UK Continental Shelf operating costs remain stable in 2017 – report
Total operating expenditure for the UK Continental Shelf was £6.9 billion last year.
Operating costs for the UK Continental Shelf remained stable with a slight rise last year, according to a new report.
The Oil & Gas Authority report said that last year total operating expenditure (OPEX) for the UK Continental Shelf (UKCS) was £6.9 billion.
This was £120 million and 2% higher than the previous year, indicating the recent years of sharp cost reductions are over, the report said.
Total operating costs are still significantly lower (28%) than the high cost operating cost environment peak of 2014.
The unit cost per barrel of oil equivalent (boe) also rose 2% last year, the UKCS Operating Costs in 2017 study said.
The average unit operating cost per barrel of oil equivalent (UOC) was £11.6 in 2017 – an increase of £0.3 per boe.
The report said: “The relative stabilisation of UOC is an encouraging sign, at a time when the oil price is rallying and operating costs may also have been expected to increase.
“This trend is expected to continue with projections showing only a marginal rise in UOC into the early 2020s.”
Looking to the future the report said production is expected to rise in 2018 and if this is the case it will be the fifth consecutive year without a significant drop in oil and gas production.
Operating costs are also anticipated to rise but at a slighter greater rate.
This is partly due to new costs created by the recent start up fields which are causing the growth in production, the report said.
As a result nominal UOC is projected to rise by 80 pence a barrel, from £11.6/boe in 2017 to £12.4/boe in 2018.
Hedvig Ljungerud, OGA director of strategy, said: “This report shows the significant progress industry has made towards sustaining efficiencies and the operational cost base in the UKCS.
“Looking to the future, production is expected to rise in 2018 with new fields coming onstream.
“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.”
