Staff and vessel shortages 'to hit North Sea oil wells phase out'

But OEUK has admitted that a competition for expertise, workers and equipment with new renewable energy projects could cause "bottlenecks" in demand for decommissioning.

Decommissioning is seen by some experts as the primary driver of emissions reductions.

And Under the North Sea Transition Deal signed last year, the industry agreed to cut emissions by 25% by 2027 and 50% by 2030.

OEUK say the wells have played a crucial role in providing the UK with the energy to keep homes warm, run businesses and power vehicles. Its latest analysis has found that UK decommissioning is expanding fast and predicts a surge in activity over the next three to four years. It says the sector will continue growing as other emerging offshore energy technologies, like offshore wind farms, also require the service.

It is estimated around 2,100 North Sea wells will be decommissioned over the next decade – around 200 per year – at an average cost of £7.8m per well. But OEUK said there are currently forecasted to be 209 offshore wind farms expected to be constructed over the next decade..

It said new energy projects were "draining the market" in key supply chain areas for the decommissioning, not least the heavy-lift vessel market.

It meant that contractors would have to choose between decommissioning works and offshore wind installations.

OEUK said that means the offshore wind, carbon capture and storage, and oil and gas sectors will need to work together and be transparent about planned projects to make sure the opportunity is properly managed.

OEUK decommissioning manager Ricky Thomson admitted that there was competition for expertise and equipment was a "concern" indicating that would increase as plans are rolled out to speed up wind farm installations due to a rise in demand.

"These will use many of the skilled personnel as well as assets the gas decommissioning sector require to complete the body of work," said Mr Thomson.

"It is a concern and an opportunity with the new energies.

"So being able to share this work makes it extremely difficult. With offshore wind you have long campaigns, long stable campaigns of repeat work and decommissioning you've got shorter, much more complicated campaigns.

"So being able to squeeze it all together and get all the expertise and assets to do so, it's quite the balancing act and it's something that we have to make sure we make happen. "It's a good problem to have. It is a challenge of a lot of work to come and a lot of assets to share and a lot of personnel to share.

"The UK is a very unique place where they're kind of the first to do most things. So for that I think that it is a concern that needs to be addressed but it's certainly more of an opportunity."

In 2022, OEUK say there will be 16 offshore wind installations forecasted to be installed. At the the same time, there were to be 22 substructure and 25 topside removals in decommissioning oil and gas facilities.

Mr Thomson said: "We have to be collaborating across sector in order to ensure that we have assets and personnel to execute all of these work scopes. In 2021, decommissioning expenditure rose by almost a fifth to £1.273bn and this year that spending is likely to increase significantly and may reach the £2bn mark for the first time.

In 2021 a tenth of United Kingdom Continental Shelf oil and gas expenditure went on decommissioning.

OEUK say ths proportion has risen to 14% in 2022 and is set to rise to 19% by 2031.

OEUK also admitted that competing with new energies and other industries to encourage new entrants into offshore decommissioning had also proved challenging.

Mark Wilson, OEUK's health and safety executive and operations director said its analysis shows that the "operating environment for the decommissioning community continues to pose problems".

He added:"The industry must stay resilient and continue to be innovative and collaborate if it is to realise the sector’s full potential. With the right support from government and action from the operators, the supply chain and academia, the UK has the opportunity to make major gains from decommissioning, as well as retain thousands of jobs in the UK."

In July, research warned that high oil prices, coupled with the UK Government’s windfall tax, could “pose a threat” to North Sea decommissioning targets.

Boston Consulting Group (BCG) said high prices “incentivise reinvestment” and the tax did not provide relief for decommissioning costs, so the “rational choice” was to continue to extract oil rather than leave it in the ground.

The group said that could have a knock-on impact on the “backlog, liquidation and performance” of decommissioning, with rising costs, emissions and challenges for specialised companies.

BCG said pushing back a field’s cessation of production date “could slow down decarbonisation”.

The North Sea has targets from the industry regulator to slash the cost of decommissioning in order to protect the taxpayer from hefty rebates.

But an August study by the North Sea Transition Authority showed a slowdown in progress in cutting decommissioning costs as it decreased by just 2% (£1.5bn) to £44.5bn last year.

The North Sea Transition Authority said decommissioning costs have fallen by 25% since 2017, but Covid-19 and supply chain pressures have slowed progress towards its 35% goal.

Oil firms can claim tax relief by off-setting decommissioning costs against current profits, or repayments of previous tax paid, if losses from decommissioning expenditure are carried back.

They can also claim lower levels of tax on future profits, which are reduced by losses created by current decommissioning costs being carried forward.