Investment and wealth creation in the UK economy

Oil and gas companies play a key role in UK investment activity, contributing a fifth of the capital expenditure invested by all production and manufacturing industries. It also continues to create more wealth than any other production or manufacturing industry. In 2005, the GVA of the oil and gas industry directly accounted for £27 billion, with the supply chain and activity induced by the oil and gas sector as a whole adding a further £12 billion. Together this accounted for over 3.5% of the total GVA for the UK.

Figure 20: UK Oil & Gas Industry Gross Value Added & Investment

The UK balance of trade also continues to benefit substantially from UKCS oil and gas production. If the UK had to import all its oil and gas in 2005, the total UK trade deficit would have risen from £47 billion to £73 billion.

Investment and expenditure

During 2005 capital investment in new and existing oil and gas fields rose to £5.1 billion (including operational expenditure, the total was £9.8 billion). Capital investment from 2006 to the end of the decade is projected to total £18 billion (adding to the £230 billion invested since the mid 1960’s).

Figure 21: UK North Sea Expenditure (2005 Prices), 1970-2005

Cost efficiency

Operating expenditure to enable recovery from existing fields remained flat at £4.7 billion but given the 8% production decline, unit operating costs (UOC) increased. In 2004 it cost £3.70 to produce a barrel of oil or gas equivalent (disregarding initial finding and development costs) but this rose to £4 per barrel in 2005, an increase of 8%.

Figure 22: UKCS Unit Operating Cost 2003-2010