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The total value of the global pool of decommissioning projects that will accumulate through 2024 could reach US$42bn, according to Rystad Energy estimates

With an average asset age of 25 years, the Northwest European market for decommissioning could grow by 2022 in annual commitments if the current low oil prices do not show signs of significant recovery in the near future.

Besides a rapidly maturing asset base and low oil prices that erode commercial viability and potential life extensions, the market for decommissioning in the North Sea will also be helped by favourable contract prices for the service.

To date, only about 15 per cent of North Sea assets have been decommissioned, but we expect an average of 23 assets to cease production each year over the next five years.

With nearly 80 per cent of the total estimated expenditure on Northwest European decommissioning in the next five years, the UK is poised to lead the way, followed by Norway with 14 per cent and Denmark with four per cent. For that period the region’s pool of removal projects is estimated at about US$17bn. By comparison, decommissioning costs in the US are estimated at US$5.7bn for the same period.

“A protracted low price environment can potentially motivate operators to leverage low contract prices and commit to their asset retirement obligations, thus spurring decommissioning activity in the Northwest Europe region. This will also provide welcome opportunities for contractors in an otherwise gloomy oilfield services market,” said Sumit Yadev, energy service analyst at Rystad Energy.