Wednesday, 09 September 2021 07:15

£2billion cost improvement by 2016 predicted for North Sea industry

£2billion cost improvement by 2016 predicted for North Sea industry

Oil & Gas UK’s annual Economic Report, which is published today, has found that efforts to improve efficiency across the sector are leading to an estimated 22%, or £2billion, reduction in operating costs by the end of 2016.

The trade organisation is attributing the figures to strong investment in asset integrity over the last four years, alongside measures being taken to improve efficiency. These have resulted in better output from a number of existing fields, and Oil & Gas UK is expecting the rate of decline in these to slow “significantly” over the next two years.

This more positive outlook is also forecasted to help reduce the average operating cost per boe across all fields from £17.80 in 2014 to £17.00 this year, and to around £15.00 by the end of 2016.

Mike Tholen, Oil & Gas UK economic director, said: “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.”

Deirdre Michie, Oil & Gas UK chief executive, added: “Difficult decisions have had to be made across the industry. We estimate that employment supported by the sector has contracted by 15 per cent since the start of 2014 to 375,000 jobs. It is likely that capacity may have to be reduced still further in order for the business to weather the downturn. The Scottish Government’s Energy Jobs Task Force and New Anglia Local Enterprise Partnership are active in supporting affected businesses and employees.

“The industry is under a lot of pressure and it is now widely recognised that a transformation in the way business is done is required if the UK sector is to become more resilient and competitive in a world of sustained lower oil prices. The challenges are being tackled head on - even before the oil price fall, industry’s attention was focused on improving our cost competitiveness whilst upholding the safety of the workforce.”

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