Oil & Gas UK Economic Report 2015

Geographically, Figure 41 shows that dry gas production in the SNS region is typically much less expensive (£12-13/boe) than in other areas of the UKCS. This is despite the maturity of the region, with many fields in the fourth decade of operation and close to the end of their productive lives. This reflects the simpler technical nature of the developments and the discounted sale price of gas when compared to oil. Fields in the NNS area, on average, will experience UOCs twice those of the SNS, with aging infrastructure, redundant facilities and a shortage of fuel gas contributing to the disparity. In contrast, in the CNS, the UKCS’ most productive region and where around one

quarter of production is gas, UOCs have been very close to the UKCS mean average for the last ten years. It is interesting to note that the gap between the unit costs of operating liquids and gas fields on the UKCS was previously much smaller (see Figure 42 opposite). The costs of operating liquid production were generally around 20 per cent higher than gas in the period prior to 2010, before production fell sharply, driving UOCs higher for both. However, there was a much greater decline in liquids production, which has led to a 40 per cent cost premium associated with producing liquids compared to dry gas, on a unit basis, in 2015.

Figure 41: Regional Average Unit Operating Costs

30

25

Southern North Sea and Irish Sea Central North Sea Northern North Sea

20

15

10

Unit Operating Costs (£/boe)

5

0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Oil & Gas UK

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ECONOMIC REPORT 2015