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ACTIVITY SURVEY
2016
page 48
Impact on the Supply Chain
The UK’s oil and gas supply chain has grown significantly over the last decade in response to the increase in activity
on the UKCS as well as demand growth for exports to the global sector.
In its latest review of the UK oilfield services sector, EY estimates that turnover rose by more than eight per cent
per year from 2008 through to 2014
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. This fuelled a boom in employment across the whole of the supply chain
over that period.
However, the sharp decline in investment and expenditure over the last 18 months has led to a severe contraction
across the supply chain, the consequences of which will continue to be felt in 2016 and beyond. The supply
chain has had to adjust quickly to falling demand for goods and services, as well as contending with a significant
downward pressure on costs that is greatly affecting their margins. Figure 38 shows that turnover has fallen by
around one quarter in 2015 with a further decline anticipated in 2016. The lack of new development projects
on the UKCS has hit the engineering, procurement, construction and installation section of the supply chain the
hardest, where a contraction of almost 50 per cent is anticipated by the end of this year.
The future of the industry, and therefore the thousands of businesses and hundreds of thousands of jobs it
supports, will depend on the sector’s ability to sustain investment through the downturn. The value of the supply
chain’s contribution to the UK economy and the world-class expertise currently anchored in the UK are at stake.
Many businesses will not be able to sustain falling revenues for much longer and, without a lift in activity, will
inevitably have to focus resources in other sectors or look to migrate overseas. Actions the industry takes now will
determine the future of the UK offshore oil and gas supply chain for many years to come.
Figure 38: Supply Chain Turnover
0
5
10
15
20
25
30
35
40
45
2010
2011
2012
2013
2014
2015
2016
Turnover by Supply Chain Sector (£ Billion)
Seismic
Drilling Contractors
Well Services and Commodities
Subsea
Engineering, Procurement, Construction and Installation
Maintenance and Operations
Source: Rystad Energy
Forecast
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