High activity, high costs continue on UKCS

With Field development expenditures heading toward about $8.5 billion by year end and operating expenditures at a similar value the year 2006 was one of the high activity in the UK Continental Shelf (UKCS). The cost escalation during 2006 continued at a spanking pace with one drilling rig contract attaining a $500,000 dayrate affecting both investment and operating cost. Development drilling continued at high levels and the year end total should be around total of 227 wells similar to 2005 levels. Exploration and appraisal drilling has been rather lower in 2006 than in 2005 but some significant discoveries have been made notably made. The year 2006 started with the effective introduction of an increase in taxation in the form of the Supplementary Charge to Corporation Tax being increased 10 to 20% with the total becoming 50%. The introduction of Promote Licenses is another initiative which has resulted in a large number of blocks to very small companies.