Royal Dutch Shell are estimated to have over US$3bn
in total abandonment and decommissioning expenditure (ABEX) in
producing UK oil and gas developments, stacking above fellow UK
operators, says GlobalData, a leading data and analytics
company.
The company’s latest research reveals the top five
companies with the greatest ABEX exposure from producing fields
in the UK are: Royal Dutch Shell (Shell), Apache Corp, Total SA,
Exxon Mobil Corp and BP Plc.
Of the UK operators, Shell is set to have the largest
ABEX liability, of just over US$3bn to abandon producing fields
in the UK, and is set to spend as much as half of that value by
2025. This is driven mainly by the Brent oil field but also
relates to expenditure in aging developments such as Pierce and
Curlew.
Daniel Rogers, Upstream Oil & Gas Analyst at
GlobalData, commented, “The total plug and abandonment
expenditure alone for the Brent field could reach US$900m and
spans from 2008 to 2020 with over 150 wells in total. The
decision not to remove the Brent gravity based concrete
structures weighing around 960,000 tons due to technical and
safety concerns will come with significant cost savings; the
decision, however, is being largely disputed by environmentalists
and neighbouring countries.”
The two producing fields identified to carry the
largest ABEX in the UK are the Brent and Forties oil
developments. The combined ABEX for the two fields could reach
some US$4bn in total, with Brent expected to cease production in
2020 and Forties not likely until 2030’s.
Daniel continued, “Despite the Forties Production
System (FPS) pipeline not due for abandonment in the near future,
the removal of the approximately 150,000 tons of platforms at the
field could cost the participants some US$700m. This will weigh
heavily on current operator Apache Corp and as a result places
the company only behind Shell in terms of UK abandonment and
decommissioning liabilities from producing assets.”
The study also reveals a significant growth in
the number of UK asset retirement contracts issued since the
industry down turn in 2014, but the number has remained
relatively flat since 2016 after a sharp initial
rise. Of those
contracts, the majority have been Plug and Abandonment (P&A)
work scopes, with near term forecast UK ABEX expected to be
weighted towards P&A activities.
Daniel added, “We have seen a negative correlation
between the number of asset retirement contracts awarded and the
price of oil over the last five years. During lower oil prices,
reduced profits from producing fields coupled with lower service
costs provide a favourable environment for asset retirement
activity. Given the recent stabilization of oil price and a push
by the UK government to maximize economic recovery from existing
assets, the outcome will likely lead to project abandonment
delays and rejuvenated investment at legacy
fields.”
