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Cost growth on a unit basis, as shown by Figure 54, has been a far bigger
problem in the UK, more than doubling between 2010 and 2014. On the
other hand, Norway was able to limit growth to 15 per cent over the same
period as they maintained more stable levels of production. The better unit
cost performance in Norway demonstrates that not only addressing the cost
base, but also investing sufficiently to maintain production levels, is critical
to prevent premature decommissioning of assets.
Figure 54: Indexed Unit Operating Costs
0
50
100
150
200
250
2010
2011
2012
2013
2014
2015
Indexed Unit Operating Cost
UKCS
NCS
Source: OGA, Oil & Gas UK, Norwegian Petroleum Directorate
9.3 Exploration Opportunities
Exploration drilling activity has historically been higher on the UKCS than the NCS, but in recent years the NCS
has performed better in both drilling numbers and volumes discovered despite efforts to stimulate exploration in
the UK. Activity in the UK has declined year-on-year since 2012 and the volumes of hydrocarbons discovered have
been disappointing. By contrast, drilling activity on the NCS has remained consistent since 2012 and a number of
discoveries have been made leading to greater confidence in exploration in Norway.
Johan Sverdrup was discovered on the NCS as recently as 2010 with recoverable reserves estimated at up to
three billion boe
36
. On the other hand, the UK has not seen a discovery greater than 100 million boe in size since
the HPHT Culzean field was discovered in 2008.
36
Source: Lundin Petroleum.
Cost growth on
a unit basis has
been a far bigger
problem in the UK.