The United Kingdom offshore oil and gas decommissioning market is expected to grow at a CAGR of more than 1 % over the period of 2020 - 2025. Factors such as decreasing the production of natural gas and increasing alternate sources of energy. However, the high cost and quality expertise required for decommissioning is expected to restraint the market.
- The increasing use of the deepwater and ultra-deepwater have created avenues in the North Sea for viable production of crude oil over the years. As the fields are maturing, they are expected to aid the growth of the segment.
- The North Sea fields are getting matured, and the demand for decommissioning is expected to rise as the production of crude oil and natural gas reduces. This may act as an opportunity for the market players.
- The number of decommissioning projects is increasing in the north sea fields under the United Kingdom, and this may act as a driver for the market in the forecast period.
Key Market Trends
Increasing Decommissioning Projects to Drive the Market
- In 2020, Shell U.K. Limited has asked for the decommissioning of the Kingfisher field in the North Sea. All installations are to be recovered to shore for re-use or recycling. Surface laid sections of pipelines and umbilical will be improved to shore for recycling or disposal. Trenched and/or buried pipeline sections will be decommissioned at their place. The end of the pipelines will be cut, and additional rock cover will be added to cut ends to reduce snagging risk. Increasing projects are expected to aid the market.
- In 2020, Shell’s plan includes the full removal of the SSIV, two risers, two pipelines, the partial replacement of two umbilicals, and any associated apparatus up to the UK-Norway median line. As the field is located on the Norwegian Continental Shelf, a separate decommissioning plan has been submitted to the Norwegian authorities for approval. Many projects are in preperation for decommissioning and may aid the growth of the market.
- The Dales Voe decommissioning facility in Shetland is one step closer to becoming a center of excellence for recycling offshore structures from the North Sea with the arrival of two new installations for decommissioning by strategic partners Veolia and Peterson. In July 2019, The facility had recycled over 80,000 tonnes of materials at the Dales Voe decommissioning facility in Shetland. Recycling provides for an increase in the profits gained from decommissioning. Facilities such as these may incentivize the decommissioning of the rigs due to a rise in the profits, which may aid the growth of the market.
- Natural Gas production in the country has decreased by 2.2%, to 3.83 Billion cubic feet per day, in 2019 from 3.92 Billion cubic feet per day, in 2018. The output may decline further in the forecast period and could incentivize the market players to decommission the rigs in case they are not able to produce enough below the cost price and thereby boost the United Kingdom offshore oil and gas decommissioning market.
- Hence, increasing number of decommissioning projects are expected to drive the United Kingdom offshore oil and gas decommissioning market in the forecast period.
Deepwater and Ultra-Deep Water Segment to Witness Growth
- For the decommissioning and removal of a deepwater platform, the methodology, engineering, and procedures are all critical areas of focus in the removal design process, and all aspects are likely to be commensurately more complicated than for smaller shallow water platforms. This requires higher expertise and better equipment to complete the project.
- Many of the platforms in deeper water are reaching the end of life stage, in areas such as the North Sea, and decommissioning is expected to become necessary. The process of decommissioning these larger and deeper water platforms is expected to be more complex and require more detailed and engineered solutions to plan and execute such operations safely and effectively. An increasing number of rigs to decommission is expected to aid the market.
- Well plugging and abandonment are the main elements of the decommissioning process and are the largest cost of the project. The wellbore must be cleaned out and plugs carefully installed in the well. This must be done correctly to prevent any environmental issues from leaving the underwater well open. In the deep and ultra-deepwater, it accounts for even higher costs for decommissioning. Increasing efforts to modernize the ecological effects in this area are expected to aid the growth of the market.
- The offshore rig count in the United Kingdom region is estimated by Baker Hughes Company to be on an average of around 14.25 units in 2019. The companies in the region may choose to decommission the rigs if the production cost increase or the crude oil prices go below the extraction cost.
- Hence, the deep water and ultra-seep water segment are expected to witness growth in the forecast period due to an increase in investments and advancement in technology.
The United Kingdom decommissioning market is moderately consolidated. Some of the key players in this market are Veolia Environnement S.A., Derrick Services (UK) Ltd, Perenco SA, Ramboll Group A/S, and AF Gruppen ASA.
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