Decisions over large field developments in the North Sea continue to be deferred, but some fields are coming through, in the form of subsea tiebacks, and costs have been cut.
According to Wood Mackenzie, 2016 to date has seen five final investment decisions made across the North Sea; all subsea tiebacks.
The latest was Statoil’s Trestakk, which offers a clear example of the cost savings that are being achieved with estimates down nearly 40%, says Wood Mackenzie.
Costs are also being reduced on larger projects. An example being Statoil's flagship Johan Sverdrup development, which Wood Mackenzie estimates phases II-IV to now breakeven at less than US$40/bbl.
More than half of the cost reductions in recent projects have been achieved through downsizing, simplification and design, says Norwegian analyst Rystad Energy.
"Less in-built flexibility and more standardized solutions have been instrumental in reducing the breakeven prices, and hence overall project costs. Intentions to optimize design, coupled with the recycling of projects, have stimulated engineering teams to reassess their design approach and in turn has made the project development and budgeting more predictable with reduced cost contingencies," the firm says.
High grading of rigs, vessels, equipment and labor have also returned considerable breakeven improvements, it says, with "highly competitive bidding rounds" in tenders/re-tenders.
Some of the gains can also be attributed to significant currency gains where breakeven prices are calculated in US$, says Rystad.
“E&P and oilfield service companies have worked intensively on methods to reduce costs. However, these improvements are also a result of a portfolio effect,” says Audun Martinsen, VP Oilfield Research at Rystad Energy. “By focusing on the areas with the highest potential within their portfolios, E&P companies naturally gained the most from these newfound efficiencies by high-grading their undeveloped fields.”
Non-sanctioned offshore developments can expect an improvement of 15-30% in their breakeven prices, the analysis shows. “The complete inventory is far from homogenous and represents complex and challenging developments that impact on breakeven price reductions, and cannot compare to the ‘best-in-class’ stories we are presented with at the moment,” adds Martinsen.
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