Oil & Gas UK Economic Report 2015

Figure 40: Distribution of Unit Operating Costs by Number of Fields

1

80

2

70

2011 2012 2013 2014

60

3

50

40

4

30

Number of Fields

20

5

10

0

0-10

10-20

20-30

30-40

40-50

50-60

>60

6

Source: Oil & Gas UK

Unit Operating Cost (£/boe - 2014 Money)

7

Many of the most costly fields to operate, those to the right hand side of Figure 40, are in fact approaching the end of their productive lives. With fewer recoverable reserves remaining and a high proportion of fixed operating costs, UOCs often accelerate excessively in the final years of production. As fields deplete over time, there will always be those operating at the tail of their production with very high UOCs in the years immediately prior to decommissioning.

Nevertheless, there are also a small number of very high cost fields on the UKCS with significant recoverable reserves remaining. These fields, most of which are found in the northern North Sea (NNS), struggle to remain viable against a backdrop of rapidly declining revenues. Dunlin is the first example of a major field that has reached its economic limit and ceased production despite significant volumes of reserves remaining within existing reservoirs.

8

9

10

55

ECONOMIC REPORT 2015