Info!
UPDATED 1 Sept: The EI library in London is temporarily closed to the public, as a precautionary measure in light of the ongoing COVID-19 situation. The Knowledge Service will still be answering email queries via email , or via live chats during working hours (09:15-17:00 GMT). Our e-library is always open for members here: eLibrary , for full-text access to over 200 e-books and millions of articles. Thank you for your patience.

UKCS operating costs decreased by 14% in 2016

Operating costs in the UK Continental Shelf (UKCS) dropped by 14% in 2016, with operators securing approximately £1.1bn reductions in operating expenditure (opex), according to report released by the UK Oil and Gas Authority (OGA) in December 2017. It is the second consecutive year that UKCS total operating costs have fallen. 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, says the OGA.

The findings of the report include:

  • The average unit operating cost (UOC) fell in 2016, for the second consecutive year, to £12/boe.
  • The pace of cost reduction has slowed down, as 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 cessation of production (COP) and start-up fields, total opex for continuing fields is lower and expected to decrease from 2017 onwards.
  • There was high variation in costs between operators in the UKCS, with the highest UOC over 12 times more than the lowest UOC.
  • There was a strong positive relationship between production efficiency (PE) and UOC. The top quartile operators (UOC basis) had an average PE of 84%.
  • Opex reduction in the UKCS was dominated by four operators who realised 60% of the total reduction in 2016. The total opex for the UKCS was £7.2bn in 2016 compared with £8.3bn 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.

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

Copies of the report can be found at https://www.ogauthority.co.uk/news-publications/publications/2017/analysis-of-ukcs-operating-costs-in-2016/

Andy Samuel, Chief Executive, OGA

Photo: OGA

News Item details


Please login to save this item