Oil & Gas UK Activity Survey 2016

ACTIVITY SURVEY 2016

There are a number of factors driving this decline:

• The urgent need for companies to reduce operating expenditure in an attempt to maintain a positive cash flow position amidst falling revenues – simply, the existing industry cost base was not sustainable.

• The industry’s cyclical nature whereby cost trends often track the lagged oil price – there has been some cost deflation so some activities are now cheaper to carry out.

• The high volume of ‘one-off’ maintenance work that was carried out from 2011 to 2014.

• The cross-industry efforts to work together to improve efficiency that are now seeing a quantifiable impact (see Appendix).

Despite the strong progress made, the need for further cost reduction measures is pressing. As such, total operating costs are forecast to fall below £7 billion by the end of 2017, back to 2007 levels, despite the addition of almost 70 new assets over the ten-year period.

Figure 36: Total Operating Expenditure Outlook

12

10

8

Range

6

4

2

Operating Cost (£ Billion - 2015 Money)

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Oil & Gas UK

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