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North Sea firms keep tight rein on costs amid oil price rally

NORTH Sea oil and gas firms’ spending on operations remained flat last year in real terms in spite of the crude price rally, the Oil and Gas Authority has found.

The regulator calculated that spending in areas ranging from offshore platform operations to subsea pipeline usage rose by just two per cent, or £120m last year, to £6.9 billion. The rise was roughly in line with inflation. Brent crude traded at around $70/per barrel on December 31 against around $55/bbl a year previously.

The findings indicate the increase in the crude price did not persuade oil and gas firms to relax the curbs on spending imposed in response to the plunge in the oil price between 2014 and early 2016. The resulting spending cuts have trigged thousands of job losses.

The OGA noted operating costs remained 28% below the peak of around £10bn recorded in 2014, when Brent crude hit a high of $115/bbl.

Total spending is expected to increase to £7.5bn this year as new fields come onstream then fall by an average 4% annually until 2023, amid a continued squeeze on costs.

The OGA found the average unit operating cost of production (UOC) per barrel increased by 2% in nominal terms last year, to £11.60 per barrel oil equivalent from £11.30. It said the relative stability seen was encouraging given the oil price rise.

Published: 09-10-2018

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