WIRELINE Issue 35 Spring 2016

ACTIVITY SURVEY 2016

Q&A

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.

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

“ 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.

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