North Sea Capital, Operating Costs to Fall 10-20%, Says Wood Mackenzie
Capital and operating costs in the North Sea will fall between 10 and 20%, with UK-focused Upstream companies reaping the greatest benefits of lower prices and Norwegian operators following suit.
‘Near term pre-Final Investment Decision (FID) projects are expected to be best placed to benefit from reductions and development costs for these projects could fall 10-20%’ Wood Mackenzie wrote on Wednesday.
The consultancy firm explained that the UK and Norway will ‘deflate’ at different rates because of specificities of the Upstream projects in the two countries sharing North Sea’s riches.
‘Wood Mackenzie says the UK and Norway will deflate at different rates, based on distinct rig and labour markets and varying activity levels. Wood Mackenzie also cautions that the outlook for upstream costs beyond 2016 is much less clear and will be largely driven by what happens to the global oil price.’
This is due to a decrease in Upstream capital investment in both the UK and Norway, the note explains.
Meanwhile, Statoil and Shell reportedly filled application to drill new wells in the North Sea and Norwegian Sea, respectively.
Also on Wednesday, the British government confirmed its Energy Bill, and the creation of an independent regulator for offshore activities.
“The new Energy Bill will boost the UK oil and gas industry by creating an independent regulator for exploration and production from the territorial sea and UK continental shelf. This new approach to industry collaboration (which fully implements last year’s independent Wood Review) will help drive down costs and improve the sector’s efficiency” UK Secretary of State for Energy and Climate Change Amber Rudd wrote on her blog commenting the speech given by the British Queen on Wednesday.
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