Oil & Gas UK Economic Report 2015

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ECONOMIC REPORT 2015 38
A significant fall in the size of the market for oilfield
goods and services is anticipated, reflecting the global
decline in capital investment by most oil companies and
the more immediate reductions in capital and operating
expenditure on the UKCS. As a measure of the size of the
change in the market, Wood Mackenzie estimates that
the number of major project final investment decision
deferrals represent over $200 billion in potential global
capital spend.
The ability to diversify beyond oil and gas may provide
a buffer for those in the facilities, marine and subsea,
and service and support sectors. However, most
companies will be directly impacted and consolidation,
through increased M&A activity, is likely as companies
seek to become more competitive. As is often the case
during a downturn, the drive to improve the efficiency
of operations to tackle rising costs will differentiate
companies (see Section 5 on pan-industry action to
improve efficiency).
It will be essential to sustain UK oil and gas production
at sufficient levels to retain the country’s strong oil
and gas supply chain capability. World energy demand
is expected to grow by 32 per cent over the next
20 years, with oil and gas demand expected to grow by
28 per cent over the same period10, reflecting the
long-term strength of the global opportunity for
the sector.
6.5 Energy Security
Oil and gas provided 68 per cent of the UK’s energy
requirements in 2014, as shown in Figure 24 opposite.
The Department of Energy & Climate Change (DECC)
estimates that there will be little change to this over the
next 15 years.
In the UK today, oil is predominantly (97 per cent) used
for transportation, while gas is used primarily for space
heating and power generation. Currently, just over half
of the domestic demand for oil and gas is met by UKCS
production, with the remainder imported. Indigenous
oil and gas production is not only economically valuable,
but also provides security of supply.
The UK has been a net importer of oil and gas since 2004.
Its import dependency sat at 48 per cent in 2014. By
2030, as demand for oil and gas remains but production
declines, DECC forecasts imports to rise to 74 per cent.
Figure 23: UK Supply Chain Statistics by Sub-Sector
Turnover £39.3 billion £1.4 billion £7.1 billion £13.2 billion £10.3 billion £7.3 billion
Proportion of Total
Supply Chain ~ 4% 18% 34% 26% 19%
Percentage
Exported 42% 57% 57% 33% 46% 34%
EBITDA Margin 13.1% 17.9% 13.3% 8% 11.1% 8.8%
Average Wages
(in sample)
£50,081 £51,140 £51,112 £49,122 £53,072 £47,957
Source: EY
Support and
Services
EY Supply Chain
Study - 2013
Results
Total Reservoirs Wells Facilities Marine and Subsea
10Figures as reported in BP Energy Outlook 2035, which is available to download at