ECONOMIC REPORT 2013
22
Expenditure and Investment
In 2012, total
expenditure exceeded
£20 billion for the first time in the history
of the industry in the UK (measured in 2012
money, that is adjusted for inflation). After a
reasonably flat period during the 1990s and
early 2000s, expenditure has now risen by an
average of 16 per cent a year for the last four
years. While expenditure on operations (opex)
and exploration and appraisal (E&A) drilling
have risen steadily over that time, it is capital
investment (capex) that is responsible for the
majority of the increase.
The offshore oil and gas exploration and
production industry continues to be the
largest investing sector and contributor to
national gross value added (GVA) among the
industrial sectors of Britain’s economy.
Capital Expenditure
Figure 13 opposite shows a time series of
capital investment over the life of the UKCS
since 1970, adjusted for inflation (based
on general inflation across the economy
2
).
In today’s money, £270 billion of capital has
been invested in developing fields over the
past 45 years.
Having started in the shallow waters of
the southern gas basin, large amounts of
capital were spent as the industry found and
developed oil fields in the deeper waters of
the CNS and NNS during the 1970s, reaching
over £11 billion in 1976. A number of very large
fields were brought rapidly into production,
but the pace of development then slowed
through the 1980s, reflecting the technical and
economic challenges arising from the building
Figure 12: Total Expenditure on the UKCS
2
In reality, the industry’s inflation has been greater than inflation in the wider economy over the last 40 years. However there are insufficient data
collected to present a reliable deflator for the industry on its own.
0
5
10
15
20
25
2005 2006 2007 2008 2009 2010 2011 2012 2013
£ Billion, 2012 Money
E&A
Capital
Investment
Operating
Costs
Source: DECC, Oil & Gas UK
25
20
15
10
5
0
£ Billio ,
2 Money
2005 2006 2007 2008 2009 2010 2011 2012 2013
