Wednesday 14 July 2004

Offshore Oil and Gas Industry Launches Economic Report 2004

North Sea sees Renewed Activity as Investment, Exploration and Development Picks Up

The offshore oil and gas industry reports evidence of renewed activity across the North Sea, pointing to a pick-up in oil and gas project approvals, better than expected exploration activity and continuing strong investment since the beginning of the year.

Speaking today at the launch of the UK Offshore Operators Associations 2004 Economic Report "Maximising Britain's Oil and Gas Resource", Malcolm Webb, chief executive of the industry representative body, said that since January, 12 new oil and gas projects on the UK continental shelf (UKCS) had been approved by the Department of Trade and Industry (DTI), compared with 14 for the whole of 2003. 

He also expected exploration to be substantially up on last year, noting that drilling has started on 22 new stand-alone exploration and appraisal wells since the beginning of the year, compared with 32 for the whole of last year.  In addition, the latest investment outlook suggests that investment will be up by at least 10 percent on 2003.

UKOOAs Economic Report 2004 provides the latest view on the industrys performance and examines the economic drivers influencing its activities.  It also demonstrates how the sector is responding to the North Seas advancing maturity through collaboration and the introduction of new work practices.

Facts highlighted in the report include:

• UK indigenous crude oil and natural gas production is valued at £23 billion or some 2.5% of Gross Value Added of the total economy.
• The industry is the largest single investor in the industrial sector of the UK economy, with capital and operational spending of £8.6 billion in 2003.
• The UKCS produced 1.5 billion barrels of oil equivalent (boe) in 2003 (795 million barrels of oil and 102 billion m3 of gas), and continues to be a net exporter of both oil and gas.
• The UK will continue to be self sufficient in gas until 2005/2006 and oil until 2007/2008.  However, indigenous production should still meet 60 percent of the UKs gas demand and 80 percent of oil demand in 2010.
• The industry employs 185,000 people across the country in exploration, production, operations, contractors and in the supply chain, whose spending supports a further 75,000 jobs.  Over a third of jobs are located in Scotland.
• In 2003, it contributed £4.5 billion to the Treasury in tax revenues, the equivalent of £80 for every person in the UK. 
• New oil and gas discoveries are typically half the size they were ten years ago, falling within the range of 20-30 million boe, and are found in increasingly complex reservoirs.
• Existing fields are producing on average 15,000 boe per day, half the average rate of a decade ago.  In the same period, the total number of oil and/or gas fields in operation has doubled to over 250.
• Over 550 million barrels of reserves changed hands in 2003, increasing the diversity of players in the basin.

"The UK offshore oil and gas industry is one of this countrys major economic successes," says Malcolm Webb.  "Oil and gas produced from the continental shelf around the British Isles have fuelled this countrys self-sufficiency in energy for over 20 years and have provided investment, jobs and tax revenues that confirm the sector as one of the most important in the UK economy."

He adds: "It is encouraging to see signs of activity picking-up, two years after the severe set-back to investors confidence caused by the introduction of the supplementary Corporation Tax rate on UK oil and gas production.  We are currently the worlds seventh largest oil and gas producer but the continuing challenge for the UKCS will be to sustain production in the long term."

The industry is currently working with the government to convert the North Seas remaining potential into attractive investment opportunities by tackling the barriers blocking activity.   Issues being addressed relate to asset trading, the implementation of new technology, provisions for decommissioning liabilities, supply chain management, the impact of regulation, business practices and behaviours, and the fiscal environment.  

Notes to Editors 1. The UK Offshore Operators Association (UKOOA) is the representative organisation for companies licensed by the British Government to explore for and produce hydrocarbons in UK waters.  It has 30 members.   For more information, please call 020 7802 2400.