Estimated read time: 9mins

Blog summary

Our CEO, George Morrison, explores the current state of the North Sea, reflecting on the challenges posed by recent fiscal policies and the energy transition. Despite the impact of the windfall tax and rising decommissioning costs, George highlights the ongoing opportunities in the region. From late-life asset extensions to advancements in carbon capture and storage (CCS), offshore wind, and green hydrogen, the North Sea’s expertise and adaptability remain key.

The state of play in the North Sea

The recent increase and extension to the windfall tax was met with frustration and recognition that, while the North Sea has long been a cornerstone of the UK economy, these recent measures are likely to accelerate the decline of oil and gas production in the region.

Despite this, significant opportunities remain. The recent collaboration between Shell and Equinor is a testament to the industry’s ability to adapt. With generations of expertise and a strong talent base, the North Sea’s legacy continues to offer reasons for optimism. The question for many is, what does this next chapter of North Sea engineering look like?

The costs of transition: North Sea decommissioning and asset life extension

One clear area to be addressed in the North Sea energy sector lies in its existing assets and the plans in place for their future. North Sea decommissioning has been an ongoing concern for some time, but while it is an inevitability, the exact timing of this for each field, and then the specific challenges of delivering it are less certain. Progress in the region is facing some major hurdles, with the North Sea Transition Authority suggesting it could name operators that failed to meet decommissioning deadlines last year. The potential of the North Sea basin as a carbon storage hub has also presented the potential for new life to be injected into old fields, bringing additional factors to be considered in decommissioning strategies.

Offshore Energies UK’s (OEUK) Offshore Decommissioning Report 2024 found that “the UK has spent more money doing less work” in the last reporting period. This was backed up by the NSTA’s Coastal Shelf Decommissioning Cost and Performance Update, which found that, while North Sea decommissioning costs were close to £2bn in 2023, the industry did not meet its planned attainment targets for the year. Only 70% of planned well plugging and abandonment activities were completed, while the industry also fell short in other areas, such as offshore platform removals.

For some operators, these pressures may lead to a reassessment of decommissioning plans and encourage them to seek further value from older fields through intervention and late-life extension. In an environment of rising costs, economic considerations will always take priority and well intervention and life extension practices can present a cost-effective opportunity.

For those pursuing this route, it is important that the intervention strategies deployed are carefully tailored to the needs of each field, or the cost of the work may eat further into the returns than is necessary. As my colleague Ben Cannell, Innovation Director at Aquaterra Energy, recently noted in Offshore Magazine, “With project economics relentlessly tight and re-entry and intervention work unlikely to subside anytime soon, operators must be alert to where business-as-usual diverges from updated best practice. Agility of deployment and flexibility of function are the name of the game for cost-effective subsea well intervention and abandonment.”

For others, where decommissioning is the best option, it should be carried out with the same laser focus on cost-effectiveness and efficiency. The UK is well positioned to deliver on this challenge, leveraging its world-renowned expertise in plug and abandonment, well decommissioning techniques, and the safe, efficient removal of offshore structures.

Advancements in CCS in the North Sea

Another opportunity is presented by the North Sea energy transition. The success of the Contracts for Difference Allocation Round 6 (AR6) has renewed confidence in the North Sea’s offshore wind ambitions, while the government’s £22bn commitment to CCS, presents a major opportunity for the region to lead in this critical technology.

The NSTA has already established a strong legislative framework to support CCS, including clear licensing systems, storage permits, and monitoring guidance. This foundation provides the certainty needed to attract investment and position the UK as a global leader in CCS innovation.

Transforming North Sea CCS from paper to powerhouse will depend on utilising skills from oil and gas, leveraging decades of expertise in subsurface engineering and offshore operations. Yet, success also demands specialised technologies and fresh approaches to tackle unique challenges, such as safely injecting and storing CO₂ at scale. This is uncharted territory and requires unprecedented levels of engineering and innovation to succeed. We have seen firsthand through our work on the pioneering CCS Project Greensand how existing techniques and expertise can be applied to repurpose platforms for CO₂ injection. But equally, we’ve also identified the need for new technologies to support CCS, such as our RAF frame technology, purpose-built for well re-entry and safely sealing wells with CCS in mind.

An opportunity for North Sea floating offshore wind?

Delivering these pioneering projects demands new levels of collaboration across industries. The 2024 OEUK Offshore Decommissioning Insight Report highlights another challenge that captures a broader industry pressure. Namely, the growing competition for heavy lift vessels. As both decommissioning projects and offshore wind installations ramp up, the need for these specialised assets has grown, increasing costs and impacting project timelines across both sectors.

Measures like smarter scheduling, early project planning, and resource-sharing strategies will be essential in optimising the use of these specialised assets, but this principle applies much more broadly. Whether it’s wind, oil and gas, CCS, hydrogen or any other offshore industry, shared technologies, tools, and talent will play a vital role in delivering results efficiently and managing costs effectively.

Looking at offshore wind in more detail, it remains one of the key shoots of optimism for the basin. The positive investments and outcomes of AR6 are hugely encouraging, with the government allocating £270 million to emerging technologies such as floating offshore wind and tidal energy. The success of AR6 has reignited momentum, but delivering on its promise will require addressing challenges such as turbine stability, grid connectivity, and installation in deep marine environments.

The Role of Hydrogen in the North Sea’s Energy Transition

Green hydrogen is another sector which holds immense promise. Particularly due to its potential for decarbonising hard-to-abate sectors, where electrification isn’t an option, like steel making. The Hydrogen Allocation Round 1 confirmation in the budget signals growing momentum, with hydrogen on track to become a key element of the UK’s energy strategy, but with progress slower than expected to date, scaling up production and infrastructure will require innovative approaches and targeted investment in key technologies, such as electrolysers.

One approach could be to combine floating offshore wind with hydrogen production, co-locating renewable generation and electrolysis, alongside minimalist green hydrogen platforms for rapid and efficient deployment. By situating these solutions where offshore wind resources are most abundant, the potential to harness maximum renewable energy is unlocked.

Investment is key, not just for green hydrogen, but for the entire spectrum of opportunities discussed here, from floating wind to CCS. Together, these industries form the foundation of a diversified and sustainable energy future. While challenges like fiscal pressures and resource competition loom large, the opportunities are too significant to ignore, and we must work hard to deliver on them.

As a proudly UK-headquartered company, Aquaterra Energy stands ready to support the full spectrum of North Sea energy opportunities. With expertise spanning late life solutions, offshore wind, CCS, and hydrogen, we are committed to delivering innovative solutions that drive the energy transition and solidify the North Sea’s position at the forefront of global energy advancements.

Key takeaways: 

In this piece we have answered:

Q: What is happening with the North Sea’s energy transition?

A: The North Sea is moving from a focus on oil and gas to renewables like offshore wind and carbon capture and storage (CCS). With collaboration and investment, it can remain a global energy leader despite the challenges.

Q: How are decommissioning costs affecting the North Sea?

A: Decommissioning in the North Sea cost nearly £2 billion in 2023, but only 70% of planned work was completed. Rising costs mean some operators are extending the life of older fields before decommissioning, creating new opportunities for well interventions.

Q: What role does CCS have in the North Sea?

A: CCS is key to the North Sea’s energy future, with clear frameworks in place to attract investment. The region’s expertise is being used to develop technologies for safely storing CO₂ and repurposing old platforms for injection projects.

Q: Why is resource competition a challenge in the North Sea?

A: Projects like decommissioning, CCS, and offshore wind all need shared resources, such as heavy lift vessels. This competition drives up costs and delays, making better planning and collaboration essential.

Q: What progress is being made with renewables in the North Sea?

A: Investments in floating offshore wind and innovative technologies are advancing the North Sea’s renewable energy goals. Government support and industry expertise are helping tackle challenges like deep-water installations.

Q: How could hydrogen benefit the North Sea?

A: Green hydrogen, made with renewable energy, offers huge potential for the North Sea. By combining floating wind farms with hydrogen production, the region could help decarbonise industries and boost its role in the energy transition.

Q: Why is collaboration important for the North Sea?

A: Industries in the North Sea must work together to share resources and expertise. Collaboration is crucial for reducing costs, improving efficiency, and ensuring the region leads in energy innovation.

Bibliography

OEUK (2024). Offshore Decommissioning Report 2024. [Online]. Available at: https://oeuk.org.uk/product/decommissioning-report-2024/ [Accessed Jan. 2025].

North Sea Transition Authority (2024). UKCS Decommissioning Cost and Performance Update 2024. [Online]. Available at: https://www.nstauthority.co.uk/news-publications/ukcs-decommissioning-cost-and-performance-update-2024/ [Accessed Jan. 2025].

HM Treasury (2024). Autumn Budget 2024. [Online]. Available at: https://www.gov.uk/government/publications/autumn-budget-2024 [Accessed Jan. 2025].

Cannell, B. (2024). A new approach reinvents shallow-water subsea well intervention. [Online]. Available at: https://www.offshore-mag.com/subsea/article/55041186/a-new-approach-reinvents-shallow-water-subsea-well-intervention [Accessed Jan. 2025].

University of Aberdeen (2025). ‘World-class’ study highlights CCUS potential for North Sea ‘super basin’. [Online]. Available at: https://www.abdn.ac.uk/news/22148/ [Accessed Jan. 2025].

European Parliament (2020). Offshore wind farms: Harnessing Europe’s largest domestic energy resource. [Online]. Available at: https://www.europarl.europa.eu/RegData/etudes/BRIE/2020/641552/EPRS_BRI(2020)641552_EN.pdf [Accessed Jan. 2025].

U.S. Department of Energy (n.d.). Hydrogen Production: Electrolysis. [Online]. Available at: https://www.energy.gov/eere/fuelcells/hydrogen-production-electrolysis [Accessed Jan. 2025].