Economic Report 2013

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Figure 35: Supply Chain Sector Revenues

However, pre-tax profits actually fell in 2009 and 2010, before rising by 27 per cent in 2011. The failure to translate increased revenues into increased profits suggests that the supply chain struggled to contain its costs in 2009 and 2010. Rising labour costs, resulting from a tight market for highly skilled people, are the likely cause of these increased costs. Ernst & Young’s report splits the supply chain into four broad categories: reservoir and seismic, exploration and production drilling, operations (comprising production and maintenance), and engineering, fabrication and installation. The relative turnovers of these are shown in Figure 35 and their profitability in Figure 36. Engineering, fabrication and installation is the largest sector in terms of revenue, accounting for some 40 per cent of total UK supply chain turnover in 2011 and employing some 32,000 people. Operations (production and maintenance) comprise the second biggest sector in terms of revenue with a 30 per cent share and it is the largest sector in terms of employment, with 38,000 employees in 2011. Exploration and production drilling typically make up a quarter of supply chain revenues and employs some 19,000 people, while the smallest sector in terms of revenue and employment is reservoir and seismic, which typically captures less than five per cent of revenues and employs around 4,000 people. The 26 per cent growth in revenues for the UK’s engineering, fabrication and installation sector in 2011 was driven by the international success of subsea engineering businesses and the demand for engineering and design work. Operations’ (production and maintenance) revenues recorded a healthy increase for a third consecutive year. This segment is made up of production processes, including a broad range of operations and maintenance work

Reservoir and Seismic

Exploration and Production Drilling

Operations (Production and Maintenance)

£ Billion

Engineering, Fabrication and Installation

2008

2009

2010

2011

Oil&GasUK,Ernst&Young Source: Oil & Gas UK, Ernst & Young

Figure 36: Supply Chain Sector Profitability

2.5

2.0