Vision 2035 Prospectus

Working together to realise the full potential of our pioneering industry

Vision 2035 offers an exciting future for the whole sector that is ambitious and challenging in equal measure. It could help unlock £920 billion for the UK economy — doubling current expectations. From what we see now, this can be achieved by: • Adding a generation of productive life to the UK Continental Shelf, so that in 2035 we still produce more than one million barrels of oil and gas a day, substantially slowing the decline in production from the basin • Growing opportunities for the UK’s oil and gas supply chain, doubling its share of international business and harnessing the power of its people through diversification and innovation to build an energy industry of scale For more than 50 years, the UK has been successfully exploring and producing the oil and gas resources located around its continental shelf to provide energy and employment to the country, creating wealth for society and establishing an industry of international renown.

Our heritage Since the first offshore gas field came onstream in 1967, the industry has produced 45 billion barrels of oil and gas equivalent (boe) and it has the potential to provide another 10–20 billion boe in the years to come. Oil and gas are still, and will continue to be, a vital part of the energy mix, providing over three quarters of the UK’s energy demand in 2016 and predicted to still provide two thirds of UK primary energy demand in 2035. Domestic production currently supplies about half of the UK’s oil and gas needs and there are sufficient resources to do so for many years to come. This will ensure we have a secure energy supply to heat our homes, fuel transport and provide feedstock to our industry. Our oil and gas heritage allows us to provide the energy we need here in the UK today, as well as positioning us to lead the energy transition. Even if we can accelerate the move to a lower-carbon future, between now and 2035 it is apparent that the UK will need more oil and gas than can be economically produced from the UKCS. This means the UK oil and gas industry is not in competition with other energy sources, rather our drive is to be competitive against other sources of oil and gas around the world.

(~$16 /boe)

Outlook Challenges

The Industry’s National

The fall in investment from 2014-17 means production decline is likely in the early 2020s

Sustaining efficiency gains is vital if the basin is to continue to ttract investment

It is important to improve exploration success

Free cash flow remains a major concern for the UK supply chain

The facts Global energy demand will continue to grow over the next few decades and although the energy mix is evolving, with other energy sectors accelerating rapidly, oil and gas will remain vital to meet increasing demand and aiding the transition as the world moves to a lower- carbon future. Vision 2035 is not something that can be achieved overnight. It is an ambitious goal which will require hard work and collaboration across the industry to maximise the recovery of our oil and gas resources and build a truly international energy supply chain of repute with strong roots in the UK. Creating a culture that embraces change, is open to opportunity and shares success will be a vital first step and good progress has already been achieved. The UKCS delivers more than half of the UK’s oil and gas There are

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The Industry’s National Contribution

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Maximising Economic Recovery Although industry has faced many challenges over the past few years, our production has remained strong, reversing a 14-year declining trend and producing nearly 600 million boe in 2017. Vision 2035 sees the basin delivering an additional 3 billion boe by 2035 on top of earlier plans, and sees industry effectively managing production so that this mature basin is still producing over 1 million boe per day in 2035. In doing this, the industry will continue to provide a base load of work and activity for its supply chain whilst providing opportunity for it to diversify into other aspects of energy and enter new markets at home and abroad. Sustaining our supply chain, encouraging diversification and exports More than 1,400 companies across the UK have built successful businesses on the back of the UK’s oil and gas industry, both serving the UKCS and also offering a major export capability. Turnover across the supply chain was estimated at £30 billion in 2016, £12 billion of which came from exports of oilfield goods and services providing the UK with highly skilled jobs and increasing the supply chain’s resilience.

Vision 2035 seeks to help the UKCS supply chain expand its international oil and gas related business, growing such turnover to over £35 billion p.a. by 2035. Growing exports and encouraging diversification will be key. The UK currently supplies just under 4 per cent of the global oil field services market; the aim is to double this share by 2035. Sustained strong activity on the UKCS offers a sound base to build on. The upstream industry will need to continue to provide its supply chain with plenty of opportunities to ensure it can flourish at home, while also allowing it to grow and diversify into other industries and grow its capabilities overseas. Initiatives by the British and Scottish governments to support the sector through the Industrial Strategy and a Sector Deal will all contribute to achieving Vision 2035.

Harnessing the power of our people The success of industry thus far has only been made possible by the ingenuity of the people that work in it. Vision 2035 relies on that being carried forward, offering the next generation a fulfilling and lucrative career and inspiring them to innovate and use their highly sought after skills to solve a new set of challenges. As energy sectors converge, creating links between the different parts of the energy sector will be key to maximising the opportunities for talented individuals to contribute to Vision 2035. Vision 2035 will only be a success with the energy and support of the people, both the 170,000 that are currently directly employed by the industry, and the 40,000 future employees that will be needed between now and 2035 to support it, as well as the many thousands of people that benefit from the sector’s wider activities.

An attractive, competitive industry As the industry has weathered the downturn, it has recognised the need to develop a more collaborative, constructive culture that is open to new opportunities and embraces innovation. Reflecting this, the industry has appointed a cultural change champion to drive the change and promote success. A willingness to collaborate underpins this and initiatives such as the Efficiency Task Force (ETF) and the development of supply chain principles promote new, constructive and more open ways of working, benefitting all involved. If we continue to collaborate and work to increase our competitiveness, then confidence in the basin will remain high, attracting investment to sustain further activity. The industry has indeed become much more competitive. Production efficiency is on the up, and was over 74 percent in 2017, rising for the fourth year in a row; operating costs have halved over the same period. Investment is returning to the basin with £3.2 billion of capital projects delivering 380 million boe already approved in 2018. The industry is continuing to work towards a sustainable cost of drilling and maintaining an attractive fiscal and regulatory environment so that the UKCS can flourish in years to come.

Get involved Oil & Gas UK is building a Vision 2035 website at www.energyvision2035.com which will be launched in the new year. It will include information about how you can get involved both personally and as an organisation. In addition, in early 2019 and all through next year, OGUK forums, workgroups and other organisations who are getting behind Vision 2035 will start to engage their members on what Vision 2035 means for them. In the meantime, if you have suggestions or just want to join the mailing list for information about Vision 2035 please contact joinus@energyvision2035.com

energyvision2035.com

Working together to realise the full potential of our pioneering industry

© 2018 The UK Oil and Gas Industry Association Limited (trading as Oil & Gas UK)