Economic Report 2017

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1. Foreword W

e lcom e t o Oil & Gas UK’ s 2017 Economic Report ͘ Our annual reƉort once more reŇects a challenging ďusiness enǀironment against ǁhich industry has ďeen in action to imƉroǀe its comƉetitiǀeness, madžimise economic recoǀery and Ɖosition itselĨ eīectiǀely to ensure longerͲterm sustainaďility͘ The sector has done much to address its cost ďase and Ɖursue the eĸciency needed to comƉete in the current enǀironment͘ thile it has ďeen, and continues to ďe, relentlessly demanding Ĩor many ƉeoƉle ʹ ďoth ƉroĨessionally and Ɖersonally ʹ it is really good to see comƉanies increasingly commiƩed to emďracing real ch ange t o se cur e t h e ir sh or t and longe r - t e r m fut ur e . As this reƉort shoǁs, industry initiatiǀes are helƉing to estaďlish a culture Ĩocused on imƉroǀing oƉerational eīectiǀeness, streamlining ďusiness Ɖrocesses and contriďuting to tangiďle increases in caƉital eĸciency ǁithout comƉromising on saĨety͘ The Oil & Gas UKͲled ĸciency TasŬ &orce has ďeen instrumental in helƉing to catalyse p an- indust r y sust ainab le ch ange . omƉanies haǀe deliǀered unit oƉerating cost imƉroǀements greater than in any other ďasin in the ǁorld since 201ϰ͘ Although the maturity and comƉledžity oĨ the UK ontinental ^helĨ ;UK ^Ϳ means it remains a more edžƉensiǀe ďasin in ǁhich to oƉerate, this is still a ďasin ǁorth inǀesting in, ǁith edžciting hydrocarďon oƉƉortunities, estaďlished inĨrastructure, access to a ǁorldͲclass suƉƉly chain, a highly sŬilled ǁorŬĨorce, as ǁell as a gloďally comƉetitiǀe Įscal regime͘ There are tentatiǀe signs that inǀestor conĮdence is starting to return to the sector, and to the UK͘ Oǀer the Įrst halĨ oĨ 2017, almost Ψϲ ďillion ǁas inǀested in UK ^ asset and corƉorate acƋuisitions͘ That trend is set to continue throughout this year and into 201ϴ ǁith Total͛s ƉroƉosed acƋuisition oĨ DaersŬ Oil announced ũust ďeĨore Ɖuďlication͘ The sector continues to suƉƉort oǀer ϯ00,000 ũoďs across the economy, ďut as this is around oneͲthird loǁer than the ƉeaŬ in 201ϰ, it could threaten core caƉaďilities ǁithin the suƉƉly chain iĨ actiǀity does not ƉicŬ uƉ͘ The latest analysis shoǁs the decline ďetǁeen 201ϱͲ1ϲ ǁas sharƉer than Ɖreǀiously anticiƉated, hoǁeǀer, there is eǀidence that the rate oĨ ũoď loss is noǁ sloǁing to a reduction oĨ around 1ϯ,000 in 2017 comƉared to almost ϲ0,000 in 201ϲ͘ M or e ne e ds t o b e done t o dr iv e any up t ur n and se cur e long- t e r m e m p loy m e nt . Up t o £ 40 b illion w or t h of Ɖotential inǀestment oƉƉortunities currently sit in comƉany ďusiness Ɖlans͘ Industry ǁill haǀe to stay the course in terms oĨ saĨely and relentlessly imƉroǀing its eĸciency and reducing its cost to ensure these oƉƉortunities ďecome ďusiness realities in the near term, and that our hardͲǁon Ɖrogress is not lost in any uƉturn͘ The UK Goǀernment͛s continued commitment to its Driving Investment Plan is a p r e r e q uisit e for inv e st or s. D e al Ňoǁ and asset trading can also ďe assisted ďy enaďling the transĨer oĨ tadž history ďetǁeen sellers and ďuyers oĨ Eorth ^ea oil and gas assets͘ The industry has Ɖresented comƉelling eǀidence Ĩor change, ǁhich should ďe include d in t h e A ut um n Budge t 2017 . Wotential inǀestors also reƋuire clarity as to hoǁ the UK ǁill resƉond to the macroͲeconomic imƉact oĨ redžit͘ T h e UK Gov e r nm e nt m ust m aint ain a st r ong v oice for our indust r y in E ur op e w h e r e indige nous oil and gas w ill continue to Ɖroǀide a ǀital Ɖart oĨ the energy midž͘ Our industry needs Ĩrictionless access to marŬets and ƉeoƉle Ĩor our suƉƉly chain and Ɖrotection oĨ energy trading and the internal energy marŬet, ǁhich haǀe helƉed Ɖroǀide secure, aīordaďle energy to the UK Ĩor decades͘

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