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Oil and gas companies face the threat of being named and shamed in the UK for failing to meet deadlines for decommissioning empty wells, Britain’s North Sea regulator has warned.
The North Sea Transitional Authority has opened a consultation on plans to impose more transparency on an industry that has fallen behind “plugging and abandoning” targets as reserves dry up.
“Not only do missed deadlines damage the credibility of the industry – and they do – cause a huge problem for the supply chain,” Stuart Payne, chief executive of the NSTA, said at an industry conference.
Investigations are already open on two companies for not meeting the deadlines, Payne said, but their identities are not being disclosed.
The consultation will decide whether to call those who are investigated, publish those who are overdue for deactivation, and issue a performance rating.
While an average of 120 wells per year have been decommissioned between 2018 and 2023, there are still 940 inactive wells pending and more than 500 are behind their original deadline, the NSTA said.
The regulator warned that the lack of available work would disrupt the stability of the supply chain and cause specialist decommissioning vessels to “literally sail away” from UK waters.
Decommissioning the North Sea is currently estimated to cost £10bn between 2023 and 2032. Supply chain disruption could increase costs further, the NSTA has warned.
Payne described decommissioning as “a great bridging opportunity” from oil and gas into future projects, such as carbon capture and storage.
“But if rigs continue to leave the basin because the industry can’t trust that the work is actually going to happen, then we make the transition harder,” he added.
Glenn Kangisser, a partner at law firm Haynes and Boone, which specializes in offshore energy, said a transparent registry “will help the supply chain by providing clarity on future projects.”
But he added: “I think you’ll also have to look at how the public and the investor community react to the publication and the publicity around the breaches. And you can consider whether NGOs could seek to amplify the publication of breaches, which could in itself will incite action”.
Oil and gas operators in the North Sea, many of which have plugged wells in the hope of passing on the cost to others, also face an uncertain tax regime.
The UK’s new Labor government has said it will raise a tax on energy profits and end investment allowances.
The government is also consulting on a plan to stop issuing new exploration licenses.
The oil and gas industry has warned that an overly aggressive tax regime will cut investment in the North Sea offshore sector, putting jobs at risk and damaging the supply chain needed to speed up renewable energy.