Close-up of an abstract orange, yellow, and black texture


Oil and gas wells and installations—developed in the 1970s and later—are reaching the end of their useful lives, and an intense period of offshore decommissioning is ramping up worldwide. But the process is a costly challenge. In fact, the value at stake in handling these projects properly could be worth several billion dollars for many countries. In the North Sea alone, the aggregate estimates for a decommissioning cost is close to $150 billion.

The Gulf of Mexico is well advanced in its decommissioning-process journey, and activity is picking up in the North Sea. Now other hotspots are emerging around the globe. And they must prepare for what is typically a massive task.

In many emerging hot spots, preparation is still at an early stage. Offshore decommissioning requires a high level of coordination among governments, operators, and contractors—players that are all driven by different incentives. Moreover, in many countries, taxpayers are on the hook for the lion’s share of a decommissioning cost, heightening public scrutiny of stakeholders’ actions.

Although operators and contractors play essential roles in defining and executing an effective oil field decommissioning agenda, national governments must lead the way by establishing a comprehensive governance framework and supporting it with strong institutions. This framework must ensure the optimal use of public funds, incentivize world-class project design and execution, and promote value-creating cooperation across the supply chain.

On the basis of our experience supporting decommissioning projects globally, we have identified five steps that governments must take to prepare:

  • Define the ambition, strategy, and master plan.
  • Establish and enforce the right governance, fiscal and risk management, and technical regulatory frameworks.
  • Set up a single collaboration platform for operators to share lessons, resolve issues, and explore joint campaigns.
  • Identify the decommissioning obligations.
  • Create and drive a rigorous performance agenda.

Reducing the Cost of Decommissioning Oil and Gas

Operators worldwide need to dramatically slash costs when it comes to the decommissioning of oil and gas installations and wells. But cost reduction isn’t a concern solely for oil and gas industry players. Governments also have a vested interest in reducing costs: taxpayers can be on the hook for as much as 50% to 80% of the bill for offshore decommissioning. Recognizing the urgency, some governments have set a goal to reduce a decommissioning cost by 30% or more. But the path to achieving reductions of this magnitude remains uncertain.

Although the goal of reducing decommissioning costs by 30% is ambitious, our experience supporting governments and operators suggests that it is achievable. BCG has worked with industry players to significantly cut decommissioning costs at the national, company, and project level. To get there, operators and governments need a detailed roadmap that directs the application of a variety of levers that are designed to make the most efficient use of decommissioning resources.

In developing cost reduction roadmaps for oil and gas decommissioning projects, we have identified dozens of sources of value and risk. To capture the value and mitigate the risks, leading operators and governments have applied six cost-reduction levers.

Preparing for the Next Wave of Offshore Decommissioning

The Application of Six Levers Can Enable 30% Savings in Decommissioning Oil and Gas

No single lever is sufficient by itself. To realize cost reductions of as much as 30%, BCG's decommissioning consulting services team helps stakeholders take an orchestrated approach that applies each of the levers relevant to a specific decommissioning project or campaign.

Fit-For-purpose design and decommissioning technology

Intelligent multiproject campaigns

Excellent project planning and execution

Factory Model

Innovative contract models

The right team

Meet Some of BCG’s Experts in Decommissioning Consulting Services

Learn More About Decommissioning Oil and Gas

Decommissioning Collaboration: Reflections from NexStep’s First Year

Jacqueline Vaessen, general manager of NexStep, discusses the Dutch platform's goals and priorities in decommissioning.

The Global Urgency of Decommissioning in the Oil & Gas Industry

BCG's Eric Oudenot explains why the decommissioning of wells and platforms has become a fast-growing priority for oil and gas companies—as well as governments—around the globe.

protected by reCaptcha

Subscribe to read our latest insights on Oil and Gas.