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ACTIVITY SURVEY
2016
page 46
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
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Operating Cost (£ Billion - 2015 Money)
Source: Oil & Gas UK
Range