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Maximising Economicand Commercial Recovery
of Oil and Gas from the UKCS– A Framework for Success
www.oilandgasuk.co.uk@oilandgasuk
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Oil & Gas UK Strategic Objectives
• Maximise recovery from the UKCS
• Sustain a long-term future for the UK offshore oil and gas supply chain
• Raise the positive profile and reputation of the UK offshore oil and gas industry
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Investment, Government support
and fiscal stability are critical to sustain the UK’s
oil and gas industry
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Maximising Economicand Commercial Recovery
of Oil and Gas from the UKCS– A Framework for Success
• The offshore oil and gas industry is the UK’s largest industrial investor, supporting 440,000 jobs across the country
• UK companies in the supply chain are global leaders in the development and application of offshore technologies and expertise
• There are up to 24 billion barrels of oil and gas still to be recovered from below the seabed around the United Kingdom. Maximising recovery of these reserves and resources will secure tax revenues, reliable energy supplies and jobs for the UK for decades to come
To maximise economic and commercial recovery,
the industry needs:
A fiscal regime tailored to maximise economic and commercial recovery of UK oil and gas resources
Fit for purpose regulation
Support for the growth and retention of our world class supply chain
A pool of skilled workers
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A fiscal regime tailored tomaximise economic and
commercial recovery of UK oil and gas resources
Oil and gas is a global business and competes for investment on an international basis. To secure that investment for the UK, the industry needs a stable and predictable tax regime to give confidence to investors.
Over time we will need a gradual reduction in the marginaltax rate to make extracting the remaining oil and gas resource from tougher, more challenging fields economically and commercially viable.
We also need certainty that the Government will honourits commitment to tax allowances on decommissioningcosts to ensure an active market in mature assets and avoid premature decommissioning.
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Fit for purpose regulation
The industry is heavily regulated to protect worker safety and the environment. The regime covers licensing, exploration, development, production and decommissioning.
This regulation must be delivered in an effective, transparent and coherent manner. We need governments to push back unnecessary and disproportionate legislation from the EU. The industry’sworld class safety regime must be protected.
Improvements will always be welcomed, but political orinternational changes that risk downgrading our regime must be firmly rejected.
We need governments and industry to manage potentialconflict with other seabed users to ensure that we maximisethe recovery of remaining oil and gas resources.
We need certainty about the process for granting licencesand reassurance that new Government policy initiatives willnot compromise existing licence conditions.
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Support for the growthand retention of our
world class supply chain
The UK is a global hub for the provision of oilfield goods,offshore technology and operational expertise and anundisputed world leader in subsea engineering.
To preserve our domestic supply chain, and the technology and innovation it fosters, government and industry must champion it. Government should adopt business- friendly policies that support a strong supply chain including competitive business and corporation tax rates, and promote the export of oilfield goods and services.
Government should prioritise world-class physical anddigital connectivity for Aberdeen and all other oil and gascentres in the UK, for example high speed broadband and good public transport and road links.
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A pool of skilled workers
Global demand in recent years for skilled oil and gaspersonnel has led to shortages of experienced personnelacross the sector.
The industry relies on expertise provided by a flexible,mobile international workforce; the Government must adoptsupportive visa regulations for skilled non-EU workers.
Industry and Government should work together with theskills body, OPITO, to ensure that skills gaps are spotted andfilled early and to coordinate re-deployment of appropriatelyskilled workers to the oil and gas industry.
Government should support sector-specific training not onlyin higher and further institutions, but also encourage greatertake up of STEM subjects in schools.
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Access to CapitalAccess to capital has been identified as a blocker to investment in the UKCS. A survey of lenders’ requirements and borrowers’ needs was carried out earlier last year and an investors’ event held in October to help smaller operators get ready access to equity and debt based finance.
Access to InfrastructureThis group was set up to accelerate existing work programmes, identify critical infrastructure, ensure robust stewardship and suggest transformational options going forward.
IOR/EORThe Increased Oil Recovery (IOR) work group was created to maximise recovery of the UKCS oil and gas resource, and has prioritised ten areas, including low salinity waterflood, chemical enhanced oil recovery (EOR) and low cost subsea developments.
ExplorationA task force has been set up to review the causes of the recent exploration downturn and to identify any policy measures that can be used to deliver greater activity.
TechnologyThe group started a year ago to assess whether UK plc would benefit froma new technology strategy. It is felt that as majors (with their international R&D budgets) leave the UKCS and are replaced by smaller operators chasing ever challenging resources, such a strategy will become increasingly important.
SkillsResearch indicates that the industry may find it difficult to recruit sufficient skilled workers to fill 10,000 jobs in the next five years. To widen the group of eligible entrants to the industry, it is recommended that current apprenticeship scopes be broadened, a strategic relationship estabilished with the MoD and an ‘industry gateway’ be set up to provide a ‘one stop shop’ for those looking to find a way in.
ExportsAn industrial strategy for oil and gas is being developed through BIS, available in spring 2013
Key Industry and UK Government Initiatives
In addition to working in the Fiscal Forum led by HM Treasury, the industry is working with BIS through the Oil & Gas Council and DECC through PILOT on the following initiatives:
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Energy Security• Oil and gas provides some 73 per cent
of the UK’s total primary energy • Production from the UK’s continental shelf
(UKCS) satisfied 49 per cent of the country’s primary energy demand in 2011:
- 68 per cent of oil demand - 58 per cent of gas demand• Up to the 2040s, 70 per cent of primary
energy in the UK will still come from oil and gas, even if the 15 per cent target for renewable energy is met
• The UKCS has the potential to satisfy close to 50 per cent of the UK’s oil and gas demand in 2020 if the current rate of investment is sustained
• A total of 41 billion barrels of oil equivalent (boe) has so far been recovered from the UKCS, with further overall recovery estimated at up to 24 billion boe
UK Employment • The industry supported at least 440,000 jobs
across the UK in 2011• Employment is spread across the UK: - Scotland – 45 per cent - South East England – 21 per cent - North West England – 6 per cent - West Midlands – 5 per cent
For more information about Oil & Gas UK, the voice of the UK’s offshore oil and gas industry, please contact:
Ashley Shackleton 020 7802 2410 [email protected]
David Petrie 020 7802 2461 [email protected]
Trisha O’Reilly 020 7802 [email protected]
Economic Contribution • Over £300 billion in production related
corporate tax has been paid to the Exchequer in over 40 years since production began
• The industry paid £11.2 billion in corporate tax on production in 2011-12, almost 25 per cent of total corporation tax received by the Exchequer
• The wider supply chain is estimated to have contributed another £6 billion in corporation and payroll taxes
• Production of oil and gas boosted the balance of payments by some £40 billion
• The supply chain added another £6 billion in exports of goods and services
• The UK offshore oil and gas industry remains the largest investor and the largest contributor to national gross value added among the industrial sectors of the economy
www.oilandgasuk.co.uk@oilandgasuk
