‘Oil exploration costs will fall by a third in 2016’ yet jobs cull continues

But the welcome forecast comes as news emerged yesterday that industry giantsShell and Taqa have both announced plans to cut hundreds of North Sea jobs.

Shell UK plans to cut 250 posts from its North Sea operations and change offshore shift patterns, as part of a drive to manage rising costs.

Staff and agency contractors based in Aberdeen and on installations in the North Sea were informed on yesterday.

Earlier, Taqa said it planned to cut about 100 jobs because of the “challenging” time facing the industry.

However, WoodMac’s positive analysis will be good news for firms aiming to pursue projects despite the near-halving in crude prices since last summer and, if accurate, it could mean fears about lower oil prices cutting future output have been overstated.

While energy companies have been wrestling with rising costs for years, with many slashing capital investments after oil crashed from $110 a barrel to less than $60, WoodMac said that by next year exploration could actually rise.

Tom Ellacot, the firm’s vice-president of upstream research, added: “While overall well numbers will dip this year, we expect recovery in 2016 as many explorers seize their chance to drill at lower cost.

“Those that hold exploration spending flat or make only modest cuts could yet achieve more with less.”

WoodMac said exploration costs would fall by 33 per cent by 2016 due to like-for like costs declining by 19 per cent, while simplifying activities and efficiency gains could save 10 per cent.

The consultancy said strength in the dollar will also save energy companies about 4 per cent overall.