Friday 12 April 2002

UK Oil and Gas Sector Sustains Recovery in 2001

The UK oil and gas sector continues to build on the recovery started in late 1999, with capital investment in 2001 up 25 percent on the previous year, production above 4 million barrels of oil equivalent (boe) per day and the number of new field development approvals reaching a six-year high, according to a new economic review of offshore oil and gas activity published by the UK Offshore Operators Association.

UKOOAs 2001 Economic Report reveals that development expenditure last year was £3.5 billion. If exploration and operating costs are included, total industry spend for 2001 is estimated at some £8 billion. Daily production of oil and gas was maintained at similar levels to the previous year at around 4.3 million barrels of oil equivalent (boe) and 21 new field development projects were approved by the Department of Trade and Industry, more than double the number approved in 2000.

Other facts highlighted in the report include:

* Around £0.4 billion spent last year in new exploration and appraisal activity, compared with £0.35 billion in 2000. 2001 also saw one of the largest discoveries in the UK North Sea for some 10 years: the Buzzard field holds an estimated 400 million barrels of recoverable oil reserves;

* New field start-ups in 2001 (14 in total) include the Elgin/Franklin fields, the largest combined development in recent years, notable for their high pressure, high temperature (HPHT) technology;

* UK oil and gas production accounted for 85 percent of the UKs total primary energy production in 2001 and was broadly equivalent to the UKs entire energy needs for industry, transport, light and heat;

* Over 70 licence holders are currently active in the UKCS, indicating that despite its maturity, the UKCS still continues to attract a wide range of oil and gas companies;

* £4.3 billion paid in upstream taxes in 2000/2001. The UK economy has benefited from £175 billion (2001 prices) in taxes paid by the industry since the mid-1960s;

* Some 264,800 jobs supported in the UK by the offshore industry in 2001, with industry related employment representing around 6 percent of the total workforce in Scotland. In addition, a significant number of jobs support activities for global export projects;

* £200 billion (2001 prices) invested in exploration and development since the 1960s. Over the last decade the industry has accounted for 18 percent of total UK industrial investment;

* 29 billion boe recovered from the UK Continental Shelf (UKCS) in total. UKOOA estimates that the UKs remaining oil and gas reserves range from 26-34 billion boe.

Last years continued recovery is testament to the skills and sustained efforts of individuals in all sectors of the industry who are working to ensure its future success, said Michel Contie, UKOOAs president. A clear signal of the industrys commitment to maximise economic recovery of UKCS reserves can be seen in the approval of some 21 new field developments, of which several are extending the frontiers of technology.

Michel Contie refers to the Clair and Penguins fields - both discoveries from the 1970s - as examples of two very different developments which demonstrate the industrys recent revitalisation.

Clair has for many years been one of the largest undeveloped fields on the UKCS, he says. Its development illustrates the reward for innovation and determination to overcome the complex technical hurdles that have prevented earlier sanction. Penguins breaks new frontiers and will become the longest sub-sea tie-back on the UKCS at some 65kms. Penguins, and other remote satellite developments, such as Otter and Nuggets which progressed in 2001, give encouragement that the fallow discoveries on the UKCS whose progress has been frustrated by seemingly impossible technical barriers and large distances from infrastructure may yet be candidates for development.

UKOOA Executive Officer Beverly Mentzer said: It is very encouraging that UKCS recovery continues to be sustained even when operating and development costs remain high in comparison to other oil and gas provinces. The ability to find and develop smaller, higher risk targets is a challenge that the Industry is vigorously addressing. The use of new technology and optimisation of existing infrastructure are contributing to the Industrys efforts to lower costs for new developments. The stable UK fiscal regime also helps attract investment.

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