Economic Report 2020

UK Oil and Gas Investment and Production

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

18

Capital Expenditure Production

16

14

12

10

8

6

4

Daily Production (Million boepd)

2

Capital Investment (£billion - 2019 Money)

0

Source: OGA, BEIS, OGUK

averaged £5.5 billion per year) total UKCS production fell by half. Annual decline rates averaged 7 per cent across the decade, though the rate of annual decline peaked as high as 11.4 per cent in 2006. In comparison, total UK oil and gas consumption only fell by 9 per cent during this decade. This trend saw the UK move from being a net exporter of oil and gas, to a net importer. By contrast, the decade between 2010–19 has seen an almost doubling of capital investment compared with 2000–09. Most of this investment was committed at the beginning of the decade, with recent years more in line with longer-term trends. The significant ramp up in investment between 2010–14 has resulted in improved production performance, with an annual average decline rate of only 3 per cent between 2010–19. Importantly, there was a 20 per cent increase in production between 2014–19, as output was boosted by a wave of new field start-ups following these high levels of investment. Despite the scale of the challenges faced this year, the

industry has continued to deliver strong production performance, with output relatively in line with 2019 at just under 1.7 million boepd (around 600 million boe). However, the slowdown in new development activity and investment does give rise to concern around the impact on production in the coming years. The trajectory of the production trend will be defined by the extent to which industry is able to find and develop new resources. Production is anticipated to return to a decline, however there are clear opportunities to manage this trend in line with the ambitions of Roadmap 2035, by investing accordingly. There are more than £35 billion of capital investment opportunities identified within company plans over the next ten years, all with varying probabilities of progression. Halting this investment in the industry will do nothing to reduce consumption of oil and gas, it will only mean that the UK will become even more reliant on net energy imports, to the detriment of the wider economy.

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