Home Fossil Energy Delays in plug & abandonment work may put $5.5 billion on UK decom tab
March 11, 2025,
by
Melisa Cavcic
With investor confidence taking a hit in the aftermath of political and fiscal woes, hydrocarbon exploration in a slump, and supply chain costs likely to rise, a postponement of plug and abandonment (P&A) assignments could hike the UK’s decommissioning bill by $5.5 billion, according to the research conducted by Westwood Global Energy, an energy market research and consultancy firm.
Illustration; Source: Westwood
Westwood’s analysis looks into the extent of financial and logistical hurdles for the North Sea decommissioning segment, predicting that $26 billion could be poured into decommissioning over the next decade, with well plug and abandonment operations alone accounting for around 50% of the cost.
This analysis shows political and fiscal uncertainty is accelerating the UK North Sea production decline, as it has left its mark on investor confidence. With this at the forefront, Westwood highlights that delays in decommissioning work could strain the limited supply chain capacity, potentially increasing well P&A costs by up to $5.5 billion.
The hike in costs is a possible scenario spurred by higher rig day rates, which create financial liabilities for operators and the UK government. The company’s analysis reveals that timing uncertainty is driving financial and operational risks for operators as the decommissioning workload ramps up, but contract awards are lagging, particularly for rigs.
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According to Westwood, deferring work scopes could strain the supply chain’s limited capacity to execute the work. Therefore, should delays persist and rig availability tighten, well P&A costs could climb up because of higher offshore rig day rates, increasing financial liabilities for both operators and the UK government, which provides tax relief on decommissioning costs.
Yvonne Telford, Research Director at Westwood, commented: “As the UK North Sea enters a new phase where decommissioning becomes the dominant industry driver, the supply chain faces significant demand and major financial risk.
“Based on current investment plans, up to 40% of UK fields could cease production before 2030. With the impact of decommissioning tax liabilities on abandonment expenditure, cost-effective P&A must be paramount.”
Offshore Energies UK (OEUK), Britain’s trade body for the offshore energy industry, emphasized in November 2024 the possibility of a surge to 33% in total expenditures by 2030 in its report, with the decommissioning portion possibly accounting for 22% of the cumulative oil and gas spending over the next decade.
OEUK’s ‘Offshore Decommissioning Report 2024’ provided further insight into decommissioning activities across the UK’s offshore energy sector, providing an outlook for the next decade. This builds on the previous reports from 2022 and 2023, which predicted that around 2,100 North Sea wells needed to be decommissioned at a cost of about £20 billion over the decade.
The report served to hammer home the significant growth in decommissioning activities,