Economic Report 2019

ECONOMIC REPORT 2019

1. Foreword OGUK’s Economic Report 2019 reinforces the importance of the UK’s oil and gas industry, a sector helping to meet today’s energy needs and one that will be a key contributor to tomorrow’s energy mix. As our report shows, there is an increasing demand for energy in an expanding global economy. Global energy demand has increased by two-thirds since 1995 and most scenarios show this continuing to grow in the decades to come. Closer to home, the UK’s energy landscape is changing at pace. The Committee on Climate Change recommended in May 2019 that the UK should aim to achieve net-zero greenhouse gas emissions by 2050, and 2045 in Scotland. The fact that these recommendations have been adopted at government level is welcomed and supported by OGUK. This industry can play a major role in delivering the UK’s net-zero future, given the recognition by the Committee on Climate Change of the importance of oil and gas as part of a diverse energy mix in 2050 and beyond. It can help deliver secure and affordable energy in a safe manner and contribute to the low-carbon solutions that will be required to realise the UK’s ambitious climate change goals. Oil and gas companies are already in action, using their skills, expertise and resources and developing their energy portfolios in ways that will help move the UK towards net-zero. A positive future for the industry is outlined in Roadmap to 2035: a Blueprint for Net-Zero . This roadmap represents the evolution of industry’s Vision 2035 and has been developed following extensive engagement through the Our Vision, Our Future campaign. Roadmap 2035 outlines what is already happening in our sector and what will be undertaken, to ensure a safe, sustainable oil and gas industry that contributes to a net-zero future. The offshore oil and gas industry currently meets 45 per cent of the UK’s overall energy needs and will continue to provide energy security for decades to come. Having an indigenous energy resource helps to ensure an energy supply we can control, regulate and access. It also brings with it a range of economic benefits. Production of domestic oil and gas directly accounts for around 1.2 per cent of the UK’s GDP and will continue to contribute billions of pounds of taxes in the future, as well as securing hundreds of thousands of skilled jobs. It is an important contribution that is key to the well-being of the UK’s economy and one that industry is proud to make. Industry’s performance continues to improve and, as a result, the UK sector is more competitive than it has been for many years. New investors are being attracted to the basin, with almost $5.5 billion of assets changing hands so far this year. Fresh opportunities are being unlocked and drilling activity is increasing following record-low levels in recent years. Eighteen exploration and appraisal wells have been drilled so far in 2019, more than the whole of 2018, and the basin is on track to drill over 100 development wells for the first time since 2015. In addition, production is higher than it has been since 2011 and production efficiency at its greatest level for a decade. The industry is also building its reputation for decommissioning excellence, which is part of the lifecycle of every asset. Experience in this area is growing and as a result of a sustained focus to improve efficiency, cost estimates continue to fall. Industry is now halfway towards the target of a 35 per cent reduction in total costs by 2022. The international competitiveness of the sector will remain critical to achieving the potential of the UK’s domestic resources and ongoing support from government and regulators is needed to maintain the progress made in recent years. Predictability, stability and clarity are all vital in the face of global challenges, and the tripartite arrangement, between government, industry and regulators can continue to serve the UK well in the future.

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