Decommissioning Works Takes Priority In Oil Exploration In Lockdown Times
Despite the energy companies slashing their exploration and production budgets, decommissioning work seems to be on top priority. With the Covid-19 pandemic leading to physical lockdowns world over, oil prices have been tumbling down as consumption has been at its lowest.
People are inbound and industries have literally halted. Major oil producing nations have had to curb production as well. According to Rystad Energy, the total value of the global pool of decommissioning projects that will accumulate through 2024 is estimated to reach $42 billion.
According to Wikipedia definitions, “Decommissioning involves the safe plugging of the hole in the earth’s surface and disposal of the equipment used in offshore oil production. Decommissioning is a rapidly developing market sector in the petroleum business, with major potential and major risks.”
If one was to keep in mind and hope that the oil prices do not recover from the downward spiral, the Northwestern European decommissioning market could see a growth of almost 20 percent in annual commitments through 2022. This is more advantageous owing to the fact that technically, the lifespan of a decommissioning facility is nothing less than 20 years.
It also worth noting that there is a horde of rapidly maturing asset base. Additionally, the low oil prices will further erode commercial viability and potential life extensions. Indeed, the North Sea decommissioning market will thus be able to see favorable service contract prices. In the coming five years, as many as 23 assets will cease production annually. Within the rest of Europe, United Kingdom is estimated to lead the way with nearly 80% of total estimated expenditure on Northwest European decommissioning in the next five years.
This will be followed by Norway with 14% and Denmark with 4%. The pool of removal projects in the region for that period is estimated at about $17 billion. By comparison, decommissioning costs in the US for the same period are estimated at $5.7 billion. According to market reports, some of the leading assets that will drive the decommissioning market in the region should include the Brent, Ninian and Thistle fields in the UK and Gyda in Norway. It is being estimated that Shell’s Brent project would emerge as the single largest asset ever decommissioned globally, representing an outlay of nearly $3 billion alone over the coming decade. Ninian and Gyda would collectively present contracting opportunities worth nearly $2 billion.