ECONOMIC REPORT 2013
51
However, pre-tax profits actually fell in 2009
and 2010, before rising by 27 per cent in 2011.
The failure to translate increased revenues
into increased profits suggests that the supply
chain struggled to contain its costs in 2009
and 2010. Rising labour costs, resulting from a
tight market for highly skilled people, are the
likely cause of these increased costs.
Ernst & Young’s report splits the supply chain
into four broad categories: reservoir and
seismic, exploration and production drilling,
operations (comprising production and
maintenance), and engineering, fabrication
and installation. The relative turnovers of these
are shown in Figure 35 and their profitability in
Figure 36.
Engineering, fabrication and installation is the
largest sector in terms of revenue, accounting
for some 40 per cent of total UK supply
chain turnover in 2011 and employing some
32,000 people. Operations (production and
maintenance) comprise the second biggest
sector in terms of revenue with a 30 per cent
share and it is the largest sector in terms of
employment, with 38,000 employees in 2011.
Exploration and production drilling typically
make up a quarter of supply chain revenues
and employs some 19,000 people, while
the smallest sector in terms of revenue and
employment is reservoir and seismic, which
typically captures less than five per cent of
revenues and employs around 4,000 people.
The 26 per cent growth in revenues for the
UK’s engineering, fabrication and installation
sector in 2011 was driven by the international
success of subsea engineering businesses and
the demand for engineering and design work.
Operations’ (production and maintenance)
revenues recorded a healthy increase for a
third consecutive year. This segment is made
up of production processes, including a broad
range of operations and maintenance work
Figure 35: Supply Chain Sector Revenues
Figure 36: Supply Chain Sector Profitability
0
5
10
15
20
25
30
2008
2009
2010
2011
£ Billion
Reservoir and Seismic
Exploration and Production Drilling
Operations (Production and Maintenance)
Engineering, Fabrication and Installation
Oil&GasUK,Ernst&Young
0.0
0.5
1.0
1.5
2.0
2.5
2008
2009
2010
2011
£ Billion
Reservoir and Seismic
Exploration and Production Drilling
Operations (Production and Maintenance)
Engineering, Fabrication and Installation
Oil&GasUK,Ernst&Young
Source: Oil & Gas UK, Ernst & Young
Source: Oil & Gas UK, Ernst & Young
