LONDON, March 1 Oil and gas operators in the
North Sea will benefit this year from another 10 percent drop in
leasing costs for equipment such as drilling rigs and subsea kit
as oversupply continues to drag down rates, analysts at
consultancy Wood Mackenzie said.
The downturn in the oil market has crippled drilling
activity in the North Sea, where costs are some of the highest
in the world due to the basin's maturity. As a result, suppliers
of oil and gas equipment have been forced to significantly lower
the prices they charge.
"Rates are coming down further in the UK North Sea because
drilling activity is flat and there remains a huge oversupply in
rigs," Mhairidh Evans, senior analyst in Wood Mackenzie's UK
Her team estimates that as many as a quarter of Britain's
drilling rig fleet is currently cold stacked, meaning the
equipment is stored away and maintained only on a basic level.
Only 30 percent of available floating rigs in Britain have
contracts beyond 2017, indicating the outlook for drilling work
Low equipment rates have helped operators cut typically high
costs on upstream projects and a further fall in prices will
continue to help make projects more viable.
Operators in the North Sea have also lowered costs by
cutting jobs and improving efficiency, for example by applying
more advanced technology to anticipate maintenance needs.
Wood Mackenzie analysts estimate that around 55 percent of
cost reductions achieved in operational expenditure (opex) will
last until 2020.
For capital expenditure, meaning investment budgets for new
projects rather than costs for daily operations, as much as 70
percent of cost savings could be sustained, Wood Mackenzie said.
It based its findings on in-depth interviews with North Sea
suppliers and operators.
"In order to maintain these cost reductions, both suppliers
and operators are required to shift their mindsets in order to
prioritise collaboration over doing things their own way," Evans
(Reporting by Karolin Schaps; Editing by Susan Fenton)