ECONOMIC REPORT 2013
5
Oil & Gas UK’s
Economic Report 2013
is the definitive
guide to the performance of the offshore oil and
gas industry in the UK, regarding its investment,
production and overall economic contribution.
Working with data from our wide and growing
membership – currently over 370 companies,
including all the leading players in the industry –
and the Department of Energy and Climate Change
(DECC), this report provides insights into the current
health and future prospects of this crucial sector of
Britain’s economy.
2013 marks 25 years since the Piper Alpha tragedy,
an anniversary which prompts us to reflect on and
rededicate ourselves to the cause of safety. The
Cullen Inquiry and consequent report transformed
the approach to oil and gas safety in the UK’s
waters. However, at the Piper 25 Conference held
in June of this year, at which Lord Cullen gave the
keynote speech, we reminded ourselves that there
is absolutely no room for complacency, that very
important challenges still remain and that we must
dedicate ourselves to continually improve the safety
performance of this industry.
I believe that the same can be said of our operational
goals. In this report you will find evidence of a
renewed commitment by the government and the
industry to the extraction of oil and gas from theUK’s
Continental Shelf (UKCS). The Coalition Government
has taken some significant and positive steps over
the past two years. New and much needed tax
allowances have boosted investment in oil and gas
production by £6 billion over 2012 and 2013; total
investment is expected to reach an all-time record
of £13.5 billion this year. Furthermore, the much
needed certainty provided on decommissioning
tax relief will release additional funds for future
investment. Partly due to these fiscal improvements,
exploration activity is now also increasing which, in
turn, boosts the prospect of more discoveries and
hence more indigenous production of oil and gas.
But the improving business environment needs to
be sustained and enhanced over the coming decades
so that this industry can support the economic
wellbeing of this country and its energy security.
Both the British and Scottish governments have
recognised the substantial contribution made by
our industry’s world class supply chain and its great
potential for growth in domestic and overseas
markets. This supply chain now contributes
£27 billion a year to the economy, about £7 billion
being in exports. The UK is a world leader in subsea
engineering, capturing 45 per cent of the global
market, and the well services companies are
generating the highest gross revenues since records
began in 1996. Britain’s fabricators have meanwhile
been integral to the construction of around 6.5
million tonnes of concrete and steel structures
installed on the UKCS to date.
The industrial strategies launched by both
governments set a strong framework for increased
investment, improved application of new
technology, growth in exports of goods and services
and, as a result of all of these, yet more jobs to add
to the 450,000 which this sector already supports
throughout the economy.
There is indeed much more that needs to be done.
Despiteimpressiveinvestmentinnewdevelopments,
the production efficiency of existing assets has been
in worrying decline, with a number of fields failing
to produce as expected. DECC and the industry are
working to tackle this serious concern through a joint
task group. We were also encouraged when, in June,
Edward Davey, the Secretary of State for Energy and
Climate Change, commissioned an independently
led review of the recovery of the UK’s offshore oil
and gas. We very much look forward to seeing the
recommendations of the Wood Review early in
2014. Unlocking the full economic potential of the
UKCS will require both the industry and government
to play their respective parts to the full.
MalcolmWebb
Chief Executive, Oil & Gas UK
July 2013
1. Foreword
