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Oil and gas companies face the threat of being named and shamed in the UK for failing to meet decommissioning deadlines for empty wells, Britain’s North Sea regulator has warned.
The North Sea Transition Authority has opened a consultation over plans to impose more transparency on an industry that has fallen behind targets for “plugging and abandonment” as reserves run dry.
“Not only do missed deadlines knacker the credibility of the industry — and they do — they cause a huge problem for the supply chain,” Stuart Payne, chief executive of the NSTA, told an industry conference.
Investigations have already been opened on two companies for failing to meet deadlines, Payne said, but their identities have not been disclosed.
The consultation will decide whether to name those under investigation, to publicise those behind schedule on decommissioning, and issue a league table of performance.
While an average of 120 wells each year have been decommissioned between 2018 and 2023, there are still 940 inactive wells outstanding and more than 500 have slipped behind their original deadline, the NSTA said.
The regulator warned that a lack of available work will disrupt supply chain stability and cause specialist decommissioning vessels “to literally sail away” from UK waters.
North Sea decommissioning is currently estimated to cost £10bn between 2023 and 2032. Supply chain disruption could raise costs further, the NSTA warned.
Payne described decommissioning as “a huge bridge opportunity” from oil and gas into future projects, such as carbon capture and storage.
“But if the rigs continue to leave the basin because 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, who specialises in offshore energy, said a transparent register would “help the supply chain by providing clarity around upcoming projects”.
But he added: “I suppose you will also have to look at how the public and investor community react towards the publication and publicity around breaches. And you can consider whether NGOs might seek to amplify publication of breaches, which might in itself prompt action.”
Oil and gas operators in the North Sea, many of which have been putting off plugging wells in the hope of passing on the cost to others, also face an uncertain fiscal regime.
The UK’s new Labour government has said it will increase a levy on energy profits and end investment allowances.
The government is also consulting on a plan to halt the issuance of new exploration licences.
The oil and gas industry has warned that an overly aggressive tax regime will cut investment into the North Sea offshore sector, jeopardising jobs and damaging the supply chain needed to accelerate renewable energy.