Dramatic Decom Cost Cuts Needed
Oil and gas operators worldwide need to dramatically slash the costs of decommissioning wells and installations, according to a new report from the Boston Consulting Group (BCG).
“For the North Sea alone, estimates of the total price tag start at close to $150 billion,” BCG stated in the report.
“In the past, the challenge of decommissioning was a balance sheet issue, with operators focused on reducing their asset retirement obligations. But as the number of wells and installations at the end of their economic lifespan soars, it’s now a real-world problem. Operators must meet or even exceed the promises made on the ledger with actual reductions in abandonment expenses,” BCG added.
In the report, the global management consulting firm outlined six levers to reduce costs. These comprise:
- Fit for purpose designs and technology
- Intelligent multi-project campaigns
- Excellent project planning and execution
- Factory model (standardized approach)
- Innovative contracting models
- The right team
“No single lever is sufficient by itself,” BCG stated in the report.
“To realize cost reductions of as much as 30 percent, stakeholders must take an orchestrated approach that applies each of the levers relevant to a specific decommissioning project or campaign,” BCG added.
Earlier this year, a Wood Mackenzie report said up to $105 billion could be spent on decommissioning worldwide over the next decade.
The report said the top three largest decommissioning spenders in the next ten years would be the UK, the US and Norway, respectively. A list of the expected top 12 spenders over the next decade, as highlighted in the Wood Mackenzie report, can be seen below.
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