The North Sea used to be one of the world's most important and profitable oil fields. To some extent, the region is still an important part of the global oil industry. Unfortunately, it is becoming an increasingly difficult place to work.

Rising costs
This year's Oil & Gas UK Activity Survey estimated that during 2013, the average North Sea operating cost was around $28.85 per barrel. However, there are many fields with operating costs in excess of $51 per barrel.

What's more, the total cost of operations in the UK Continental Shelf (the North Sea) is expected to rise 10% this year as higher wages and maintenance costs eat away at profits.

According to the oil services firm AMEC, the average barrel of oil produced within the region is now worth only $60, including gas. This implies that many fields have razor-thin margins which are only getting thinner. Now that margins are so tight, even small $5 to $10 movements in the price of oil can send a field over the edge. The hostile tax environment isn't helping, either.

The U.S. Energy Department recently released figures showing that Britain's petroleum revenue tax raid during 2011 consumed around 81% of profits for older fields and 62% for newer ventures. Many operators are still reeling from the blow.

With the risk of another tax raid on the horizon, companies are now asking the question, why bother?

Not viable
Chevron (NYSE:CVX) is one of the operators that is reconsidering its future in the North Sea.

The company is considering the future of its Rosebank project, a joint venture with Austria's OMV in a relatively unexplored region of the North Sea. The two partners had hoped to reach a decision on the outcome of the project this year, after Chevron threw cold water on the project last year. Initially, Chevron believed that the costs were too high and the project would not be economically attractive.

Both Chevron and OMV want Rosebank's costs to come down. Current estimates put the cost of the Rosebank project at $10 billion; the two partners want this figure to be lower before they give the go ahead on it next year. The Rosebank field is estimated to contain 240 million barrels of total potentially recoverable oil-equivalent resources.

The final decision will hopefully be made during 2015, after the key Scottish independence vote that is scheduled to take place within the next few months. If Scotland votes to leave the UK, the project's outcome could change significantly.

Costs have also been an issue for Norwegian oil company Statoil (NYSE:EQNR). Statoil is developing the Bressay heavy oil field in conjunction with the UK's own Royal Dutch Shell (NYSE:RDS.A). Once again, however, the two have hit a snag over costs. To try to simplify the project and reduce costs, the two companies have gone back to the drawing board.

The estimated cost of the Bressy project is around $6 billion to $7 billion, making it one of the UK's largest developments in decades.

Bressay is another huge field, estimated to contain around 250 million barrels of recoverable oil. Statoil and Shell were originally aiming to get the project up and running by the first quarter of 2018, with technology in place to continue production for up to 30 years.

Regardless of Bressay's fate, Statoil's development of its nearby Mariner field (which has around 250 million barrels of recoverable oil) is set to continue. Mariner is another $7 billion project. There is also talk that the Bressy field could share infrastructure with a nearby field called Bentley, which is of similar size. This would reduce costs and increase the returns from the project.

The bottom line
The North Sea is becoming a hostile place to work, and many operators are leaving the region. Chevron, Shell, and Statoil have put projects on hold to try to push down costs, but there is still no certainty that developments will go ahead.