High activity, high costs continue on UKCS ///

This year has been one of high activity in the UK Continental Shelf (UKCS), with field development expenditures heading toward about $8.5 billion by year end and operating expenditures at a similar value. But these very high figures conceal part of the story. During 2006 cost escalation continued at a spanking pace – with one drilling rig contract attaining a $500,000 dayrate – affecting both investment and operating costs. Shortages of rigs continued and held up the drilling of interesting prospects. Priority was sometimes given to the drilling of incremental production projects to reap the benefits of high oil and gas prices. Continued shortages of skilled labor of all types resulted in substantial salary increases. For instance, the divers recently went on strike and achieved a settlement with a salary increase of no less than 44% over two years. Oil and gas production declined in double digit percentage terms.

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