Upstream oil and gas investment on the UK Continental Shelf (UKCS) reached a record £13.5 billion this year, according to a new study.
But, despite the high spending, production efficiency continues to be an issue in the North Sea, says Oil & Gas UK’s 2013 Economic Report.
Oil & Gas UK chief executive, Malcolm Webb, says: “The recent sharpening of focus within government and industry on the business environment required to grow that contribution in future has given investors the confidence to develop new fields and redevelop older fields, so we are now seeing the highest-ever investment. This is heightening the business opportunities for the UK’s supply chain and is boosting employment to 450,000 jobs across Britain.”
Although the UK remained the third largest producer of gas and second largest producer of oil in Europe in 2012, annual production declined by 14.5% to 567MM boe, or 1.54MM boe/d.
In 2012, only nine new fields with total reserves of 146MM boe began producing.
Oil & Gas UK anticipates that 15 fields, with combined reserves of 470MM boe, will come onstream in 2013. The Banff, Gryphon and Elgin fields are also coming back onstream, but over the year, production is now forecast to fall to a range of 1.2-1.4MM boe/d.
Webb said: “Despite impressive investment in new developments, the production efficiency of existing assets remains in worrying decline. DECC and the industry are working to tackle this serious concern through a joint task group. The Wood Review, which is currently examining how to maximise UKCS recovery, is also very timely and we very much look forward to seeing the recommendations early in 2014.”
According to the report, the UK’s oil industry supply chain now generates sales of £27 billion a year, including £7 billion in exports, says the report. Subsea engineering is worth £9 billion a year and holds 45% of the global market, according to the report. Well services companies are generating revenues of almost £2 billion a year, the highest since records began, it adds.
In 2012-13, £6.5 billion was paid in tax on production, representing more than 15% of the Exchequer’s total receipts of corporate tax.
In addition, the oil and gas supply chain is estimated to have paid an additional £5 billion in corporate and payroll taxes, taking the total industry contribution to almost £12 billion.
According to the UK Government, oil and gas will still provide some 70 per cent of the UK’s total primary energy in 2030.
Image: Malcolm Webb
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