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ECONOMIC REPORT 2015
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5.4 Cost and Efficiency: Achievements to Date
Early improvements in the cost and efficiency of
operations on the UKCS are already apparent. The
portfolio of assets is constantly evolving as new fields
start up and some old fields are decommissioned.
Typically, fields perform better in their early years
before production comes off plateau and more
regular maintenance interventions are required. New
start-ups usually have a positive impact on UOCs,
which, when looked at on a UKCS basis, can mask
problems experienced in some of the older assets. One
of the aims of this report is to unpick the impact new
start-up fields have on production and operating costs
to investigate how well the industry is doing in reducing
costs and maintaining production in its existing assets.
As reported, £9.7 billion was spent in 2014 operating
the UKCS. When considering the impact of the current
cost and efficiency drive, the costs of operating existing
assets are expected to fall by 22 per cent by the end
of 2016. This involves significant cost reductions by the
existing business of almost £800 million (eight per cent)
this year and a further £1.3 billion (14 per cent) next
year. However, as a number of new fields will be brought
on-stream over the next two years, some of this gain
will in part be offset. As a consequence, total operating
expenditure is expected to fall to £9.3 billion this year
and fall further to £8.6 billion next year.
Extensive work was carried out to improve asset
performance in response to the sharp fall in production
over the period 2010 to 2013, which led to significant
increases in operating cost. This investment is now
Reduction from Existing Fields
Contribution from New Fields
0
8.0
8.5
9.0
9.5
10.0
2014/15
2015/16
Total Operating Costs
(£ Billion)
Source: Oil & Gas UK
9.7
8.9
9.3
9.3
8.0
8.6
Figure 15: Changes in Operating Costs (New versus Existing Fields)