Natural gas and oil operating costs in the Western Canadian Sedimentary Basin (WCSB) continued to rise in 2008 because of higher processing fees, maintenance services and higher energy costs, but the costs through the first nine months of 2009 were “virtually flat” from a year ago, Ziff Energy Group reported last week.

Ziff’s “2009 Improving Field Performance Study on the WCSB” is the company’s 16th report to assess upstream operating and production reliability. Ziff researchers analyzed 210 fields and 26,800 producing wells operated by exploration and production companies and trusts, which together produced 3.3 Bcf/d of natural gas and 160,000 b/d of conventional oil in 2008. Annual operating costs totaled C$2.3 billion.

Weighted average unit costs increased 13% to C$1.10/Mcfe for gas fields and by 15% to C$13.70/boe for oil fields, the study found.

“The ‘Big Four’ gas costs are lease fuel used, not costed, by most producers (23%); processing fees (21%); surface repairs and maintenance (14%); and purchased energy (11%),” noted the report. Oil fields’ “big four” costs were surface repairs and maintenance (18%), purchased energy (16%), well servicing (12%) and contract services (11%).

Although average operating costs were almost flat in the first nine months of 2009 compared with the same period of 2008, Ziff’s researchers found that the range of operating company performance was “wide.” Three companies were able to cut costs in the first nine months of 2009 by more than 10%, but seven companies reported that their operating expenses had actually risen by more than 10% in the same period, the study noted.

There are “significant cost improvement opportunities,” said Ziff, which are generally available for several cost classifications, including:

According to Ziff, the goal of the study was to compare fields of similar type, and the trend is for a “continuation in significant overall cost inflation.” On average, said researchers, “potential operating cost reduction opportunities are 20% of total adjusted operating costs.”

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