Industry Trend Analysis - Rosebank Revival Highlights UKCS Cost Savings - OCT 2017


BMI View: The expected revival of Chevron ' s Rosebank project in the West of Shetlands highlights ongoing cost savings and efficiency improvements being made in the North Sea. The likely downsizing of the project design is consistent with the wider North Sea trend of balancing value over volume .

A new tender for a floating production, storage and offloading vessel (FPSO) for Chevron ' s Rosebank oil field project is expected to be announced in the latter part of 2017, building momentum behind a potential FID within the next two years. The project, north-west of the Shetland Islands, has been consistently delayed since an initial FPSO contract was awarded in 2013, then cancelled. The original USD1.9bn contract, awarded in 2013 to Hyundai H eavy Industries, was previously postponed and then cancelled in late 2016 amid glacial progress of the project's front-end engineering and design and rising cost amidst the fall in oil price. The project, operated by Chevron with a 40% stake, had a planned capacity of 100,000b/d of oil and 2.24mn cm/d of natural gas, though this will be redesigned. Significantly, if a reengineered Rosebank project were to go ahead, it would represent one of the few greenfield oil and gas developments in the UK's project pipeline post-2019.

The Rosebank resource base remains technically challenging and expensive to develop. Difficult geology, extreme environmental conditions, geographical isolation and the absence of infrastructure had seen limited development interest in the area. However, steady progress in reducing development costs has reignited the potential for the project to go ahead, with Chevron estimating that the overall cost of the Rosebank project to have been reduced by around 30% compared to pre-downturn valuations. This reimagining and reengineering of the project is indicative of the wider trends in the North Sea, where both unit development costs and unit operating costs have been reduced significantly (see ' North Sea Investment To Rise ' June 21 , & ' North Sea: Innovate Or Divest ' September 13 2016).

Cost Savings Key To Rosebank Revival
Unit Development Costs & Unit Operating Costs USD/boe (LHS) & Operational Expenditure GBPbn (RHS)
Source: Oil & Gas UK, BMI

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