on so I would be hopeful that will generate some activity.”

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