Since this year, with the outbreak of New Coronary Pneumonia leading to a sharp drop in global demand and the low international oil prices, the "retirement tide" of upstream projects in the oil and gas field is accelerating.
      In fact, the last round of sharp drop in oil prices has prompted energy producers focusing on oil and gas development and production to implement strong cost optimization and efficiency improvement measures. Although the overall expenditure budget for this year has been further tightened, due to the lack of profitable investment options, and without increasing the operating pressure on their projects, they are beginning to increase retirement costs.

"Best Choice" in Low Price Environment

      According to the latest report released by the independent energy research institute of Norway, if the current oil price does not substantially recover, it is estimated that the total cumulative decommissioning of global oil and gas projects will reach 42 billion dollars by 2024, compared with 6.2 billion dollars last year.
      Resta Energy estimates that well plugging and abandonment (P&A) will account for 45% of the total cost of decommissioning; The second is platform disassembly, which accounts for nearly 20% of the total cost. Platform wells are the main part of P&A, accounting for 65% of the total abandoned wells, and the rest are subsea wells. In terms of decommissioning costs, subsea wells are higher than platform wells, with an average abandonment cost of $11 million per subsea well and $5 million for an ordinary platform well.
      The accelerated decommissioning of oil and gas assets also provides support for the sluggish oil service market, and the owners of offshore support ships, maritime buildings, cranes and heavy ships will welcome welcome business opportunities. Sumit Yadev, an energy analyst at Resta, said that if the oil price is still difficult to recover in the next few years, energy producers can only use the lower contract price to fulfill their asset retirement obligations. "Although they are very concerned about the issue of retirement, the low price environment provides an opportunity to reduce the cost of retirement.".
      Resta Energy pointed out that during the round of oil price slump that began in 2014, the daily rates of drilling rigs and ships dropped by 30% - 40%. It is expected that this time, they will also decline, and it is expected to last until 2022.
      Wood Mackenzie, an industry consultancy, predicted in a report that between 2018 and 2022, the global expenditure on the decommissioning of oil and gas equipment will reach 32 billion dollars, while in the 10 years from 2018, the overall cost of decommissioning will reach hundreds of billions of dollars, with Britain, the United States and Norway accounting for the highest proportion.
      It is worth mentioning that although the "retirement tide" of oil and gas assets has not yet fully started, experienced workers in this field have started to change jobs. Bloomberg News said that workers in the oil and gas industry are "swarming into" the geological survey, land acquisition, power trading, engineering, finance, asset management, energy contract formulation and other business fields of the wind and solar energy industry.

      In addition, according to Oil Price Network, the UK North Sea region will lead the decommissioning of global oil and gas assets in the next five years. If the current low oil price continues to the end of the year, it will greatly promote the retirement of UK's oil and gas assets. Nearly 10% of the country's offshore assets have cost more than $25/barrel, and nearly 80% of the oil and gas assets have produced more than 75% of the available resources. In addition to the increasingly poor exploration results and increasingly stringent regulatory rules, energy producers can only choose to perform their retirement obligations when it is unprofitable.

      It is understood that Shell, Total, Repsol and Premier Oil are expected to allocate at least 10% of their North Sea expenditures to asset retirement activities in the next five years.
      Resta Energy pointed out that 15% of oil and gas assets in the North Sea region have been retired so far, and it is estimated that 23 oil and gas assets will be shut down every year in the next five years; Over 2500 oil and gas wells will be decommissioned in the next 10 years, 1500 of which will be located in the UK. From 2020 to 2024, the UK will lead the decommissioning of oil and gas assets in Northwest Europe, and its decommissioning expenditure will account for 80% of the total decommissioning expenditure in Northwest Europe; Norway followed closely with 14%, and Denmark ranked third with 4%. During the same period, the cost of decommissioning in the United States was about 5.7 billion dollars.
      From the perspective of specific projects, Brent Oilfield, Ninian and Thistle Oilfield in the UK and Gyda Oilfield in Norway, one of the international oil price benchmarks, will lead the retirement market of oil and gas assets in northwest Europe. Ninian and Gyda Oilfield will jointly propose a retirement contract with a total value of 2 billion dollars, and Brent will become the largest retired asset in the world history. Shell, the operator, will bear nearly 3 billion dollars in the next 10 years.
      In fact, among Western European countries, the UK has the largest number of old equipment, with the dismantling cost accounting for 54% of the total, and the number of retired platforms in the country accounting for 45% of the total. According to a report of the British Petroleum and Natural Gas Administration (OGA), from 2017 to 2025, at least 349 oil and gas fields in the North Sea will have equipment decommissioned, with the largest number on the British continental shelf. During this period, more than 200 oil and gas platforms will be completely or partially dismantled, nearly 2500 drilling wells will be blocked and abandoned, and nearly 7800 km of transport pipelines will be decommissioned.