Cost Efficiency – Introduction and Background

If the UK oil and gas industry is to remain sustainable from an economic standpoint, the UKCS must continue to represent an attractive region for investment in an increasingly global market place. As mentioned above, cost inflation has been running in the order of 20% per annum in 2005 and 2006. This has fed through into committed spending plans and resulted in sharp increases in expenditure.

Cost Efficiency – Key Statistics and Commentary

The cost of developing and producing a single barrel of oil or gas equivalent (the unit technical cost, or UTC) rose by 45% between 2005 and 2006 to $22/boe. Combined with the current low gas prices and higher tax take which took effect from January 2006, the competitiveness of the UKCS is being progressively reduced. The forecast predicts that between 2007 and 2009, UTC will continue to rise to $25/boe. As a result it is possible that some of the more marginal developments may not go ahead, resulting in reduced oil and gas reserves recovery.

UKCS New Developments’ Unit Technical Cost 2005-2009

Cost Efficiency – Supplementary Statistics and Commentary

For more information, see the Supplementary Statistics Section.