Urgent action on oil and gas decommissioning could create 25,000 jobs – report

A think tank has called for “urgent action” to ensure oil and gas companies decommission old North Sea infrastructure, saying doing so could create up to 25,000 jobs and deliver a £15 billion economic boost.

A report by Redwater Insights found Government action to guarantee operators clean up ageing infrastructure could also provide a “critical skills bridge” for 15,000 skilled workers facing an unemployment “cliff edge” as the North Sea basin continues to decline.

To achieve this, Redwater said the North Sea Transition Authority – which regulates the sector – needs increased powers to impose binding deadlines on operators around the decommissioning of infrastructure.

It said currently regulators are “regularly” approving requests to delay removal of infrastructure, despite some 500 oil and gas wells already being overdue for decommissioning, and a further 1,700 due to be plugged in the next six years.

The body also called for operators to be required to pre-fund some decommissioning costs, and for more support to be given to workers transitioning from oil and gas production to decommissioning roles.

Redwater Insights director of legal Sophie Marjanac said: “When operators delay their clean up responsibilities, this creates further uncertainty for workers and their communities.

“Proper decommissioning will provide a skills bridge for current oil and gas workers and create new jobs along the east coast of the UK, from Aberdeen to Great Yarmouth.

“We need urgent action to avoid a disaster for jobs, communities and the UK economy.

“There are more than 500 oil and gas wells currently overdue for plugging and abandonment in the North Sea, with hundreds more expected to reach end-of-life in the next few years.

“Overly flexible regulation means operators are kicking the decommissioning can down the road. But delaying too much longer runs the risk of ballooning costs and highly skilled workers leaving the industry.”

The report, entitled After The oil: Jobs And economic Impacts From UK Offshore Decommissioning, calculated that timely decommissioning could attract £25.6 billion of investment from operators.

It said this would generate nearly £7 billion in direct economic benefit to the UK, plus a further £9 billion in indirect and “induced” gross value added.

However it warned there is only a short window to avoid delays causing “potentially disastrous” impacts for UK jobs and regional economies.

The report found oil well degradation and deterioration of structures are expected to significantly increase the cost of repair and removal work – and that this would be exacerbated by workers retiring or leaving the sector.

Ms Marjanac went on: “The Treasury could face a significant challenge if cost blowouts cause companies to fail and decommissioning liabilities fall to taxpayers.

“Meanwhile, regional communities risk being hit harder if the only workers skilled enough to decommission old assets have had to leave the industry because of continued delays.

“There is a fast closing window for proper decommissioning.

“We need urgent action from Government, regulators and most importantly from operators who are legally obliged to ensure their wells are cleaned up properly.”

Lang Banks, director of WWF Scotland, said: “Having earned hundreds of millions of pounds in profit from extracting fossil fuels from under the North Sea, it is only right that oil and gas companies clean up after themselves.

“Unnecessarily delaying the decommissioning of oil and gas facilities leaves our marine environment at risk of harm and undermines efforts to create skilled jobs and support coastal communities.”

A spokesperson for the UK Department for Energy Security and Net Zero said: “Oil and gas production will be with us for decades to come, and we will manage existing fields for the entirety of their lifespan – while actively scaling up clean energy industries in the North Sea.
 
“Our ambitious plans to make the North Sea a clean energy powerhouse for Britain will create up to 40,000 new jobs in Scotland by 2030.”