Business Outlook 2017

Figure 10: Operational Expenditure

12

Operating Cost

Upper Range

10

8

6

4

2

Operating Costs (£ Billion - 2016 Money)

5

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Oil & Gas UK

The impressive pace of cost improvement and strong production performance on the UKCS have meant that unit operating costs (UOCs) have fallen by 37 per cent in pound terms and 48 per cent in dollar terms 13 from $29.70/boe (£18/boe) in 2014 to around $15.30/boe (£11.30/boe) in 2016. The measures taken have been necessary for producers to retain or regain margins and have transformed the UKCS into a region that can compete against other mature basins for capital. It is expected that UOCs will stabilise in the region of $14.30/boe (£11/boe) during 2017 and 2018 14 , the lowest since 2010 in dollar terms.

Figure 11: Unit Operating Costs

30

Unit Operating Costs (£ per boe) Unit Operating Costs ($ per boe)

25

20

15

10

5

Unit Operating Costs (£ and $/boe - 2016 Money)

0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Oil & Gas UK, OGA

13 Dollar terms have been impacted by the depreciation of the pound against the US dollar. 14 Assumed US dollar to pound rate of 1.3 for 2017 and 2018.

23