The struggling producing industry on the UK Continental Shelf needs deep cost cuts, according to the Oil & Gas UK's Activity Survey 2015.
"This report demonstrates that cost reductions of up to 40% per barrel of oil equivalent must be achieved to secure a sustainable future for this basin," the trade group said.
The report, based on data from all exploration and production companies operating on the UKCS, documents an 8% increase in operating expenditures in 2014, to £9.6 billion, coupled with a 1.1% decline in production to an average 1.42 million boe/d.
The production decline was "the best year-on-year performance in 15 years," Oil & Gas UK said. Liquids output was down by 2.6%, gas production up by 1.1%.
In the absence of major unplanned shutdowns, production might increase to 1.43 million boe/d this year as up to 15 fields come on stream.
Oil & Gas UK has been seeking rapid action from the UK government on promises to improve the fiscal regime for producers (OGJ Online, Jan. 13, 2015). Findings in the new survey align with those of its most recent quarterly surveys (OGJ Online, Feb. 2, 2015).
According to the new survey, the average operating cost on the UKCS rose to £18.50/boe last year from £17/boe in 2013.
Investment totaled £14.8 billion last year, half going to only 12 fields.
Operators discovered 50 million boe of potentially commercial reserves, compared with an average of more than 250 million boe/year over the last 10 years.
They drilled 126 development wells, including sidetracks, compared with 120 in 2013, and sanctioned development of 8 new fields and 28 brownfield opportunities.
Only 14 exploratory wells were drilled last year, including sidetracks, out of 25 that had been expected. Exploratory drilling has declined since 2009.
With oil prices low, operators expect to drill as few as 8-13 exploration wells this year. Appraisal drilling will fall to no more than 5 wells from 18 wells in 2014.
Survey respondents estimated potentially recoverable oil and gas on the UKCS at 10 billion boe. Of that, 6.3 billion boe is sanctioned for development, down from 6.6 billion boe a year ago.
Fourth-quarter 2014 intentions indicated that, of the 3.7 billion boe representing a potential investment target, less than 2 billion boe is likely to be developed.
"And we now expect a further reduction in this number," Oil & Gas UK said.
