North Sea decommissioning grapples with delays despite government incentives 

The North Sea decommissioning sector continues to face delays, as technical, regulatory, and financial hurdles prevent the rapid shutdown of offshore assets on the UK Continental Shelf (UKCS), according to a new analysis from Wood Mackenzie, an energy intelligence group.

While the UK Government’s Energy Profits Levy (EPL) has prompted several operators to accelerate cessation of production (COP) timelines, a mix of logistical, commercial, and regulatory complexities is stalling general decommissioning efforts, according to the analysis.

The consultancy underlines mounting supply chain constraints and cost inflation within the sector, which it values at $58 billion through to the early 2060s. Despite this scale, a wholesale trend of early COP remains elusive.

“Since the energy profits levy (EPL) was introduced in 2022, several UK operators have announced their intention to accelerate COP on their assets, declaring that further investment is no longer viable,” said James Reid, Senior Research Analyst at Wood Mackenzie.

At present, the UK North Sea has 242 producing offshore fields, alongside 255 fields that have ceased production. Only 76 of those ceased assets have been fully decommissioned. Wood Mackenzie projects that gross decommissioning costs will surpass development capex by 2032, peaking at over $3.5 billion annually in the mid-2030s.

Despite the sector’s maturity and changing fiscal landscape, decommissioning efforts remain cautious, Wood Mackenzie noted. The regulator’s stance, coupled with cost pressures and limited supply chain capacity, is driving a measured approach rather than a “dash to decom.”

“The growth of small players has been key to rejuvenating old assets, but decommissioning, and the potential acceleration of it, presents increasing risks to JV partners and the UK government which presents companies with more reason to keep kicking the decommissioning can down the road,” Reid noted.

In scenarios where companies default on their obligations without backup from JV partners or other stakeholders, the financial burden could ultimately fall to UK taxpayers, the report warns.

In October, Wood Mackenzie pointed out that the United Kingdom (UK) could get its hands on an additional £10 billion of North Sea oil and natural gas value from existing assets if it puts the right set of fiscal and regulatory policies in place.