Operating costs continue to rise in the oil and natural gas fields of Western Canada, according to the newest annual study by Calgary-based Ziff Energy Group. In a study of 2001 costs for a total of 195 fields, Ziff determined that oil costs had increased 9% over those in 2000, while gas costs jumped 18% from the year before.

Ziff’s analysis found that the average oil operating costs increased to C$6.50/boe in 2001, up from C$6.10/boe in 2000. For gas, the average cost increased to C$0.69/Mcfe in 2001 from C$0.58/Mcfe in 2000. Energy costs for electricity and natural gas were up even more, increasing 38% for gas and 32% for oil. Energy also impacted costs for many other services, said Ziff.

With the increase in activity as well as a “buoyant drilling program,” the cost of many services also increased, raising the total cost of repairs and maintenance by 33% for gas and 11% for oil. The only category where both costs did not rise was for the other operating costs, including field overheads, contract services, trucking and third-party processing, which were up 3% for gas, but fell 4% for oil.

“Over the last two years we have recommended to all our clients in Canada and the U.S. to commence programs that manage their energy use more efficiently,” said CEO Paul Ziff. “Those who did were prepared, while many others continue to be stressed by the full impact of high costs. While some energy costs have backed off in 2001, we expect continued volatility over the next several years, and alert knowledgeable managers will be able to outperform industry averages.”

Ziff said the year ahead “will present challenges for producers seeking to maximize cash flow. Commodity prices have recently strengthened, but much of the recent volatility has been caused by the challenges of potential supply and the uncertainty of world politics” like oil. “Reducing operating costs is the quickest lever for producers and some proactive companies are reviewing the operating cost of every property they operate.”

For more details on the study, visit the web site at ziffenergy.com, or call Court Mackid, director of Canadian E&P Services, at (403) 265-0600.

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