Oil & Gas UK Economic Report 2014

Figure 2: Nominal and Real Brent Prices from 1970 to 2013

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140

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120

Brent Price (Nominal) Brent Price (Real)

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80

60

4

Brent Price ($/boe)

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5

20

0

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Source: BP Statistical Review 2014, World Bank

expressed in sterling was almost unchanged at £69.50/bbl for the year. However, over the course of 2013, sterling steadily appreciated against the dollar, a trend which continued in the first half of 2014. By mid-2014, the $/£ exchange rate stood at 1.70, the highest since the onset of the financial crisis in 2008. This will have put pressure on upstream margins of late, given the exposure of UK Continental Shelf (UKCS) producers to costs denominated in sterling.

natural gas markets are more regional in nature, but are increasingly linked by price responsive flows of liquefied natural gas (LNG). The wholesale gas market in Britain at the National Balancing Point (NBP) reflects supply and demand conditions in the closely integrated markets of north west Europe. In 2013, NBP prices continued their steady recovery from the recessionary low in 2009. Reform and re-negotiation of continental term contracts and the post-Fukushima tightness of world LNG markets both again served to tighten the north west European market in 2013 amid near-stagnant demand in the UK and the Eurozone. Month ahead NBP averaged 67.1 pence/therm (p/th) in 2013 ($10.50 per million British Thermal Unit), the highest

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Gas Markets and the National Balancing Point

Oil markets are truly international with inter-regional trade flows of crude and products on a very large scale. In contrast,

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ECONOMIC REPORT 2014