As would be expected for a maturing oil and gas province, overall production from the UKCS has been falling since 1999. This trend is set to continue in the future; the real challenge is to ensure that production falls as slowly as possible, thereby increasing the contribution to the UK economy and maximising overall recovery of reserves. In terms of economic sustainability the industry’s strategy is to work towards the following overarching objectives:

• Good stewardship of UK resources; reserves recovery and replacement, and infrastructure utilisation;
• Maintaining and enhancing industry investment levels, supply chain effectiveness and cost efficiencies;
• Continued contribution to energy production and value added to the UK economy.

Stewardship of our reserves is another important consideration in maximising recovery of those reserves. This requires efficient investment, sustained exploration drilling activity and existing infrastructure to be used to its full extent, in which case forecasts predict that further recovery of up to 25 billion barrels of oil equivalent (boe) is possible. The introduction of new (promote and frontier) licences and the “fallow fields” initiative have been instrumental in licence availability, introducing new investors and thereby encouraging high drilling activity.

An area of prime importance for sustaining the UK’s oil and gas production lies with maintaining investment expenditure which is increasingly set against a backdrop of intense global competition for funds. PILOT set a target of attracting £3 billion a year of investment until 2010. Total expenditure across the UKCS was £12.4 billion in 2007, of which £4.9 billion was capital investment and a further £1.3 billion was spent exploring for oil and gas. However, current forecasts suggest that these figures will remain relatively stable in the coming years, albeit against a backdrop of surging cost inflation. To sustain investment, we must ensure that the UKCS remains globally competitive as an oil and gas producing region.

Recent estimates suggest that the UKCS supports around 350,000 jobs in the UKCS both directly and indirectly. In addition, the growing export market for goods and services from the UK supply chain is responsible for another 100,000 jobs. Due to this huge export market, the UK’s balance of trade benefits enormously. Operators overseas are increasingly recognising the expertise which the supply chain in Britain possesses, after some forty years of development and operation of domestic production.

Taking full advantage of remaining UKCS reserves will in turn maximise value added to the UK economy and contribution to public finances. Indeed, the contribution that industry makes to the UK economy is substantial; in 2006 the industry contributed £22 billion to the UK economy’s ‘value added’ figure and in the financial period 2006–07 HM Treasury benefited from tax receipts of around £9 billion, followed by £7.8 billion in 2007-8. Recent estimates suggest that tax receipts will be closer to £12 billion in 2008-09. PILOT, a joint programme involving the Government and representatives of the UK oil & gas industry, including operators, contractors, suppliers, the trade unions and SME’s, which aims to secure the long-term future of the Industry in the UK, has set a target of achieving 3 million barrels of oil equivalent (boe) per day of production in 2010. Total production of oil and gas in was 2.8 million boe per day in 2007 and the rate of production is forecast to be around 2.4 million boe per day in 2010, some 600,000 barrels of oil equivalent per day short of the PILOT target. The industry is actively working to reverse this trend via a number of different initiatives.

Economic Sustainability Table