For immediate release: Monday 2 November 2026
Oil and gas companies holding a fraction of security needed to decommission ageing North Sea assets
Fraction of cash of required for near-term decommissioning visible in company reports
Massive shortfall of security highlights growing risk of burden falling to taxpayers
Figures underscore UK’s failing system of voluntary pre-funding agreements
LONDON – Oil and gas companies operating in the North Sea are holding only a fraction of the security needed to fulfil their mandatory obligations to decommission ageing and inactive wells, new analysis shows.
North Sea operators will need to spend an estimated £21 billion to dismantle and remove old oil and gas infrastructure between now and 2032. However a review of most-recent company reports revealed operators are collectively disclosing just £1 billion in UK financial security to cover these decommissioning liabilities – or five percent of the forecast short term expenditure.
This review also showed that just £25 million was being held in restricted cash. Even once tax reliefs are factored in, the security held by operators is clearly inadequate.
The figures should raise alarm for regulators, government and investors over the potential for companies to default on their clean-up obligations amid a growing decommissioning crisis.
In the UK, oil and gas companies are legally required to decommission all infrastructure they install. While companies across the industry have been reporting record profits and shareholder returns from higher oil prices, overly lax regulation has led to companies delaying clean-up work, leaving an increasing backlog of inactive wells to be removed.
Redwater Insights, a data-driven research group analysing the risks associated with oil and gas decommissioning liabilities, examined the financial statements of 25 oil and gas companies operating in the UK North Sea to determine the amounts firms are actually setting aside for end-of-life decommissioning.
The research shows:
While 52% of operators disclosed that they held some amount of financial security for their global decommissioning liabilities, only 32% disclosed UK-specific security;
While records show that £21 billion is forecast to be spent on decommissioning in the period to 2032, North Sea operators only disclosed £1 billion of financial security held for UK decommissioning liabilities in their most recent annual reports (2024 or 2025), with only £25 million UK-specific security actually held in cash;
To give a sense of scale, the UK-specific financial security held therefore represents only 5% of the forecast expenditure over the next seven years to 2032, with restricted cash representing only 0.1% of that forecast expenditure.
Even once tax reliefs, which should cover roughly a quarter of total costs, are factored in, the security held by companies is clearly inadequate.
As a portion of their own forecasts, the financial security held (either global or UK-specific) covers, on average, only 25% of the companies’ total disclosed decommissioning liabilities.
Redwater Insights Legal Researcher Olivia Lunn said:
“These figures clearly show that companies operating in the North Sea are failing to set aside the funds required for them to fulfil their legal obligations to decommission properly.
“Our analysis of company records shows that operators are holding just 5% of the security needed to cover the £21 billion the industry regulator estimates will be spent on clean-up to 2032.
“The current system of voluntary decommissioning agreements is not fit for purpose. Regulatory reform is urgently required to ensure operators set aside funds now to lessen the burden on taxpayers in the case of insolvencies and defaults.
“As the North Sea is a declining basin, operators cannot rely on their potential future profits to fund clean-up.”
Failing regulatory regime
As a mature and declining basin, there are currently 500 inactive wells already overdue for clean-up across the UK Continental Shelf, and more than 1000 due within the next few years.
During their lifetime, assets are often transferred between companies, especially as they approach late life. While the UK has a trailing liability regime that requires past owners to pay the decommissioning bills if current owners default, taxpayers are not immune.
Under the current tax system for the oil and gas industry, the UK government pays a portion of decommissioning costs via tax credits. Decommissioning relief deeds (DRDs) also essentially guarantee the equivalent of the tax credit whenever a company pays for a defaulted entity’s decommissioning obligations.
One way to ensure companies pay for their own clean-up is to ensure they set aside funds early on in a project’s lifetime to cover future decommissioning costs. In the UK, companies often have a specific pre-funding mechanism, called a decommissioning security agreement (DSA).
However, these agreements are often opaque, inadequate and always voluntary.
The regulatory reliance on DSAs has resulted in underfunded liabilities, defaults and litigation-induced delays to decommissioning work – all of which threatens to become more common as the declining North Sea moves through its end-game, while the volatility of oil prices and decrease in production mean operators will not always be able to rely on cash flow to fund clean up.
A more detailed examination of DSAs can be found here.
-ENDS-
Notes to editors
DSAs are private contracts. But, under financial reporting requirements, companies need to disclose if any of their cash is ring-fenced, and they might voluntarily disclose other, lesser forms of security, such as surety bonds, letters of credit or parent company guarantees. Therefore, while DSAs aren’t listed on a public register, companies’ financial statements provide a fairly reliable insight into how much they’re setting aside for their end-of-life expenses.
We looked at the financial statements of 25 oil and gas companies operating in the UK North Sea. We selected companies who featured in either the NSTA’s table of operators’ decommissioning performance or in Carbon Tracker’s Asset Retirement Obligations Scorecard, as together, this roster represents most companies operating in the UK with decommissioning liabilities.
The type of security held ranges from ring-fenced cash, to less secure forms of security including surety bonds and letters of credit.
To give a sense of scale, we compared the amount of pre-funding to the NSTA’s cost forecasts. We made our calculations by dividing UK-specific security by the NSTA’s forecast expenditure in the period to 2032.
Media contact: media@redwaterinsights.org
About Redwater Insights
Redwater Insights offers data-driven research and analysis on the financial and environmental risks associated with oil and gas clean-up and decommissioning liabilities. Our expert team combines financial, legal, data and regulatory analysis to provide sector-leading asset retirement obligation (ARO) insights across regulation and policy, audit and accounting, and data and analytics. We use this insight to inform and advise the industry, investors and policymakers with the aim of strengthening accountability and improving market integrity.
