Oil & Gas UK’s 2013 Economic Report, published today (21 August), highlights how the renewed commitment from the Government and industry to extract oil and gas from the UK’s Continental Shelf (UKCS) is succeeding in promoting investment to an all-time record of £13.5 billion this year.

Oil & Gas UK’s chief executive, Malcolm Webb, explains: “The offshore oil and gas industry generates almost £40 billion a year for the economy by producing oil and gas worth £32 billion and by exporting oilfield technology and expertise worth £7 billion. 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 world-renowned supply chain and is boosting employment to 450,000 jobs across Britain.”

The UK’s world-class supply chain now generates sales of £27 billion a year, including £7 billion in exports. It is considered a world leader in subsea engineering which is worth £9 billion a year and holds 45 per cent of that global market, and well services companies are generating revenues of almost £2 billion a year, the highest since records began.

Oil and gas extraction has provided the Exchequer with more than £300 billion (2012 money) in production tax over the past 45 years. In time, the current unprecedented investment will lift production, bringing with it significant funds for the public purse. In 2012-13, £6.5 billion was paid in tax on production, representing over 15 per cent 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.

Mr Webb comments: “The industry is the UK’s largest industrial investor and contributor to gross value added. With 15 to 24 billion barrels of oil equivalent (boe) still remaining to be developed, the UKCS possesses great potential for contributing to economic growth for decades to come.”

According to the UK Government, oil and gas will still provide some 70 per cent of the UK’s total primary energy in 2030. 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 per cent to 567 million boe, or 1.54 million boe per day (boepd).

In 2012, only nine new fields with total reserves of 146 million boe began producing. Much more encouragingly, we anticipate that 15 fields, with combined reserves of 470 million 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 to 1.4 million boepd.

Mr Webb addresses the continued decline in production, stating: “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.”

Concluding, Mr Webb says: “The industrial strategies launched by both the British and Scottish governments provide a clear framework for increased investment, innovation, growth in exports and British job creation. Unlocking the total economic potential of the UKCS will require both the industry and government to play their respective parts to the full.”