Oil & Gas UK Economic Report 2014

Internationally, there is forecast to be significant, rising demand, both onshore and offshore, with a large increase in deep water expenditure forecast. The main areas with international opportunities for companies based in the UK include sub-Saharan Africa (such as Angola and Nigeria), North America (onshore shale and offshore Gulf of Mexico), South East Asia (Malaysia and Australia) and South America (Brazil). Whilst there is overall a strong demand for products and services from the three sub-sectors, a number of significant issues were uncovered that may affect companies’ abilities to tap these opportunities. The businesses interviewed by EY identified a variety of threats and barriers that affect the whole supply chain in the following categories: • Slowdown in future UKCS activity and uncertainty over the UK’s onshore demand • Rising costs affecting competitiveness • Labour supply constraints preventing companies from growing • Increased international competition eroding companies’ competitive position • Lack of visibility and access to international opportunities, limiting the size and growth of exports • Inadequate UK infrastructure (such as in and around Aberdeen and its hinterland), limiting foreign investment and increasing the costs of doing business.

To build on the UK’s strengths, its current competitive position and to address these threats and barriers, EY identified a variety of actions for government and industry, a number of which are noted below:

Source: EY

Ensuring the longevity and maximising the quantity of domestic offshore and onshore demand is a cornerstone of anchoring this supply chain in the UK for the long term. This requires: • Creating a fiscal, legislative and regulatory regime appropriate to the UKCS’ maturity • Encouraging technical innovation and greater cross-industry collaboration • Establishing a strong regulatory body to monitor asset performance • Increased support from the government for independent exploration and production (E&P) companies which acquire assets from larger E&P companies

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ECONOMIC REPORT 2014