• 1 day EPA's Pruitt cites Bible to justify administration policies
  • 2 days Watch for biofuels policy changes ...
  • 2 days Syria's Ghouta - Is there Threat Of Genocide? The World Is Silent.
  • 2 days Norway - World's Most Democratic Country! Where is the U.S. on the list?
  • 1 day Majority unlikely to use self-driving cars
  • 23 mins US shale production dull until someone starts talking shareholder payback
  • 2 days Saudi Arabia's Building a $500 billion Mega-City and Will Run 100% on Renewable
  • 46 mins Perovskite Co.'s will they live to the promise?
  • 45 mins Ideas on demand
  • 2 days First Oklahoma, Now Kansas Fracking Tied to Earthquakes
  • 2 days VW Looks At Apple For Electric-Car Design Guidance
  • 2 days DNA Robots Target Cancer
  • 2 days HAPPY RIG COUNT DAY!!
  • 3 days US admin to kill Energy Star program
  • 3 days CRUDE OIL PRICES
  • 2 days Plastic bans to dent oil demand growth-BP
Alt Text

Has OPEC Been Too Successful?

While OPEC and Russia continue…

Alt Text

What Is The Right Price For Oil In A Balanced Market?

The current shale narrative has…

Alt Text

Oil Claws Back Gains

Oil prices recovered towards the…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

UK Oil And Gas Costs To Rise 100% If Brexit Fails

North Sea

The UK’s embattled oil industry might have to tackle a twofold increase in trade costs if its separation from the European Union takes place under a no-deal scenario, an industry group has warned.

The warning comes just as the region’s oil and gas companies start to boost investments in the UK’s continental shelf, thanks to generous government incentives.

The UK government is attempting to negotiate a trade deal with the European Union, but optimism is fading as talks struggle to get off the ground. As Bloomberg noted earlier this week, after the end of yet another round of disappointing discussions, no government in Europe is willing to make concessions to London, as they have enough to deal with at home with populism on the rise and public opinion unlikely to hail any concessions to the British separatists.

EU leaders chose to begin trade deal negotiations with London in December, despite the latter’s insistence the talks begin this week. If the talks end unfavorably for the UK, Oil & Gas U.K. warned this week, the investment rush currently underway in the UK’s section of the North Sea would slow down to a trickle as the cost of labor and equipment jumps. This, the group said, will inevitably happen if the UK reverts to World Trade Organization rules in the absence of a trade agreement with the EU.

Earlier this year, Oil & Gas U.K. conducted a study of the potential effects of an unfavorable Brexit scenario on the oil and gas industry and found that it could see its cost of trade swell from the current $791 million (600 million pounds) to $1.45 billion (1.1 billion pounds). This is the cost on $97 billion (73 billion pounds) worth of annual trade in goods and services related to the oil industry. Related: How OPEC Continues To Cheat On Its Own Deal

For Oil & Gas U.K., this would be the worst-case scenario. While, theoretically, costs equaling one-tenth of turnover isn’t insurmountable for an industry, UK oil and gas is working in one of the highest-cost oil basins in the world. Operators there also face hundreds of millions in decommissioning costs and field depletion.

On the other hand, a recent Wood Mackenzie report found that the UK North Sea section has become the second hottest spot for deal making, after U.S. shale. Some oil majors have reduced their presence there, selling assets to independents who are eager to make the most of what oil remains in the North Sea, which isn’t an insubstantial amount. Others, namely French Total, have expanded their footprint through acquisitions.

There’s an ongoing cost-cutting drive among North Sea operators and it’s already paying off. In its Economic Report 2017, the UK’s Oil & Gas Authority said that operation costs per unit in the North Sea have fallen the most across all oil basins in the world. While this doesn’t mean that North Sea field operators can pump crude at Aramco’s production costs, it’s attractive enough to motivate further investment.

BP, for instance, has cut its production costs from $30 a barrel to about $15, and plans to further reduce this to less than $12 by 2020. Shell and other producers have managed to cut costs by as much as 60 percent.

So, there could be a silver lining in the threat of trade costs doubling for UK’s oil and gas players. It would motivate finding new ways to reduce costs and likely lead to faster adoption of the digital oilfield—it’s been hailed as a great cost-saver, after all.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News