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Rig work could give massive boost to North Sea

THE opportunity for the North Sea to become a global centre of excellence for decommissioning oil rigs has been highlighted by a new report, which also claims greater supply chain efficiency and collaboration could yield the industry billions of pounds in additional revenue.

The report, which comes amid renewed focus on the future of North Sea revenues, calls for fresh thinking to maximise the lifespan of the resource.

It highlighted a £35 billion revenue opportunity in developing the expertise in Scotland for decommissioning ageing rigs with complex infrastructure, such as pipes and sea-bed equipment, in deep water, and exporting it to areas such as the Gulf of Mexico and West Africa.

Noting the importance of UK government tax relief on decommissioning expenditure, set at 50% on the cost of equipment, Kevin Reynard, senior partner at report author PwC, said: "That's where I see the real upside - in setting ourselves up as a centre of excellence."

Asked how equipped the industry in Scotland was to handle this work, Mr Reynard said oil and gas companies were assessing with engineering firms how to go about decommissioning some of the North Sea's oldest assets efficiently, and in a cost-effective way.

He said it could ultimately mean valuable work for companies and ports across the north east of Scotland, including Aberdeen and Invergordon, should these rigs be dismantled onshore.

Mr Reynard added: "From a strategic and evaluation point of view, there is a lot for Scottish and British industry to get involved in.

"The big costs are in the drilling to do the plugging and abandoning of the wells, and the vessels which will actually lift the bits of the oil rig and take them to shore.

"It is where they come from because that's where a big chunk of the expenditure will be. That will be global, not British or Scottish. Therefore, how do we capitalise? That is the big question."

Beyond decommissioning, the report claims profits in the oil and gas chain could be boosted by as much as £3bn or 10% by operating more efficiently and greater company collaboration. The UK North Sea supply chain currently contributes £27bn to the economy each year.

Mr Reynard said major savings could be realised by oil companies "treating the supply chain as a strategic asset or a strategic partner".He said: "I think it's about cleverer ways of working or more efficient ways of working together."

Mr Reynard noted a collective will in the industry to meet the challenges facing it, and said: "We are seeing a shift in that appetite, not just to maximise the recovery, but to work together to maximise it."

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