UKCS Pronounced Cost Reduction Period May be Over
The recent period of pronounced cost reduction on the UKCS may be over, according to a new report from the UK’s Oil & Gas Authority (OGA).
The report highlights that, following a sharp fall in UKCS operating expenditure (OPEX) from 2014-2016, total OPEX from 2017 onwards is now projected to be “relatively flat”, aside from an isolated increase in 2018.
UKCS OPEX rose two percent in 2017 to $9 billion (GBP 6.9 billion), according to the report, which outlined that this figure was still 28 percent lower than the 2014 high. OPEX for offshore fields made up 89 percent of the gross total for 2017, with the remainder comprised of facilities and pipelines OPEX.
Average unit operating costs (UOC) per barrel of oil equivalent (boe) in the UKCS also rose by two percent in 2017 to $15.13 (GBP 11.6)/boe, according to the report.
The report described the “relative stabilization” of UOC as an “encouraging sign at a time when the oil price is rallying and operating costs may also have been expected to increase”.
Hedvig Ljungerud, director of strategy at the OGA, said the report shows the “significant progress industry has made towards sustaining efficiencies and the operational cost base in the UKCS”.
“This analysis allows us to monitor closely the performance of each asset and operator and benchmark them to help drive improvement. With the significant upturn in the oil price it’s vitally important that industry does not revert back to inefficiencies or cost inflation,” Ljungerud said in an organization statement.
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