News ID: 214164
Published: 0828 GMT April 29, 2018

Cost of dismantling North Sea oil, gas likely to be double UK government target

Cost of dismantling North Sea oil, gas likely to be double UK government target
independent.co.uk

Shutting down oil and gas operations in the North Sea is likely to cost double the UK government’s current target, leaving younger generations with a hefty tax bill.

An analysis of current government figures suggests the goal of £39 billion to dismantle the region’s pipelines and wells is a significant underestimate, independent.co.uk wrote.

Instead, a figure of over £80 billion is cited as a far more realistic projection in the new report for the Intergenerational Foundation (IF).

The higher price tag will leave each child in the UK with a bill of up to £3,000 if the government allows companies drilling in the North Sea to avoid their decommissioning obligations.

As the UK transitions to a more sustainable economy in an effort to meet its climate targets, a transition away from fossil fuels is essential.

However, these new findings highlight the lasting cost oil and gas will have even after UK citizens are no longer receiving any benefits from them.

“We think the target the government have set themselves for the cost of decommissioning flies in the face of what it knows itself to be the case, and what its own experts have told us,” said Andrew Simms, report coauthor and co-director of think tank the New Weather Institute.

Industry regulator the Oil and Gas Authority published estimates in 2017 for the cost of decommissioning the 250 fixed installations, 3,000 pipelines and 5,000 wells that make up the UK’s North Sea fossil fuel infrastructure.

The figure they arrived at was around £60 billion, with the goal of slashing this by 35 percent.

This leaves a final target of £39 billion, a figure that Simms and his coauthor David Boyle disputed in their report, entitled ‘Rigged: How the UK oil and gas industry is undermining future generations’.

They say OGA’s own analysis of decommissioning costs, as well as that carried out by auditors KPMG, has found large-scale projects like dismantling the North Sea’s pipelines inevitably run into problems, and end up costing far more than planned.

“It’s far more common to see an overspend on initial estimates of costs for megaprojects in this sector of 35 per cent rather than a saving,” explained Simms.

“So we think there has been a massaging down of the figures to make it seem more acceptable when in fact the likelihood is of a significant overspend.”

   
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