BAKU, Azerbaijan, Jan. 8
By Leman Zeynalova - Trend:
Operational production costs in the oil and gas industry have fallen across the globe, Trend reports with reference to Rystad Energy, the independent energy research and consulting firm headquartered in Norway.
The consulting firm said the United Kingdom is emerging as a cost-cutting powerhouse among global offshore regions.
From 2014 to 2018 the UK reduced operational production costs by 31 percent, followed by Norway and the United States with opex reductions of 19 percent and 15 percent, respectively, according to Rystad Energy.
Sara Sottilotta, Oilfield Service Analyst at Rystad Energy, believes that the reduction in operating expenditure is largely the result of offshore regions – such as the United Kingdom, Brazil, Nigeria, Angola, the Gulf of Mexico and Norway – feeling the squeeze of uncertain oil prices, which in turn has driven operators and contractors to nurture operational improvements in pursuit of lower unit prices.
“Secondly, with a greater focus on strategic planning, more efficient maintenance management and the increased and improved implementation of technology, opex per barrel of oil equivalent (boe) has fallen. It should be noted, however, that in times of downturn some opex reduction has historically been a consequence of maintenance deferral. This is important to bear in mind, as unplanned outages caused by equipment failure and damages have quadrupled globally since 2013,” said the company.
“The UK has experienced the greatest reduction in opex per boe, falling from more than $30 per barrel in 2014 to just $16 per barrel in 2019. The drop is attributable to two main factors: the general increase in production, and the falling share of production from mature fields as new fields came on-stream and old fields were shut-in,” Sottilotta said.
Changing rotation cycles, the closing of older fields and lower salaries have also contributed to the reduced cost levels. A majority of UK offshore operators switched from two-week to three-week personnel rotations in 2015-2016, generating salary and logistics savings by reducing the number of flights required to shuttle personnel to and from offshore facilities. Still, despite this significant decrease in operational costs, the UK exhibits the highest opex per boe of all major offshore regions due to smaller field size, a fragmented operator landscape, a more mature continental shelf, and a higher number of personnel on board (POB) per produced barrel.
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