North Sea oil and gas companies cut operating costs by $1.43bn to average $15.6-barrel

North Sea oil and gas companies cut their operating costs by an average of 14% last year to an average of $15.6 a barrel (£12).

New data from the industry regulator OGA shows that operators benefitted from approximately $1.43bn ( £1.1bn) reductions in operating expenditure.

The “Analysis of UKCS Operating Costs in 2016” inaugural report, published today by the Oil and Gas Authority shows that UKCS total operating costs fell for the second consecutive year in 2016, with more than half of UK operators achieving substantial cost reductions in 2016.

Lower costs are expected to be sustained for the next five years, supported by the efforts of those active in the UKCS to maximise economic recovery of its oil and gas resources.

Other key findings of the report:

  • The pace of cost reduction has slowed down, as Unit Operating Cost (UOC) fell by 18% in 2016 compared with a 22% annual reduction in 2015. UOC in 2016 was over a third lower (35%) than the peak seen in 2014.
  • Excluding COP and start-up fields, total OPEX for continuing fields is lower and expected to decrease from 2017 onwards.
  • OPEX reduction in the North Sea was dominated by four operators who realised 60% of the total reduction in 2016. Total OPEX for the UKCS was £7.2 billion in 2016 compared with £8.3 billion the previous year.
  • The range of operators achieving reductions in operating cost is diverse – the top performing operators include new entrants, national oil companies, oil majors and independents.
Dr. Andy Samuel
Dr. Andy Samuel

Andy Samuel, Chief Executive of the OGA, said: “This report shows the significant progress industry has made towards consolidating the operational cost base.

“The reduction in Unit Operating Costs, driven by a combination of lower costs, higher efficiencies and higher production volumes, is a positive story for the UKCS through what has been a difficult operating environment in recent years.

“This analysis allows the OGA to identify cost-efficient assets and operators and provide benchmarking metrics which benefit our asset stewardship engagements and help drive further improvements in efficiencies.

“It is important that operators continue to collaborate and share lessons learned to sustain cost efficiencies for the future, while continuing to maintain high standards of health, safety and environmental management. This will enable industry to withstand future oil and gas price fluctuations and be more profitable in periods of stability and growth.”

18 Dec 2017

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