Boston Consulting Group analyst, Martha Vasquez, told Decom Week in Aberdeen that some of us are concerned as to where the money needed for NorthSea decommissioning will come from.
Martha Vasquez – described by the CEO of the newly renamed Decom Mission, Sam Long, as an “analyst and protagonist for the decommissioning market” – said production and cash flows from currently producing assets are, as expected, “declining fast.”
Ms Vasquez highlighted that cash flow projections for the basin through to 2035 just about cover decom costs – if other areas for spend aren’t taken into account.
If a company defaults on decommissioning payments, the UK Government has powers to reclaim that from the company, or previous operators or partners on the asset in question.
Ms Vasquez explained that there is a 5% decrease in cash flow per year projected between 2015 and 2035.
© Supplied by Rory RaittTo this, Ms Vasquez said: “All the cash flows in this time period to 2035 from these assets, if companies combine them, they amount to more than £30 billion, which is enough to pay for decom of all those assets.
“The challenge is that companies have many other ways that we could potentially use that money. It’s not all going to decom.”
This prompted the Boston Consulting analyst to ask: “Where is the cash going to come from? If I am a regulator, I would look into that.
“The shareholders of these companies, may also be interested to know what money companies are putting aside to make that happen.”
Ms Vasquez admits: “Many companies are already putting funds aside”, and “There are also new developments that are going to add to financing of the legacy assets decom.
“Many are also counting on a tax relief and hopefully the regulation doesn’t change drastically, they are also counting on new technologies and new delivery models to slash costs. There’s a lot of factors that will enable companies to pay for the decomissiong.”
© Supplied by Rory RaittJust before the analyst took to the stage at the Ardoe House Hotel, the UK regulator’s chief executive, Stuart Payne delivered a keynote speech addressing some of these issues.
The North Sea Transition Authority (NSTA) boss told attendees that the industry is making “a safe and successful effort to decommission and repurpose of the North Sea.”
Mr Payne explained that the NSTA forecasts “up to £200 billion worth of private capital” to be invested in the North Sea between now and 2030.
The regulator boss said that decommissioning has been the “coming feature” in the industry for a while now, however, “we are right in the delivery period now” and that “£20 billion worth of activity” is needed this decade.
Mr Payne described this as both “a massive opportunity and a major challenge.”
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