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UK oil and gas companies are facing a bill of some $24 billion, or 20 billion pounds, for plugging unused wells, Reuters has reported, citing figures from Offshore Energies UK, the industry body.
There are more than 2,000 old wells and related facilities that would need to be put out of commission over the next ten years. What’s more, the bill will swell particularly fast in the next three to four years, OEUK said, as more and more wells will be shut down.
The average cost of decommissioning a well is around 7.8 million pounds, according to the industry body, or more than $9.2 million.
This will put an additional expense burden on North Sea producers who were just slapped with a 10-percent increase in their windfall profit tax, which will see them pay 35 percent in taxes on their earnings.
According to Reuters, oil production in the UK’s North Sea shelf peaked at some 4.4 million barrels daily in the 1990s and has been in a steady decline since then, not least because of political pressure to reduce the country’s oil and gas production.
Interestingly, an earlier report by the OEUK from this month said that the UK needs more oil and gas exploration to enhance its energy security and move the transition forward.
“The waters off the coast of the UK still contain oil and gas reserves equivalent to 15 billion barrels of oil equivalent (boe), enough to fuel the UK for 30 years, but more investment in exploration is needed to slow down the decline in domestic production to safeguard the nation’s energy security,” the report said.
The report’s authors added that more oil and gas production will also help move the transition along through the industry’s commitment to reducing emissions to net zero by 2050.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com