Economic Report 2016 - Oil & Gas UK

8. The Efficiency Task Force After a period of reactive change where survival was the priority, costs were cut and efficiencies sought to ease cash-flow pressures, the industry is now reaching the stage where there is little further opportunity to remove costs from the business without fundamentally changing company processes, standards and behaviours. As businesses accept the ‘lower for longer’ price environment, they recognise that strategic long-term change in how they operate is going to be critical to sustain an industry where revenues have fallen by around 40 per cent over the last two years. Figure 48 below shows the path industry has followed since the fall in price. There is a limit to what more can be done on the cost reduction side, with significant progress already achieved in that area. Efficiency improvements are now well under way and the associated knowledge sharing is vital to help ensure the gains are delivered basin-wide. Radical change is ongoing as some companies make more structural adjustments through adaptation, differentiation and diversification in both sector and geography.

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The industry is now reaching the stage where there is little further opportunity to remove costs from the business without fundamentally changing company processes, standards and behaviours.

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Figure 48: The UKCS’ Cost Structure

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Evolution/Revolution

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Change

Progression

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Efficiency

Impact

Adaptation

Cost

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Time

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