Oil & gas boasts efficiency drive
9 Sep 2015
Efforts to improve efficiency in the North Sea are beginning to pay off, a new report suggests.
The annual Economic Report, published today by trade association Oil & Gas UK, reveals that efficiency increases across the UK oil and gas sector will lead to the reduction in the cost of operating existing assets by 22% by the end of next year.
The cost reduction, which Oil & Gas UK says amounts to around £2 billion, is supported by the first annual production increase for 15 years.
I am confident that we have turned a corner with improvements in cost and efficiency
Oil & Gas UK chief executive Deirdre Michie
According to Mike Tholen, Oil & Gas UK economic director, provisional governmental data suggests that production in the first half of this year was 3% higher than in the same period last year.
It is an indication that over this year, the UK Continental Shelf (UKCS) is likely to see an annual production increase that will help to reduce the average operating cost per boe for across all North Sea fields from an estimated £17.80 in 2014 to £17 this year, the report says.
The report also says average operating costs per boe will drop by a further £2-3/boe - to around £15/boe - by the end of 2016.
“Whilst the improvement will be offset to some extent by £1.1 billion of operating expenditure relating to new fields brought on stream in the intervening period, these new developments are vital for the future of our industry, in terms of both oil and gas production as well as the commercial opportunities they bring for the supply chain,” Tholen said.
Oil and Gas UK chief executive Deirdre Michie said: “I am confident that we have turned a corner with improvements in cost and efficiency.
“However, a continued low oil price will inevitably cause companies to reflect on the long-term viability of their assets. Retaining infrastructure and delaying decommissioning will be essential to prolong production from existing fields and promote future new developments,” she said.
Elsewhere, and in an effort to ramp-up North Sea efficiency and reduce costs further, Oil & Gas UK launched a new Efficiency Task Force (ETF) last week.
The ETF is officially tasked with driving improvement, making the oil and gas sector more competitive, and supporting the drive to maximise economic recovery from the UKCS, Oil & Gas UK said.
“Tackling efficiency has been at the forefront of industry minds for some time – but has become more acute and urgent as the value of our end product has more than halved in the last year,” said John Pearson, ETF group leader and Oil & Gas UK co-chairman.
“We now need to step up, increase the effort and resource we’re putting in, and get the job done as a united industry,” he said.
The ETF is supported by a dedicated resource from Oil & Gas UK and its industry members, the industry body said.
