Rystad Energy recently published a report focusing on the operational production costs in the oil and gas industry which have fallen across the global. Specifically,the United Kingdom has emerged as a world leader in cost-cutting powerhouse among international offshore regions.
As the report shows, the UK managed to cut the production by 31% between 2014-2018. Following there was Norway with 19% and then the United States with 15%.
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.
…said Sara Sottilotta, Oilfield Service Analyst at Rystad Energy.
After paying attention on strategic planning, more efficient maintenance management and advanced technology implementation, opex per barrel of oil equivalent (boe) marked a fall. Not to be missed, in times of downturn some opex reduction has remarkably been a consequence of maintenance deferral.
This is a major fact as unplanned outages caused by equipment failure and damages have quadrupled globally from 2013.
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 continued.
As Rystad further highlighted, changing rotation cycles along with the closing of older fields and lower earnings have been also part of the reduced cost levels.
Several UK offshore operators have switched from two-week to three-week personnel rotations in 2015-2016.
By reducing the number of flights required to shuttle personnel to and from offshore facilities, savings in salary and logistics were generated.
Although the significant decrease in operational costs, the UK noted the highest opex per boe of all major offshore regions because of its smaller field size, a fragmented operator landscape, a more mature continental shelf, and a higher number of personnel on board (POB) per produced barrel.
For the records, Brazil came second in the list marking a great drop in opex per boe, falling from $16 per boe in 2014 to $11 per boe in 2019.
The above-mentioned reduction came from the significant increase in production, especially from the giant Lula field.
Across the globe, opex per boe in Norway is among the lowest, helped by the rising exchange rate between Norwegian Kroner (NOK) and the United States dollar (USD), which grew from an average of NOK 6.3 per $1 in 2014, to an average of NOK 8.3 per $1 in 2017.
On the other hand, Mexico’s operating costs per boe have risen since 2016, as a result of decreasing production and an increasing share of production from mature fields.
The UK managed to achieve, through its decrease in operational expenditure per production unit, despite considering expenditure in local currency.
Norway and the US from their side, follow behind with each of the three leaders primarily doing business in their respective domestic currencies.
Concluding, Angola and Nigeria usually carry out operational transactions in USD. In light of the situation, when considering operational expenditure in local currency these countries seem to have experienced skyrocketing opex due to soaring local inflation, while real change in opex is likely not as great in magnitude.