Low oil prices have already battered projects in the UK North Sea and now the Brexit could further complicate a coming wave of decommissioning projects.
According to a Wood Mackenzie analysis seen by Bloomberg decommissioning in the UK North Sea has accelerated since oil prices fell below $50 per barrel and forced nearly a third of the area’s projects to operate at a loss.
Wood Mackenzie analyst Fiona Legate told Bloomberg that political uncertainty tied to the Brexit could complicate decisions to invest in the North Sea.
“There is a lot of political uncertainty in the U.K. following Brexit and this adds another complexity in investment decisions,” Legate said.
The possibility of another independence referendum in Scotland, where the UK’s largest offshore projects are located, could further complicate plans for North Sea projects.
While the UK North Sea holds several large oil and gas fields production has been steadily declining over the past several years, forcing firms to cut investment and jobs.
Earlier this year, a survey sponsored by law firm Bond Dickinson found that found that three in four North Sea oil and gas contractors are “less confident about their prospects than they were a year ago.”
The operators surveyed said they have seen their UK-based headcounts decline 15 percent over the last year and expect headcounts to tumble another 17 percent this year.
A report published by Oil & Gas UK now forecasts that total decommissioning expenditures in the UK Continental Shelf (UKCS) from 2015 to 2024 will hit about $22.23 billion.
Decommissioning in the North Sea is expected to account for about fifty percent of those costs.
The industry group expects 79 platforms to be removed across the UKCS over the next decade while 1,200 wells are forecast to be plugged and abandoned over the same period.
Oil and Gas UK said in February that upstream firms are expected to approve less than $1.32 billion to spend on new North Sea projects, compared to an average of about $10.5 billion per year over the last five years.
“We have a huge task ahead but the prize is worth fighting for. The UKCS still holds up to 20 billion boe which can continue to provide a secure supply of energy for the country, support hundreds of thousands of jobs, generate several billion pounds in corporate and payroll taxes from the supply chain and stimulate countless technological innovations,” chief of Oil & Gas UK Deirdre Michie said in February.