Economic Report 2018

4.1 UK Oil and Gas Industry – Contribution and Opportunity The UK’s offshore oil and gas industry continues to make a vital contribution to the UK economy and Vision 2035 recognises that under the right conditions it will be capable of doing so for many years to come. The industry provides: • Employment – the industry currently supports more than 280,000 jobs across the UK, many of whom are in highly skilled roles. 21 • Taxation – the industry is a significant tax contributor, through corporation, production, employment and other taxes. Government statistics and other information show that: - Almost £1.2 billion was paid by oil and gas companies through production taxes in financial year 2017-18 - The oilfield service sector paid more than £300 million in corporation taxes in 2016 (latest figures available) - The industry further contributes significant levels of employment taxes and other taxes such as irrecoverable VAT, duties and business rates. These typically amount to more than £2 billion per year. • Energy security – overall, three-quarters of the UK’s energy comes from oil and gas. The UKCS meets just under half (46 per cent) of the UK’s energy needs, and the more the UK produces, the less it needs to import. • A world-class indigenous supply chain – there are more than 1,400 UK companies providing oilfield goods and services across the E&P life cycle – both at home and via international exports – generating more than £30 billion of revenue in 2016. - £12.3 billion of goods and services were exported from the UK oil and gas supply chain in 2016, significantly contributing to the UK’s balance of payments • Technical innovation – the UK has led the development of technology to exploit offshore oil and gas resources and is recognised as a global leader in mature basin solutions. The launch of the OGTC in Aberdeen seeks to consolidate industry's technological advantage and encourage further advancement in this field. £180 million has been committed over ten years to support industry as part of Aberdeen City Region Deal, with this being match-funded by industry. Vision 2035 recognises that the UK’s indigenous oil and gas industry offers two primary sources of value. First, through maximising recovery of the UK’s own offshore oil and gas resources and second from making the most of the supply chain which has developed in support of exploration and production activities across the UKCS. Without any intervention, it is expected that the industry will generate around £630 billion in revenue over the period through to 2035, based on a 2016 perspective. Vision 2035 seeks to transform this opportunity, boosting activity and revenues by half. In doing so it will unlock a further £290 billion in revenue for the industry, resulting in an overall prize of £920 billion for the UK economy. This will be achieved by: • Increasing recovery from the UKCS, where success could add a new generation of productive life to the UKCS by mitigating the rate of long-term production decline. • Encouraging the UK’s oil and gas supply chain to make the most of opportunities available on the UKCS and expand its export footprint, with the aim of doubling its share of the international market by 2035. It will also be important to support this ambition through increased diversification into new sectors.














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