Slowdown hits UK supply chain, report finds

Offshore staff

LONDON – Oil & Gas UK says its Economic Report 2016 demonstrates the tenacity of Britain’s offshore oil and gas industry in the face of difficult market conditions.

The industry has cut the cost of extracting a barrel of oil or gas from the UK continental shelf (UKCS) by nearly half since 2014 and at the same time raised production by 10%.

However, the supply chain has suffered an average 30% fall in revenues since 2014, with around 120,000 likely job losses over the past two years.

Deirdre Michie, Oil & Gas UK’s chief executive, said: “The UKCS is in urgent need of fresh investment to boost exploration and drive activity, particularly for the supply chain.

Exploration has fallen to record lows and little new investment has been approved in 2016 and 2017 looks no better.”

Increased asset trading is one area that could free up new investment, particularly in late-life UK offshore facilities, she said.

“In light of this I am calling on governments today to vigorously champion the UK’s oil and gas industry, by providing certainty in our fiscal regime, encouraging new entrants to the market, and recognizing our supply chain as vitally important to the economy.

“The evidence in the report demonstrates what our industry can achieve when the basin’s competitiveness is addressed and the tax regime reformed. Now it is time for the UK and Scottish governments to reinforce their efforts to promote the UKCS, nationally and internationally, as an attractive investment with world leading capability from front-end exploration to late life operations.”

The association has called for the following action:

  • The UK government to re-affirm its commitment to the “Driving Investment” fiscal strategy, targeting a more competitive, simple and predictable fiscal regime as the basin continues to mature
  • HM Treasury to complete its work on decommissioning tax relief over recent budgets by introducing measures to enable tax relief to be transferred upon an asset sale. This would facilitate trading of assets, encouraging new entrants to the market and liberating new investment for buyers and sellers alike
  • The UK and Scottish governments to promote the increasing competitiveness of the basin as well as the capability of the UK’s oil and gas supply chain, both nationally and internationally, as part of the UK’s new industrial strategy, recognizing the sector as a key element of Britain’s economy.


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