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Summary Contribution to the UK Economy The UK remains a world class oil and gas country. In 2003 it: Ranked as the forth largest producer of gas in the world; Ranked as the eleventh largest producer of oil; Produced 795 million barrels of oil, averaging at 2.15 million barrels of oil per day; Produced 102 billion m3 of gas, with the UK remaining a net exporter of gas over the year; Saw UK gas production peak at 330 million m3/d in January '04, against peak winter gas demand in excess of 440 million m3/d (the gap between supply and demand being met from storage and imports); Continued to be a net exporter of oil and gas (net exports worth £5.4 billion in 2002); Expects to remain self sufficient for gas in 2004, and potentially also in 2005 depending on demand; Expects to remain self sufficient for oil through to 2007/8, with current oil demand of 1.8 million barrels per day for UK's own use; Will continue to meet the majority of the UK's energy needs well into the next decade. In 2003 the oil and gas industry was the largest single industry investing in the industrial sector of the UK economy. The industry spent £8.6 billion, made up of: £3.6 billion on capital investments delivering new production; £400 million on exploration, to find future production; £4.6 billion on operating costs for existing fields, platforms, pipelines and onshore facilities; The industry also: Contributed around £4.5 billion in taxes to the Treasury; Provided employment for 260,000 people: 30,000 directly employed by the operators; 155,000 employed by contractors and the supply chain; 75,000 induced jobs from the economic activity of the above. Employment is split: 34% in Scotland; 25% in South East England; 11% within North of England & East Anglia; 30% in the rest of Britain. Over the last 35 years the industry has (in 2003 money): Invested £211 billion in exploration and capital to develop the offshore oil and gas industry; Spent £105 billion in UKCS operations; Contributed £195 billion in tax revenues to the UK Treasury. Events in 2003 In 2003 the oil price remained strong as: Brent crude averaged $28.80 (£17.60) per barrel, a 15% increase in the US dollar price over 2002; UK oil price remained effectively flat in sterling, as it has done for the last 3 years, at £17.17 per barrel. This has been due to the weakening of the dollar. Costs in the UKCS are predominantly driven by sterling prices. During the year the UK oil and gas industry: Saw 11 new developments announced including: Broom and Buzzard (oil); Seymour (condensate); Carrack, Rose & Rhum (gas). Set a new world record with the 67 km tie back of Nuggets (gas) into the Alwyn North infrastructure; Announced 8 significant new discoveries from exploration, including high cost/high risk wells such as West Franklin (£50 million high pressure/high temperature gas well); Welcomed new entrants such as Oilexco, who announced an exploration success in January '04. The 21st licensing round in 2003: Saw 27 new entrants to the UKCS; Included the award of 53 promote licenses (new, low cost licenses to encourage new players in exploration). The Treasury and industry consulted on measures to increase exploration and appraisal activity on the UKCS, resulting in the introduction of the Exploration Expenditure Supplement (confirmed in 2004 Budget) to assist new entrants to the UKCS. The 2003 budget saw Petroleum Revenue Tax removed from new third party business to level the playing field between old and new infrastructure in the UKCS. Infrastructure owners will pass on the benefits of lower taxation through reduced tariffs to attract new business. The UK and Norwegian Governments agreed on key terms for a Treaty governing cross border co-operation between the two countries. The Treaty: Paves the way for Norwegian gas imports; Includes plans for the new pipeline bringing Norwegian Ormen Lange gas to the UK, landing at Easington; Opens up development opportunities in 120km wide corridor along the UK Norway median line.