UK offshore oil and gas operating costs and expenditure remain stable

Operating costs, efficiency and expenditure on the UK Continental Shelf (UKCS) remained stable in 2018, according to a new report by the Oil and Gas Authority (OGA).

Delivered for the first time in an interactive online dashboard, findings from the UKCS Operating Costs 2018 report include:

Total UKCS operating expenditure (opex):

• Total opex remains stable, with a slight 6% rise to £7.2bn, driven largely by new field activity. This has delivered an additional 70,000 boe/d compared to the previous year.
• Operating costs are dominated by five operators, which comprise approximately half of opex spend in 2017 and 2018.
• Opex is anticipated to rise by 2% (6% in nominal terms) by 2020, due to new fields coming online. After that, total opex is expected to fall at an average rate of 3%/y due to a combination of fields ceasing production and a decrease from what is predicted to be a year of high activity in 2020. 

Unit operating cost (UOC) – operating cost per barrel:

• UOC also remained stable, with a marginal 2% rise to £11.6/boe.
• More than half of operators saw a decrease in their average UOC, with this improvement in cost efficiency mostly being driven by production gains.
• The OGA’s medium term projections suggest UOC will steadily rise, increasing 10% over the next five years to £12.8/boe (2018, real prices). This is influenced by production decline rather than cost inflation. This is more than 20% lower than the 2014 level in both real and nominal terms, demonstrating industry’s ability to keep costs stable.

Hedvig Ljungerud, OGA Director of Strategy, says: ‘Efficiency measures, put in place by operators during the last global oil price downturn, appear to have been sustained. We use this analysis to closely monitor the performance of assets and operators; benchmarking them to help drive improvement. It’s vitally important that industry does not revert back to the inefficiencies or cost inflation we saw pre-downturn.’

To see the full report, visit https://www.ogauthority.co.uk/data-centre/benchmarking/ukcs-unit-operating-costs-2018/