Economic Report 2002 Index

Next Section

Contribution of the Offshore Oil and Gas Industry to the United Kingdom UK Energy Production The offshore oil and gas production industry continues to make a major impact on Britain's national and local economies. In 2002 oil and gas production is estimated to have been some 4.2 million boepd, a decline of some 100,000 boepd relative to 2001. On a worldwide scale, the UK is a significant oil and gas producer, ranking as the 4th largest gas producing country, and the 10th largest oil producer in 2001. Figure 3 illustrates the major contribution the industry has made over the past 30 years to UK production of primary energy from all sources, and how in recent years UK oil and gas production has been broadly equivalent to the full energy consumption in the UK. The UK is projected to lose its self-sufficiency in energy during the current decade as oil and gas production continues to decline. Although Britain's overall trade balance in 2001 was in deficit by over £33 billion, net exports of crude oil and natural gas were worth £6 billion. The value of UK indigenous crude oil and natural gas production was £21 billion, or some 2.4% of Gross Value Added. UK Economy The UK economy has benefited from £190 billion (2002 prices) in North Sea taxes since the mid-1960s. Government tax revenues have been particularly strong in recent years, with the impact of high crude prices more than offsetting the production decline and adverse exchange rate movements. The UK Treasury estimates North Sea taxes at £4.9 billion in 2002. Government tax revenues have been particularly strong in recent years The industry has invested some £205 billion (2002 prices) in the exploration and development of the UK offshore sector since activity began in the mid-1960s. Over recent years the North Sea industry has represented some 17% of total UK industrial investment. In 2002 total industry expenditure (on exploration, development and operating costs) is expected to be close to £8.5 billion, a similar level to 2001.   BOX 1 "Aberdeen Football Club is at the heart of the local community, a community in which the oil and gas industry plays a significant role. We have received tremendous support from the major operators, contractors and supply companies over the years both on and off the pitch from direct sponsorship through to help with community projects and youth development. This is a mutually beneficial relationship as they too have gained from the opportunity to raise their profile and get involved with the community in which they operate. "This industry is very important to the continued prosperity of the North-east and its people. We hope to continue to build sustainable partnerships with the sector well into the next few decades." Keith Wyness Chief Executive Aberdeen Football Club   Employment A study by CogentSI and Public and Corporate Economic Consultants (PACEC) commissioned by UKOOA indicated that some 265,000 jobs were supported by the UK offshore oil and gas industry in 2001. Subsequent increases in expenditure by the oil and gas industry suggests that in 2002 total oil industry employment will have been maintained or increased. The UK continues to develop as a regional hub, and further research suggests many more jobs in the UK support oil and gas exploration and production activities globally. The oil industry represents 6% of total employment in Scotland. Total oil industry expenditures (on exploration, development and operations) are expected to be about £8 billion in 2003. Future direct and indirect employment opportunities are expected to rise in the areas of information technology and knowledge management as well as in the drilling and sub-sea well-head construction sectors. Approximately 8% of oil related jobs are offshore, working on or servicing the oil and gas installations, but the majority of jobs are those which are created directly by the spending and the investment patterns of the industry. The largest concentrations of oil and gas related employment are in the North East of Scotland and the East Coast of England. These regions are the homes of the ports and terminals where oil and gas come ashore, as well as the major construction and fabrication yards which supported the first and second generation of UKCS development and production. However the importance of the oil and gas industry is not confined to these areas, since there are oil related jobs in some 6,000 companies located in almost every part of the country as illustrated in Figure 7.       Managing the future manpower needs of the industry is of critical importance to its continuing success. To this end, UKOOA has stimulated and participated in several important initiatives. Opportunities for geoscientists and technicians across a range of key skills have been identified. UKOOA is working with the Offshore Petroleum Industry Training Organisation (OPITO) and the Engineering Construction Industry Training Board (ECITB) to develop projections of employment needs and a web site: www.oilcareers.com exists to assist placements. The average age of the work force, at 50, remains high, suggesting plenty of opportunity for younger people to enter the industry and participate in the next phase of its development. The next phase of UKCS development will undoubtedly give rise to a transfer of employment from some industry sectors and to new opportunities in other areas. With state of the art technology required to recover many of the undeveloped discoveries on the UKCS and with oil and gas production set to continue for several decades, as well as ever expanding demands to supply the global industry, career opportunities in the oil industry are still very attractive. To reinforce this view a Graduate Attraction programme was launched in December 2002 to encourage students to consider the opportunities which can be offered by the industry. UKOOA also strongly supports the Upstream Oil and Gas Industry Technician Training Programme, launched in September 2002, under which 120 young people commenced Modern Apprenticeships designed to offset the decline in the industry's pool of skilled technical staff. In addition, UKOOA is working with Keele University on a 5 year programme to enhance the teaching capabilities for schools in the geosciences in the expectation that many more people will pursue a career in the industry.   BOX 2 Enhancing UKCS Competitiveness through Exports The overall spend in the UKCS during 2003 is expected to exceed £7 billion. Still a very healthy expenditure and before we talk about the UKCS being in decline - let's consider this as an excellent base to build a substantial Export capability. As a mature province the UKCS faces stiffer competition for the global investment dollar. To create the conditions that enables oil and gas (O&G) operators to invest we need to ensure that our section of the world's O&G industry is highly competitive across a wide range of metrics. The Supply/Contracting chain has made significant progress in developing an export capability but industry in general, and perhaps the SME sector in particular, still has a long way to go. But let's consider our glass to be at least half full for the following reasons. The capability developed over 30 years in servicing a demanding and leading-edge offshore industry has honed skills and products that are highly attractive to overseas customers. The experience of a wide range of exporting companies is now available via mentoring schemes and various organisations including Chambers of Commerce, Department of Trade and Industry, etc. These players have improved immeasurably with respect to their support (financial and knowledge based) to exporters both new and experienced. In addition the latest data suggests that the worldwide Exploration & Production spend for 2003 is set to increase by 4.2% to a whopping $132.4 billion. Exporting brings a new set of challenges that requires innovative solutions - applying these new found skills to our domestic market can improve our competitiveness, truly a win-win situation. Tom Smith Managing Director Nessco Limited