A NEW FUNDING SOLUTION IS NEEDED FOR OIL DECOMMISSIONING

Oil pump at sunset
Nicholas Newman Oil Man magazine May 2017

At the time of writing, we are seeing an increasing number of media reports detailing the huge number of abandoned oil wells in Alberta and Texas. In addition, governments and the industry are experiencing growing concern over the increasing costs of decommissioning and reinstatement of both onshore and offshore oil and gas fields.

With oil prices at an unexpected all-time low, long- held assumptions about funding perspective decommissioning and reinstatement costs are proving unrealistic in meeting the requirements of many producers and regulators. Public opinion and governments, in general, will no longer tolerate the abandoning of such installations by the energy industry, leaving the hard-pressed taxpayer with a problem running into billions of dollars to resolve.

In fact, as both the industry and governments turn their attention to these issues, it is becoming clear that this problem is increasing in scale as energy resources mature and become more expensive to operate. In the current tough economic climate, there has been a rise in the number of wells abandoned or orphaned by operators. At the last count, there were some 1,400 abandoned wells in Alberta and more than 10,000 in Texas. Today, Alberta’s current abandoned well clean-up fund has only $240 million in the kitty whilst current estimates suggest that at least $29 billion is needed. Funded systems are experiencing a similar shortfall in US states, including Texas. Read  more

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