Containing Oil & Gas Decommissioning Costs

The Dutch government is facing a wave of decommissioning of oil and gas wells and facilities, driven by aging fields and the volatility of oil prices. The challenge: manage that decommissioning—estimated to cost a minimum of €6.7 billion—safely and efficiently.

BCG helped develop an initiative to bring together regulators, oil and gas companies, and other stakeholders in order to drive the decommissioning of onshore and offshore infrastructure in the Netherlands. The goal of this effort was to devise a comprehensive decommissioning approach that minimizes safety incidents and environmental impact while reducing costs.

The key to the effort was ensuring that all stakeholders—including companies, government, regulators, and suppliers—codeveloped one nationwide joint approach. BCG helped bring all those groups together to craft the Netherlands plan for Decommissioning and Re-use. That blueprint outlined the vision for not only decommissioning assets but also the reuse of some facilities (such as topsides) and the repurposing of others (such as geothermal wells). It included a list of ten concrete steps to ultimately slash decommissioning costs by one-third.

We then set out to support implementation of the plan. The first step was the creation by stakeholders of NexStep, an organization that coordinates and fosters cooperation to drive longer-term execution of the plan and ultimately reduce costs by 30% to 35%. Second, we helped build a centralized database with information on the timing, scope, and estimated costs of all decommissioning work in the country. Third, we supported analyses of the regulatory landscape to identify potential opportunities for a more efficient regulatory framework. Finally, we developed an approach to share industry lessons and best practices.

The work in the Netherlands has enabled the nation to manage its significant decommissioning task in a cost-effective way—and can serve as a model for use in countries around the world facing a similar challenge.

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