Some oil and gas pipelines in the North Sea could become redundant if new reserves are not found and developed in time, a meeting in Aberdeen was told yesterday.
As production declines on the UK continental shelf, quantities of oil and gas going through major pipelines to onshore terminals might not be enough to keep them viable, the event was told.
This would be despite there still being billions of barrels of oil in future prospects still waiting to be developed.
The comments were made as part of the unveiling of a new report on the state of the North Sea oil and gas decommissioning market, commissioned by Granite City-based industry body Decom North Sea.
Its author, noted petroleum economist Alex Kemp, of Aberdeen University, said in particular, some pipelines in the southern North Sea were closer to being of “questionable economic viability”.
For other pipelines in the rest of the North Sea, he said the issue was of a gap between mature oil fields running down and new ones starting up, making pipelines potentially uneconomical for a period despite there being potential future demand, however, larger trunk lines would take longer to phase out.
Professor Kemp said: “The risk is pipelines will close down.
“It is going to happen in the southern basin in the next few years.
“We have tested our findings with people from the Department of Energy and Climate Change working on infrastructure and they are agreeing; several schemes in the southern North Sea do not have long to go. There is a need to encourage new developments to address this.
“There is more investment needed in reinforcing the infrastructure and preventing it coming to the end of its economic life.
“In the southern basin this could be quite soon, but really the main idea applies to the wider pipeline system as well.
“Accelerating development of fields would be the obvious advantage to everyone.”
According to Prof Kemp’s report there could be £32-£36billion worth of decommissioning work in the UK North Sea in the next 30 years, depending on an oil price range of $70-$90 a barrel, with a spike in spending in 2024.
At the lower price there would be about 530 installations needing to be taken out of operation by 2042.
At the higher price, it would be 690.
Most of the cash will be spent in the northern North Sea on mature fields, where the water is deeper and installations bigger, with smaller field developments dominating the later years, however, the level of work is likely to be “lumpy”, according to the report, potentially when a couple of larger field developments are decommissioned over a similar period.
Prof Kemp said concerns over decommissioning liabilities could put off potential purchasers who could extend the life of infrastructure from buying it.
“Quite a few assets have been on the market and have not been bought,” he said. “In significant part, this is due to problems small companies have getting finance. But part of it is decommissioning relief.”
The increase in the tax on UK oil and gas producers had also accelerated some decommissioning programs, notably CNR’s Murchison platform, which the firm decided would close instead of being invested in following last year’s tax hike.
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