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W I R E L I N E
- I S S U E 3 5 S P R I N G 2 0 1 6
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Activity Survey 2016
Oil & Gas UK’s Mike Tholen discusses the key findings of the
Activity Survey 2016
and what it means for the industry.
“
While it will take time for the impact of a
lightened tax rate to benefit upstream cash flows
– coupled with the improvements in efficiency
and cost – it puts this sector in a much more
competitive shape for the future.
ACTIVITY SURVEY 2016
Q&A
Q: What does the
Activity Survey
tell us about the current state of
the industry?
A:
Well before the oil price began its
steep and sustained descent over
18 months ago, the basin’s maturity had
already added technical challenge and
expense to operations. The drop off in
investment approvals expected this year,
to less than £1 billion from a typical
£8 billion per year over the last five years,
illustrates just how keenly the mature
UK Continental Shelf (UKCS) has
been affected by the drop in oil price
and underlines the importance of the
industry’s concerted action to
improve efficiency.
Q: What progress has been made?
A:
With companies sharing insight into
minimising production downtime offshore
over the last couple of years and new fields
coming onstream, production efficiency
is recovering. The
Activity Survey
reported
that the basin’s average unit operating
cost has already improved by 28 per cent,
falling from almost $30 per barrel of oil
equivalent (boe) in 2014 to just over
$20/boe last year. Further improvement
to around $17/boe is expected by the end
of this year taking the total reduction to
over 40 per cent in two years.
Q: Where does the UKCS rank in
competitiveness?
A:
There is no reliable, recent
comparison of operating costs in basins
across the world. While the significant
progress made in the UKCS to lower unit
operating costs will have had a positive
effect on competitiveness, at a $30 oil
price almost half of UKCS oil fields
are still likely to be operating at a loss
through 2016. With around $400 billion
cut from exploration and production
budgets globally it is inevitable that
costs will have to be driven down
further if the basin is to get in shape to