Oil & Gas UK Economic Report 2015

6. Economic Contribution

1

2

Over recent years, there has been considerable deliberation about whether the domestic offshore oil and gas sector’s full economic contribution to the UK is properly understood. It is now accepted that the total value added (TVA) from the UKCS derives as much from the indigenous supply chain that has developed over the last five decades as it does from the UKCS’ direct outputs. If domestic offshore oil and gas extraction were to cease overnight, then the economy would be diminished by the loss of direct oil and gas output as well as the activity underpinned by service industries supporting the sector.

There is, however, no single measure that reflects the sector’s TVA. Industrial and fiscal policy has nonetheless begun to reflect the sector’s wider value proposition. In the recent reforms of oil and gas production taxation, HM Treasury has explicitly stated that “when making judgements about fiscal policy, the government will consider the wider economic benefits of oil and gas production, in addition to (fiscal) revenues” 5 .

3

4

5

Figure 17: Total Value Added from the UKCS

6

Gross Value Added

Supply Chain

7

Profitability

UKCS TVA

8

Energy Security

Employment

Fiscal Contribution

9

Source: Oil & Gas UK

10

5 Driving Investment: a Plan to Reform the Oil and Gas Fiscal Regime from HM Treasury is available to download at http://bit.ly/1DmXfPY

33

ECONOMIC REPORT 2015