Field abandonment costs off the U.K. will outpace development costs soon after the turn of the century.
So predicts Arthur Andersen & Co., London.
The analyst expects capital outlays for U.K. offshore developments to total 13.6 billion ($20.4 billion) during the next 3 years. That is about 20% lower than capital spending for development during 1991-93.
Field development spending off the U.K. will fall to less than 1 billion ($1.5 billion)/year in real terms starting in 2002.
"The rapid decline in capital expenditure on new developments in the next decade will, however, be replaced by abandonment expenditure," said the analyst, "as more and more fields reach the end of their economic life."
Arthur Andersen said it will cost a total 7 billion ($10.5 billion) to abandon the U.K.'s fields, of which about 230 have been developed to date. Most abandonments are expected during 2004-14. Abandonment of fields presently classified only as discoveries may add 20-30% to the projected cost.
The Britannia field development prospect and North Morecambe producing gas field are the only large developments expected to require abandonment after 2020. Most future developments will be small fields, expected to be decommissioned by 2015.
Infill and extended reach drilling, satellite developments, cost cutting, and recent renewed confidence in oil prices have extended the economic life of many previously marginal oil and gas fields, Arthur Andersen said.
Nevertheless, "...it must be noted that a number of fields, namely Beatrice, Buchan, Deveron, West Don, Northwest Hutton, Ivanhoe, and Rob Roy, which are all near the end of their life, remain susceptible to oil price changes."
