Dec. 15 (UPI) -- The cost for oil and gas companies to operate in British waters declined by 14 percent last year in part due to improved efficiency, a government report found.
The British Oil & Gas Authority said in its inaugural report on operating costs on the British continental shelf, revealing that operators realized $1.4 billion in reductions in collective spending last year -- a decline of 14 percent. By the government's estimate, more than half of the British operators said the cost of doing business offshore was lower for the second year in a row.
"The reduction in unit operating costs, driven by a combination of lower costs, higher efficiencies and higher production volumes, is a positive story for the British continental shelf through what has been a difficult operating environment in recent years," Andy Samuel, the chief executive at the agency, said in a statement.
Last year, the average unit operating cost was $16 per barrel of oil equivalent. By comparison, Canadian company Husky Energy said its operating cost was around $9 per barrel of oil equivalent and it expected to break even so long as crude oil prices held above $35 per barrel.
The price for Brent crude oil, the global benchmark derived from the North Sea, was around $63.50 early Friday.
"Some operators have forecast cost increases, which indicates that some earlier reductions may have been the result of activity deferment and may be unsustainable," the government's report noted.
As the price of oil dropped to historic lows last year, British supermajor BP was forced to reduce its North Sea headcount. Marking a recovery for this year, and though its regional reservoirs are reaching the age of maturity, the company aims to double its North Sea production to 200,000 barrels of oil equivalent per day by 2020.
When in November, the British authority received 96 applications for offshore access, Mike Tholen, a policy director for exploration and production at trade group Oil & Gas U.K., said it was a clear vote of confidence.
"This will help realize as much of the 2-6 billion barrels of yet to find potential, particularly given the maturity of this licensing round and its large inventory of prospects and undeveloped discoveries," he said in a statement.
The government report said operating costs are expected to show stability once the year is out. In terms of production, the forecast of 603 million barrels of oil equivalent for 2017 is above the 2015 estimate by 5.6 percent.