Offshore Oil & Gas Industry Market Report 2006
Key Note Publications Ltd, November 2006
This Market Report analyses the UK offshore oil and gas industry, which covers activities in the waters surrounding the UK, known as the UK Continental Shelf (UKCS). In 2005, total sales of oil, gas and related products amounted to £28.69bn, an increase of 22.8% on 2004. Government revenues and taxes attributable to UK oil and gas production reached an estimated £9.7bn in 2005/2006, up by 84.7% on the previous year.
Oil and gas production is falling. At 182.1 million tonnes of oil equivalent (mtoe), output in 2005 was 9.9% lower than 2004's output and 22.4% lower than it was in 2001. Oil and gas account for roughly equal shares of UKCS output.
41 years after the first recoverable reserves were discovered in the UKCS, the UK oil and gas industry is a mature one. While there are likely to be some short-term, small increases in output, as a few remaining large fields come on stream and the lives of older fields are extended, the long-term future will be one of decline, unless new major discoveries are made. The more recent discoveries have been smaller than earlier discoveries and they are also more difficult and expensive to bring into production. Some of the larger international oil and gas companies are selling their less attractive UKCS assets and switching their attention to other parts of the world, which give better returns on investment.
In the context of the recent government Energy Review, the UK offshore oil and gas industry has an important role to play in providing energy for the UK. Longer term, UK energy needs will have to be met by an increasing amount of oil and gas imports, much of which will come from countries where the culture and politics are very different from those in the UK.
Issues of particular concern to the UKCS oil and gas sector include recent rises in taxation (which could deter companies from investing in the industry) and decommissioning of redundant structures and pipelines (during the next 20 years, hundreds of structures and pipelines will have to be removed and disposed of in an environmentally acceptable manner).
The UK will be dependent on fossil fuels for decades to come, but carbon emissions are a serious disadvantage of this type of fuel. There is currently a major debate about whether or not to renew the UK's ageing nuclear power stations, all of which are due to be withdrawn from service in the 2020s. Nuclear power has the advantage of not producing carbon emissions, but the renewal of nuclear power plant would reduce the market for gas in gas-fuelled power plant.
The future of the UK oil and gas industry largely rests on international oil prices. Owing to the hostile environment in which oil and gas in the UK are recovered, the UK market is based on high prices. The current conflicts in the Middle East and unrest in other oil- and gas-producing countries raises the possibility that the UK could experience disrupted oil and gas supplies from these regions. Moreover, large emerging economies such as China and India will be major competitors for the world's energy resources. Any escalation of these factors could lead to renewed efforts to extract the maximum possible oil and gas from the UKCS, even at a very high cost. There has been a rise in the number of exploration licences taken out in the 2005 licensing round, an indication of sustained, but high risk (of not finding recoverable reserves), interest in the UK offshore oil and gas industry.
1. Market Definition
REPORT COVERAGE
MARKET SECTORS
Oil
Natural Gas
Natural-Gas Liquids
MARKET TRENDS
Oil
Gas
ECONOMIC TRENDS
Population
Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2001-2005
Gross Domestic Product
Table 2: UK Gross Domestic Product at Current and Annual Prices (£m), 2001-2005
Inflation
Table 3: UK Rate of Inflation (%), 2001-2005
Unemployment
Table 4: Actual Number of Unemployed Persons in the UK (million), 2001-2005
Household Disposable Income
Table 5: UK Household Disposable Income Per Capita (£), 2001-2005
MARKET POSITION
The UK
Table 6: UK Production of Primary Fuels by Type of Fuel by Volume (million tonnes of oil equivalent), 2001-2005
Table 7: UK Production of Primary Fuels by Type of Fuel by Volume (million tonnes of oil equivalent and %), 2001 and 2005
Figure 1: UK Production of Primary Fuels by Type of Fuel by Volume (%), 2005
Overseas
Table 8: Consumption and Production of Oil in Selected Major Economies (million tonnes), 2005
Table 9: Consumption and Production of Gas in Selected Major Economies (million tonnes of oil equivalent), 2005
2. Market Size
THE TOTAL MARKET
By Value
Sales
Table 10: The Total UK Market for Oil and Gas by Sector by Value (£m), 1996-2005
Figure 2: The Total UK Market for Oil and Gas by Sector by Value (£m), 2001-2005
Government Revenue from Taxes and Royalties
Table 11: Taxes and Royalties Attributable to UK Oil and Gas Production by Value (£m), 1995/1996 to 2006/2007
UK Production
Table 12: UK Production of Petroleum and Natural Gas by Volume (million tonnes of oil equivalent), 2001-2005
BY MARKET SECTOR
Oil
By Value
Table 13: UK Sales of Oil by Value (£m and %), 2001-2005
By Volume
Table 14: UK Petroleum Oil Production by Volume (million tonnes of oil equivalent and %), 2001-2005
Gas
By Value
Table 15: UK Sales of Natural Gas by Value (£m and %), 2001-2005
By Volume
Table 16: UK Production of Natural Gas by Volume (million tonnes of oil equivalent and %), 2001-2005
OVERSEAS TRADE
Exports
Oil
By Value
Table 17: UK Exports of Crude Oil by Value (£m), 2003-2005
By Volume
Table 18: UK Exports of Primary Oils (million tonnes), 2001-2005
By Country of Destination
Table 19: UK Exports of Crude Oil by Country of Destination by Volume (000 tonnes), 2005
Natural Gas
By Value
Table 20: UK Exports of Natural Gas by Value (£m), 2003-2005
By Volume
Table 21: UK Exports of Natural Gas by Volume (gigawatt hours), 2001-2005
By Country of Destination
Table 22: UK Exports of Natural Gas by Region of Destination by Volume (000 tonnes), 2005
Imports
Oil
By Value
Table 23: UK Imports of Crude Oil by Value (£m), 2003-2005
By Volume
Table 24: UK Imports of Primary Oils by Volume (000 tonnes), 2001-2005
By Country of Origin
Table 25: UK Imports of Crude Oil by Country of Origin by Volume (000 tonnes), 2005
Natural Gas
By Value
Table 26: UK Imports of Natural Gas by Value (£m), 2003-2005
By Volume
Table 27: UK Imports of Natural Gas by Volume (gigawatt hours), 2001-2005
By Country of Origin
Table 28: UK Imports of Natural Gas by Region of Origin by Volume (000 tonnes), 2005
3. Industry Background
RECENT HISTORY
The Oil Fields
Table 29: Crude Oil Production from Major Oil Fields (000 tonnes per annum), 1975-2000, 2001, 2003 and 2005
The Gas Fields
Table 30: Gross Production from Major Gas Fields (million cubic metres), Total to End of 2000, 2001, 2003 and 2005)
NUMBER OF COMPANIES
Table 31: Number of UK VAT-Based Enterprises Involved in the Extraction of Crude Petroleum and Natural Gas by Turnover Sizeband, 2005
EMPLOYMENT
Table 32: Number of VAT-Based Enterprises Involved in the Extraction of Crude Petroleum and Natural Gas by Employment Sizeband, 2005
REGIONAL VARIATIONS IN THE MARKETPLACE
DISTRIBUTION
Table 33: Distillation Capacity of UK Refineries by Volume (million tonnes of oil equivalent per year), 2005
HOW ROBUST IS THE MARKET?
LEGISLATION
Licensing Scheme
Regulations
KEY TRADE ASSOCIATIONS
Association of British Offshore Industries
British Marine Equipment Association
Energy Institute
Institute of Marine Engineering, Science and Technology
International Maritime Contractors Association
Society of Maritime Industries
Subsea UK
UK Offshore Operators Association
UK Spill Association
4. Competitor Analysis
THE MARKETPLACE
Table 34: Selected UK Facility Operators and Oil Fields, 2006
MARKET LEADERS
BG Group PLC
Company Structure
Current and Future Developments
Financial Results
BP PLC
Company Structure
Current and Future Developments
Financial Results
Centrica PLC
Company Structure
Current and Future Developments
Financial Results
Chevron Corporation
Company Structure
Current and Future Developments
Financial Results
ConocoPhillips
Company Structure
Current and Future Developments
Financial Results
Royal Dutch Shell PLC
Company Structure
Current and Future Developments
Financial Results
Total SA
Company Structure
Current and Future Developments
Financial Results
OTHER COMPANIES
Apache Corporation
Canadian Natural Resources
ExxonMobil
Hess Corporation
Interconnector (UK) Ltd
Kerr-McGee
Marathon Oil Corporation
Perenco
Talisman Energy Inc
OUTSIDE SUPPLIERS
5. Strengths, Weaknesses, Opportunities and Threats
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
6. Buying Behaviour
ENERGY CONSUMPTION
Energy Consumption of Primary Fuels
Table 35: UK Inland Energy Consumption of Primary Fuel† by Type of Fuel by Volume (million tonnes of oil equivalent), 2001-2005
Fuel Used in Electricity Generation
Table 36: Fuel Mix Used in UK Electricity Generation by Type of Fuel by Volume (%), 2005
Table 37: UK Electricity Generating Capacity by Type of Plant (megawatts), 2001-2005
Energy Uses of Petroleum Products
Table 38: Energy Uses of Petroleum Products (%), 2005
NON-ENERGY USES OF PRIMARY FUELS
Table 39: UK Inland Deliveries of Petroleum for Non-Energy Uses (000 tonnes), 2005
GAS APPLICATIONS
Table 40: Demand of Natural Gas by End Use (gigawatt hours), 2005
MARKETING OF ENERGY
7. Current Issues
FUTURE UK ENERGY CHALLENGE
FUTURE OIL AND GAS SUPPLIES
INCREASED TAX
NUCLEAR POWER
INCREASE IN LICENCES
DECOMMISSIONING
CARBON EMISSIONS
CORPORATE ACTIVITY
8. The Global Market
OVERVIEW
OIL
Reserves
Table 41: World Proved Oil Reserves by Region (billion barrels, billion tonnes and %), 2005
Production
Table 42: World Oil Production by Region (million tonnes and %), 2005
Consumption
Table 43: Global Oil Consumption by Region (million tonnes and %), 2005
NATURAL GAS
Reserves
Table 44: World Natural Gas Proved Reserves by Region (trillion cubic metres and %), 2005
Production
Table 45: World Natural Gas Production by Region (billion cubic metres and %), 2005
Consumption
Table 46: Global Gas Consumption by Region (billion cubic metres and %), 2005
9. Forecasts
ECONOMIC FORECASTS
Population
Table 47: Forecast UK Resident Population by Sex (000), Mid-Years 2006-2010
Gross Domestic Product
Table 48: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2006-2010
Inflation
Table 49: Forecast UK Rate of Inflation (%), 2006-2010
Unemployment
Table 50: Forecast Actual Number of Unemployed Persons in the UK (million), 2006-2010
UKCS Expenditure 2005 to 2010
Table 51: UKCS Development Capital Projections (£bn), 2005-2010
FORECASTS 2006 TO 2011
Oil
Table 52: UK Oil Production Projections (million tonnes), 2006-2011
Table 53: Forecast UK Production of Oil by Volume (million tonnes of oil equivalent), 2006-2011
Gas
Table 54: UK Gas Production Projections (billion cubic metres), 2006-2011
Table 55: Forecast UK Production of Natural Gas by Volume (million tonnes of oil equivalent), 2006-2011
Future Reserves
MARKET GROWTH
Figure 3: Growth in UK Oil and Gas Production by Volume (million tonnes of oil equivalent), 2001-2011
FUTURE TRENDS
10. Company Profiles
BG Group PLC
BP PLC
Centrica Plc
Chevron Ltd
Conocophillips Ltd
Royal Dutch Shell PLC
Total E&P UK PLC
11. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Rebounds
Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
Fewer Adults Wish to Borrow
Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), August 2005-2006
SPENDING FROM SAVINGS
Strong Recovery in Spending from Savings
Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
Savings Grow in Relative Importance
Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), August 2005-2006
12. Further Sources
Associations
Government Publications
Other Sources
Bisnode Sources
BG Group PLC
BP PLC
Centrica Plc
Chevron Ltd
Conocophillips Ltd
Royal Dutch Shell PLC
Total E&P UK PLC
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