Gas Prices Rose Last Year

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Production and operating costs of oil and gas field operators in the UK North Sea section went up by about 2 percent last year, the Oil and Gas Authority—the national industry watchdog—said in a new report.

The total operating expenditure of North Sea oil and gas companies active in the region stood at a little over US$9 billion (6.9 billion pounds), the OGA said, adding that despite the slight climb, they were still 28 percent lower than costs in 2014 before oil prices collapsed.

The authority has calculated the average cost per barrel of oil equivalent at US$15.17 (11.60 pounds) for 2017, which is pretty good considering the North Sea used to be one of the highest-cost oil and gas producing regions in the world.

In the Southern North Sea and the Eastern Irish Sea, costs actually fell last year, while in the Central North Sea these costs were the highest. Even so, the data collected by the OGA showed that more than 50 percent of field operators in the area reduced their overall operating expenses last year from a year earlier, despite the fact that cost per barrel of oil equivalent rose for most of them.

Recently, the North Sea has become a hot spot for M&A deals: Equinor earlier this month said it had agreed to buy Chevron’s stake in Rosebank, one of the largest undeveloped oil and gas finds in the British section of the North Sea. For Chevron, the deal is part of a larger plan to exit the North Sea in full. Marathon Oil announced it would leave the North Sea, too, and would instead focus on its domestic operations.

Also recently, an independent company, EnQuest, bought the remainder of BP’s stake in the Magnus field. BP went on a selling spree in the North Sea last year, and even offloaded its Forties pipeline. Another local independent, Verus Petroleum, paid $400 million for stakes in several fields, sold by Japanese Itochu.

Irina Slav for OilPrice.com