ECONOMIC REPORT 2013
27
Operating costs have risen by around
90 per cent since 2000. Adjusting for inflation,
the increase is only around 50 per cent over
the last 13 years, or about 3.5 per cent a
year, representing good cost control from an
overall perspective. This increase has been
consistent over the last decade, excluding
a dip after the financial crisis in 2008 and
2009. Keeping operating costs under control
is a considerable achievement for the
industry, given the need to maintain ageing
assets to satisfactory standards
4
and the
worldwide competition for resources,
especially skilled people.
While growth in operating costs has been
fairly well contained, the unit cost per barrel
produced has risen much more, particularly
in recent years as production has declined.
The unit operating cost (UOC) has risen four-
fold over the past decade, a worrying trend
that could have a major influence on the
longevity of the UKCS. Lower production is
providing constant upward pressure on UOCs,
alongside the recent increase in expenditure
on asset integrity.
The range of UOCs for individual fields
on the UKCS is very wide, from less than
£5/boe all the way up to around £70/boe.
There are several fields on the UKCS that now
cost more than £40/boe to operate. Oil & Gas
UK has found that much of the cost escalation
is concentrated in a small number of fields, but
the general trend for UOCs is rising markedly
and this will not change unless the decline in
production is reversed. If there were to be a
fall in commodity prices, the more expensive
assets would have to be shut down and could
face premature decommissioning.
Figure 18: Unit Operating Costs for the UKCS, 2001 to 2013
4
More information about asset integrity and the Health & Safety Executive’s Key Performance 4 (KP4) programme can be found at:
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2
4
6
8
10
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unit Operating Costs (£/boe) 2012 Money
Source: Oil & Gas UK
