Economic Report 2013 - page 23

ECONOMIC REPORT 2013 23
and commissioning of the first generation of
deep water platforms, high marginal tax rates
and, subsequently, falling oil prices, with capex
declining sharply to around £4 billion in 1987.
There was another surge of investment at the
end of the 1980s and into the early 1990s,
as the industry responded to meet more
stringent health and safety regulations in the
aftermath of the Piper Alpha disaster. Several
new fields were also developed and some
early, large fields underwent re-development.
However, with low oil prices and high costs,
capital investment declined again in the late
1990s and early 2000s, as many investors
considered the UKCS to be a less attractive
destination for their capital compared with
other opportunities around the world. Despite
the oil price trebling between 2003 and 2008,
investment on the UKCS continued to remain
relatively flat until 2009.
In 2012, capital expenditure rose to
£11.4 billion, and Oil & Gas UK believes that it
will increase by a further £2 billion, reaching
£13.5 billion in 2013. This rate of investment
has not been seen since the mid-1970s
and capital expenditure this year is almost
certain to be an all-time record (but subject
to the caveat in footnote 2). This represents
a step-change in activity for an oil and gas
province that had not previously seen capital
investment above £7 billion since the early
1990s. Five main reasons have identified
behind this recent increase:
a. A new wave of investment in a small
number of large fields – 30 per cent of
the capital in 2012 (almost £3.5 billion)
was spent in just four fields. Eight
developments approved by DECC since
the beginning of 2010 have a projected
capital investment of over £1 billion each
(see figure 14). Capital in such projects
is typically spent over a three to five year
period and Oil & Gas UK’s analysis suggests
Figure 13: A History of Capital Investment on the UKCS
(2012 money)
Figure 14: Total Field Investment by Year of Approval
0
2
4
6
8
10
12
14
16
19701972197419761978198019821984198619881990199219941996199820002002200420062008201020122014
Capital Investment (£ Billion) 2012 Money
Source:DECC,Oil&GasUK
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Capital Investment in the Field (£ Billion)
Year of Field Approval Source: DECC, Oil & Gas UK
Source: DECC, Oil & Gas UK
Source: DECC, Oil & Gas UK