The discovery and production of 44 billion barrels of oil and gas in the UK’s North Sea since the 1960s has left the industry with the need to decommission 320 fixed installations, 3,000 pipelines and 5,000 wells at a cost, estimated by the UK’s Oil and Gas Authority, of between £ 45 and £77 billion. Taking the mid-way estimate of £ 58.3 billion, the House of Commons Public Accounts Committee report, March 2019 accepts HMRC’s calculation that £ 24 billion (USD 30.1 billion) would fall to the tax payer through tax reliefs.
Cost to taxpayers
There remains significant uncertainty as to the potential cost to British taxpayers, since new fields are still being commissioned and there is a higher degree of financial risk from default, because the majority of “late-life” and “new-entrant” operators will be smaller enterprises, likely unable to support the scale of liabilities carried by the majors. In such cases the tax payer will pay the full cost. Another consideration to be taken into account is the method of decommissioning. Full decommissioning, with plugging and abandoning wells and removing platforms to return the sea-bed to its natural state is the most expensive and environmentally challenging. Leaving the legs or partial decommissioning is less costly and leaving things in place and making installations safe is the cheapest.
Cost of dismantaling oil rigs
A case in point is the dismantling of Shell’s giant Brent Delta 3 storey rig platform, weighing 24,500 tons, in a single-lift operation using the heavy lift catamaran Pioneering Spirit. The operation left behind the three supporting 170 metre concrete legs in place in April 2017. In May 2017 The Daily Mail newspaper reported that the decommissioning of Brent Spar cost an estimated £500 million (USD 628 million).