North Sea operators are expected to shut in assets early adding costs to those remaining, an analyst has warned.
Fiona Legate, a research analyst at Wood Mackenzie, has said that it is likely more firms will follow in the footsteps of Fairfield Energy, which recently announced it would start decommissioning its Dunlin field five years early due to the impact of low oil prices.
As more platforms and fields cease to operate, terminal and pipeline costs for neighbouring fields in the same chain are expected to rise. This is of particular concern in mature areas such as the Northern North Sea, where interdependence is high.
Fairfield said the Dunlin Alpha platform would continue to export oil from third parties into the Brent system pipeline until decommissioning gets underway. But the move pressure on its neighbour EnQuest to find a work-around, as its Thistle and Don fields currently export oil via Dunlin.
The Fairfield assets also export through the Sullom Voe oil terminal, which means increased operating costs for others at a time when firms are attempting to drastically reduce their expenditures.
Ms Legate, a research analyst at Wood Mackenzie said: “The maturity of the UK North Sea has really started to show and with the fall in the oil price, companies are placing a lot more scrutiny on projects and fields and taking a view on whether they can continue to produce economically. We expect to see more announcements like Fairfield’s.”
The cost of operating pipeline systems in the UK has shot up in recent years, partly because ageing infrastructure requires more maintenance, but also due to legislative changes.
“That has been quite costly and pipeline operators have passed that cost on to the users. For smaller producers, who have to pay this cost on top of their tariff to use the system, it has been damaging to their economics. So we are likely to see some fields cease production earlier than expected,” Ms Legate said.
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