Economic Report 2013

Total Expenditure (in 2012 money) • Total expenditure on the UKCS was over £20 billion for the first time in its history. • Since 1970, the industry has spent over £500 billion by: o Investing £317 billion in exploration drilling and field developments o Spending £183 billion on production operations o Spending£2billionondecommissioning assets that have ceased production Taxation • The industrypaid£6.5billion incorporation taxes on production in 2012-13. • Whilst subdued production and record investment have driven tax revenues down in the short-term, the contribution from oil and gas production was still over 15 per cent of the Exchequer’s total receipts of corporation tax. • The wider oil and gas supply chain is estimated to have paid an additional £5 billion in corporation and payroll taxes. Capital Investment on Developments • Capital investment reached £11.4 billion as the development of a number of large projects continued and other smaller opportunities were incentivised by field allowances. • Oil & Gas UK predicts that capital investment will reach a record of £13.5 billion in 2013. • Over 2011 and 2012, 45 projects have been approved by DECC which require capital expenditure of the order of £22 billion, yielding over two billion boe of production over time.

• Total capital investment committed to projects already in production or under development totalled £44 billion at the start of 2013, £13 billion higher than 12 months earlier. Operating Costs • Total operating expenditure was ten per cent higher than in 2011, at £7.7 billion. • Unit operating costs continued to rise to an average of £13.50 ($21.50) per barrel as production continued to fall and spending on asset integrity and rejuvenation increased. Reserves • Almost 42 billion boe has been recovered from the UKCS so far. • Further overall recovery is forecast to be in the range of 15 to 24 billion boe. • Considering the full range of opportunities available, current investment plans have the potential to deliver 11.4 billion boe in total, as follows: o 7.4 billion boe from existing fields or those currently under development

Four billion boe from incremental and new field developments (not yet approved)

o

• Total expenditure of up to £1,000 billion (in 2012 money) will be required over the remaining life of the UKCS, if recovery is to reach the upper end of the forecast.

8

ECONOMIC REPORT 2013