Oil & Gas UK's Webb sees extended lives for North Sea production, infrastructure

Aug. 6, 2012
The North Sea oil and gas sector, contrary to what some sources say, still has a long life ahead of it, maybe 50 years or more.

Malcolm Webb
Oil & Gas UK

The North Sea oil and gas sector, contrary to what some sources say, still has a long life ahead of it, maybe 50 years or more.

The UK offshore oil and gas industry plays an important role in maximizing the potential of the region's hydrocarbon resource, bringing benefits to the UK economy and long-term energy security, as well as developing technical expertise that is in high demand globally.

Oil and gas produced off the UK's coastline in 2011 met 68% of the country's demand for oil and 58% of its demand for gas—that's half of the UK's primary energy needs. Even upon achievement of the government's target to source 15% of our energy from renewables by 2020, nearly three quarters of our energy demand will still be met by oil and gas.

Oil and gas not supplied from our own reserves can be satisfied through imports; however, this will be at significant extra cost to the economy. We are fortunate, therefore, that up to 40% of the UK's resource still remains to be extracted.

The UK offshore oil and gas sector is the country's largest industrial investor, providing hundreds of thousands of skilled jobs, exports, and tax revenues for Britain. One quarter of all corporation tax (£11.2 billion) paid to the public purse in 2011-12 came from charges on offshore oil and gas production.

Furthermore, 45 years of exploration and production operations in the UK has resulted in a supply chain that has an unrivaled range of products, services, and expertise, honed in some of the world's most physically and economically challenging offshore environments.

The UK's oil and gas support services sector is defined by the sheer breadth of its reach and diversity of its capabilities which include seismic surveying, exploration, engineering and design, fabrication, production, maintenance, and decommissioning.

Malcolm Webb, chief executive of Oil & Gas UK, is also chairman of SPE Offshore Europe 2013.

This capability is in strong demand internationally, boosting the number of jobs in the UK supported by the industry to about 450,000. Oil & Gas UK's July 2012 Economic Report estimates that our contractor community pays a further £6 billion each year in corporate and payroll taxes and exports goods and services also to the tune of £6 billion.

The oil and gas supply chain therefore is an important element in the UK economy and one which continues to flourish. Our latest Well Services Contractors Report, for example, reveals that UK gross revenue in that part of the industry grew dramatically by 28% to $2.8 billion (£1.7 billion) in 2011.

Mature and experienced

A mature oil and gas province presents many challenges, but it has proved advantageous for the supply chain. It means that the UK is at the forefront of finding cost-effective ways to prolong the life of aging assets and maximize the recovery of hydrocarbons, with advances in subsea technology being just one example.

Sixty percent of new UK developments make use of subsea technology. According to UK Trade and Investment's report into UK Oil and Gas World Class Capabilities, the global subsea hardware and equipment market is expected to rise by 23% to $139 billion from 2011 to 2015, and so the opportunities for UK companies in that area are clear.

Operating within a mature province also involves the industry in developing expertise to extend infrastructure life and maintain asset integrity. This has stimulated companies to work on ground-breaking pan-industry programs and technological innovation. The industry's strengths in this area will enable it to manage ageing effectively in all types of assets and export this knowledge internationally.

Oil & Gas UK has published new guidance in this area, and with the right approach, there is no reason why infrastructure cannot be operated safely and effectively beyond its originally conceived service life.

Moving forward

For the UK offshore oil and gas industry to grow and develop its technical expertise, it will need to continue to maintain and enhance its robust safety regime.

This is why Oil & Gas UK and its member companies objected to the European Commission's proposals to regulate offshore safety centrally from Brussels and to replace this gold-standard regime with a generic, "one-size-fits-all" system that will add no value.

Establishing the right business environment is also crucial if the industry is to continue to provide jobs, tax revenues, and support for the balance of trade and energy supplies. Accordingly, Oil & Gas UK and our members are working collaboratively with government to seek to ensure a tax regime that continues to stimulate investment.

Oil & Gas UK's role

As the leading representative body for the UK offshore oil and gas industry, our membership comprises the full range of enterprises that are active in our industry from supermajor oil companies to SMEs.

Our aim is to strengthen the long-term health of the industry by maximizing recovery of the UK's oil and gas resources, ensuring a sustainable future for the supply chain, and raising public awareness of the contribution it makes to the economy and energy security.

We undertake pan-industry work that promotes collaboration and exchange of information. We run forums, publish and monitor guidelines, manage projects and discussions on key issues, and hold networking and industry leading events. We also represent the sector to government and seek ways to increase awareness of the industry's economic value among leading politicians.

Access to skilled personnel is vital for a sustainable industry and we work closely with skills body OPITO on that agenda, also.

The UK offshore oil and gas sector is a burgeoning and exciting industry with companies of all shapes and sizes playing their part in its growth. There is much work to be done to ensure it can meet its full potential, and Oil & Gas UK is proud to play its part in that endeavor.