Driving operational performance in oil and gas

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T he p ri z e o f o p e rat i o n al e x ce l l e n ce
T hro u g h o p e rat i o n al e x ce l l e n ce , t he i n d u s t ry can t ap i n t o A verage opex / b b l costs U S $ , 2 0 0 7 — 1 4
significant savings. For example, the cost of extracting oil
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an d g as co n t i n u e s t o i n cre as e , an d a re v i e w o f o p e rat i n g
co s t s p e r b arre l o f o i l o v e r t he p as t s e v e n y e ars s ho w s a
s t e ad y e s cal at i o n f o r m aj o rs , n at i o n al o i l co m p an i e s
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(NOCs) and independents alike. While exact performance
d at a v ari e s b y s u b s e ct o r, an d w i t hi n s u b s e ct o rs , co m p an i e s
are al l f aci n g an i n cre as e i n e x t ract i o n co s t s .
T he rat e o f e s cal at i o n v ari e s b y co m p an y an d y e ar, s o 8
average numbers are used to reflect a general trend. The
compound annual opex/bbl cost escalation rate (CACER),
similar to a compound annual growth rate (CAGR), can be
d e t e rm i n e d f o r e ach o rg an i z at i o n an d g ro u p o f o rg an i z at i o n s ,
majors, NOCs and independents.
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A verage opex / b b l costs U S $
C A C E R
M a j o r s 2. 85%
N O C s 5. 01%
I n d e p e n d e n t s 5. 54%
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2007 2008 2009 2010 2011 2012 2013 2014
Maj o rs N O C s I n d e p e n d e n t s
Top-performing companies have achieved a CACER of
P roj ect cost escalation in oil and gas and savings potential ( U S $ b )
only 2.25%. Running a model for the majors within the
i n d u s t ry — as s u m i n g 9 3. 5m b b l / d ay , a s t art i n g co s t b as i s $35
$280
of US$6.80/bbl and cost escalation at 2.85% and 2.25% —
$27 5
reveals that US$30b is available to be saved over five years $30
between best-in-class and average performance. Given that
$27 0
$25
t he m aj o ri t y o f co m p an i e s hav e a co s t b as i s hi g he r
$265
than US$6.80/bbl, and that NOCs and independents have
$20
much higher cost escalation, the US$30b figure can
$260
actually be considered quite conservative, displaying the
$15
hu g e o p p o rt u n i t y t hat e x i s t s acro s s t he i n d u s t ry .
$255
C u mu lative savings — $ b
$10
$5
$250
$245
P roj ect annu al opex cost — $ b
$
2016
2017
$240
2018 2019 2020
C u m
u l at i v e s av i n g s 2. 25% 2. 85%