The decommissioning of oil and gas infrastructure in the North Sea is falling short of set targets, with operators risking fines of up to £1 million for non-compliance.
Over 500 inactive oil wells, legally required to be deconstructed, cleaned, and sealed, have missed their original deadlines, according to the North Sea Transition Authority (NSTA).
Last year, UK operators in the North Sea achieved only 70% of planned well decommissioning activities.
The NSTA is losing patience with operators failing to meet deadlines and has begun opening investigations into those lagging behind schedule.
While the maximum sanction is a £1 million fine, the authority prefers to engage in stewardship and work closely with companies to improve their decommissioning efforts.
Current State of Decommissioning
At present, 940 inactive wells require decommissioning, with more than half having missed their original deadlines. On average, 120 wells have been decommissioned per year from 2018 to 2023.
The cost of decommissioning continues to rise, presenting a significant financial hurdle for operators.
Moody’s estimates the aggregate decommissioning liability for companies in its analysis at $22.4 billion, representing more than 50% of total liabilities for some operators in mature basins.
The NSTA forecasts that from 2023 to 2032, operators will spend approximately £24 billion on decommissioning, a £3 billion increase from previous estimates.
The authority is spearheading a project to identify wells ready for decommissioning from 2026 to 2030 and assess the required supply chain capacity.
As the industry grapples with these challenges, the NSTA continues to push for accelerated decommissioning efforts whilst exploring potential opportunities such as repurposing old oil wells for carbon capture and storage.
