WoodMac: $32 billion to be spent on decommissioning worldwide in 5 years

Wood Mackenzie Ltd. estimates $32 billion will be spent on decommissioning worldwide during 2018-22. Governments determine who pays for decommissioning, and decommissioning laws and regulations remain incomplete or untested in many countries.

Ross Millan, WoodMac director of global fiscal research, and Graham Kellas, WoodMac senior vice-president of global fiscal research, wrote a report on various decommissioning approaches.

Decommissioning is most mature in the US Gulf of Mexico where an average of more than 100 platforms/year have been removed since about 1985.

“The maturity of the North Sea was brought into sharp focus by the latest oil price drop,” the report said. “The UK accounted for 16% of the estimated 472 fields that ceased production in 2013-17. It will spend almost $30 billion on decommissioning in the next 10 years because its upstream business is almost entirely located offshore.”

WoodMac forecast another 700 fields worldwide could cease production during the next 5 years depending upon oil prices.

Governments having high tax rates or profit share in production-sharing contracts effectively can be liable for most of the decommissioning expenses if costs are fully deductible, the WoodMac report said.