There will be a gradual rise in offshore oil and gas decommissioning in both UK and Norway over the coming decade, a new report suggests, with activity growing from a market worth more than £2 billion in 2015.
Decommissioning Insight 2016 was launched yesterday by Oil & Gas UK, the leading trade association for the UK offshore oil and gas industry, at an industry conference on decommissioning in St Andrews, sponsored by Aberdeen Harbour Board.
The report is the first survey of both the UK and Norwegian decommissioning markets and provides the most comprehensive picture to date of anticipated activity in these two countries between now and 2025.
It confirms that decommissioning is a growing, if still emerging, market, despite low oil prices continuing to challenge the economics of the more mature offshore assets around the North Sea.
Total decommissioning expenditure in the UK and Norway last year was £2.1 billion, compared with just under £1.6 billion in 2014, and represented 5 per cent of total industry expenditure, compared with 2 per cent in 2010.
The total amount forecast to be spent on decommissioning on the UK Continental Shelf (UKCS) between now and 2025 is £17.6 billion up from £16.9 billion for 2015-2024.
Mike Tholen, Oil & Gas UK’s upstream policy director, said: “With low oil prices continuing, you might expect decommissioning to be a key focus for the sector in the years ahead, however we are not witnessing a rush to decommission.
“Different factors are at play and the picture is much more complex. Some companies are deferring cessation of production as field life has been extended by sustained efficiency improvements; others are delaying activity due to cash-flow constraints; while elsewhere, companies may be expediting decommissioning to take advantage of falling costs in the current downturn.”
While 52 new projects appear for the first time in this year’s report, most of these have been a long time in the planning. Over the next decade, there are more than 100 platforms forecast for complete or partial removal from both the UK and Norwegian continental shelves. Over 1,800 wells are scheduled to be plugged and abandoned and around 7,500 km of pipeline is forecast to be decommissioned.
Mr Tholen continued: “Of the estimated £17.6 billion of decommissioning expenditure on the UKCS over the next ten years, more than 50 per cent of this market will be found in the central North Sea.
“The UK’s supply chain will need to focus on developing a high-quality, cost-efficient and competitive decommissioning capacity to make the most of the opportunity and provide a range of goods and services that can not only be deployed in the UK but also exported overseas.”
Since the 2015 survey, unit costs of decommissioning appear to be falling, particularly for well plugging, abandonment and making safe. This is partly due to a market-driven response to the downturn as associated costs (such as rig rates) have fallen. The industry is also increasingly applying past experience to new decommissioning projects to positive effect.
Oil & Gas UK is working on the MER UK Decommissioning Board with the Oil and Gas Authority (OGA) and the Department for Business Energy and Industrial Strategy to develop new fit-for-purpose technical, commercial and operational solutions to lower the cost of decommissioning while maintaining high safety and environmental standards.
Mr Tholen added: “There could still be up to 20 billion barrels of oil and gas to recover from the UKCS. If the UK is to continue to gain the full economic benefit from its oil and gas resource, it is important that the industry continues to work with the OGA as well as with HM Treasury to attract fresh investment, avoid premature decommissioning, retain the critical infrastructure needed to access future reserves and ensure decommissioning is carried out in a timely and most cost-effective way.
“We are now working with HM Treasury to explore further avenues in its ‘Driving Investment’ fiscal strategy for the sector, including the possibility of transferring tax relief on decommissioning costs with the sale of assets.”
The 2016 Decommissioning Insight report is available here.
Are the UK Governments Plans for the Energy Sector Smart?
The revolution in the energy sector marches on, wind turbines and solar panels are harnessing more renewable energy than ever before – so where is it all leading?
The UK government have recently announced plans to modernise the way we produce, store and use electricity. And, if realised, the plans could be just the thing to bring the energy sector in line with 21st century technology and ideologies.
Central to the plans is an initiative that will see smart meters installed in homes and businesses the length and breadth of the country – and their aim? To create an environment where electricity can be managed more efficiently.
The news has prompted some speculation about how energy suppliers will react and many are predicting a price war. This could benefit consumers of electricity and investors, many of whom may be looking to make a profit by trading energy company shares online using platforms such as Oanda – but the potential for good news doesn’t end there.
Introducing New Technology
The plan, titled Smart Systems and Flexibility is being rolled out in the hope that it will have a positive impact in three core areas.
- To offer consumers greater control by making smart meters available for all homes and businesses by 2020. Energy users will be able to monitor, control and record the amount of energy they use.
- Incentivise energy suppliers to change the manner in which they buy electricity, to offer more smart tariffs and more off-peak periods for energy consumption.
- Introduce new standards for electrical appliances – it is hoped that the new wave of appliances will recognise when electricity is at its cheapest and at its most expensive and respond accordingly.
How the Plans Will Affect Solar Energy
Around 7 million houses in the UK have solar panels and the government say that their plan will benefit them as they will be able to store electricity on batteries. The stored energy can then be used by the household and excess energy can be exported to the national grid – in this instance lower tariffs or even payment for the excess energy will bring down annual costs significantly.
The rate of return on energy exported to the national grid is currently between 6% and 10%, but there are many variables to take into account, such as, the cost of battery storage and light levels. Still, those with state-of-the-art solar electricity systems could end up with an annual profit after selling their excess energy.
The Internet of Things
Much of what the plans set out to achieve are linked to the now ubiquitous “internet of things” – where, for example, appliances and heating systems are connected to the internet in order to make them function more smartly.
Companies like Hive have already made great inroads into this type of technology, but the road that the government plans are heading down, will, potentially, go much further -blockchain technology looms and has already proved to be a game changer in the world of currency.
It has already been suggested that the peer to peer selling of energy and exporting it to the national grid may eventually be done using blockchain technology.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
Don and Alex Tapscott, Blockchain Revolution (2016)
The upshot of the government’s plans for the revolution of the energy sector, is that technology will play an indelible role in making it more efficient, more flexible and ultimately more sustainable.
4 Case Studies on the Benefits of Solar Energy
Demand for solar energy is growing at a surprising rate. New figures from SolarPower Europe show that solar energy production has risen 50% since the summer of 2016.
However, many people are still skeptical of the benefits of solar energy.Does it actually make a significant reduction in our carbon footprint? Is it actually cost-effective for the company over the long-run?
A number of case studies have been conducted, which indicate solar energy can be enormously beneficial. Here are some of the most compelling studies on the subject.
1. Boulder Nissan
When you think of companies that leverage solar power, car dealerships probably aren’t the first ones that come to mind. However, Boulder Nissan is highly committed to promoting green energy. They worked with Independent Power Systems to setup a number of solar cells. Here were the results:
- Boulder Nissan has reduced coal generated electricity by 65%.
- They are on track to run on 100% renewable energy within the next 13 years.
- Boulder Nissan reduced CO2 emissions by 416,000 lbs. within the first year after installing their solar panels.
This is one of the most impressive solar energy case studies a small business has published in recent years. It shows that even small companies in rural communities can make a major difference by adapting solar energy.
2. Valley Electric Association
In 2015, the Valley Electric Association (VEA) created an 80-acre solar garden. Before retiring from the legislature, U.S. Senate Minority Leader Harry Reid praised the new project as a way to make the state more energy dependent and reduce our carbon footprint.
“This facility will provide its customers with the opportunity to purchase 100 percent of their electricity from clean energy produced in Nevada,” Reid told reporters with the Pahrump Valley Times. “That’s a step forward for the Silver State, but it also proves that utilities can work with customers to provide clean renewable energy that they demand.”
The solar energy that VEA produced was drastically higher than anyone would have predicted. SolarWorld estimates that the solar garden created 32,680,000 kwh every year, which was enough to power nearly 4,000 homes.
This was a major undertaking for a purple state, which may inspire their peers throughout the Midwest to develop solar gardens of their own. It will reduce dependency on the electric grid, which is a problem for many remote states in the central part of the country.
3. Las Vegas Casinos
A number of Las Vegas casinos have started investing in solar panels over the last couple of years. The Guardian reports that many of these casinos have cut costs considerably. Some of them are even selling the energy back to the grid.
“It’s no accident that we put the array on top of a conference center. This is good business for us,” Cindy Ortega, chief sustainability officer at MGM Resorts told Guardian reporters. “We are looking at leaving the power system, and one of the reasons for that is we can procure more renewable energy on the open market.”
There have been many benefits for casinos using solar energy. They are some of the most energy-intensive institutions in the world, so this has helped them become much more cost-effective. It also helps minimize disruptions to their customers learning online keno strategies in the event of any problems with the electric grid.
4. Boston College
Boston College has been committed to many green initiatives over the years. A group of researchers experimented with solar cells on different parts of the campus to see where they could produce the most electricity. They discovered that the best locationwas at St. Clement’sHall. The solar cells there dramatically. It would also reduce CO2 emissions by 521,702 lbs. a year and be enough to save 10,869 trees.
Boston College is exploring new ways to expand their usage of solar cells. They may be able to invest in more effective solar panels that can generate far more solar energy.
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