Oil & Gas UK Economic Report 2014

UKCS, such as Leman, Forties, Brent, Beryl and Ninian were being developed. The next big peak was in the aftermath of the tragic Piper Alpha disaster of 1988, when the industry implemented the recommendations of Lord Cullen’s investigation and report, and there was a further surge of investment in new fields. Another peak came in 2008 when the oil price surpassed $140/bbl, and investment in 2013 reached a record high of £14.4 billion. It should be noted, however, that, although Figure 13 is in constant (2013) money, it has been produced using national inflation rates from the Office of National Statistics (ONS). There is no recognised inflation index applicable only to this industry, whose costs have not generally followed the national economic cycle; were there such an index, the relative heights of the peaks in Figure 13 would probably be different.

Capital investment of £14.4 billion last year was some £3 billion higher than the previous record set just 12 months earlier. Oil & Gas UK believes 2013 will be the peak year for capital investment, although it will remain above £10 billion during 2014 and 2015, before falling to £7-8 billion a year by the end of the decade. In recent years, there have been a small number of very high value opportunities available on the UKCS. Figure 14 overleaf illustrates that the top five such investments have typically accounted for around 30 per cent of annual capital expenditure over the past three years, each of them holding significant value and containing at least 100 million boe of recoverable reserves. They are, though, technicallychallenginganddifficult to access.

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Figure 13: Capital Investment in the UK Continental Shelf since 1970 (in 2013 money)

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Capital Investment (£ Billion) 2013 Money

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1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: DECC, Oil & Gas UK

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ECONOMIC REPORT 2014