1

Paul Dymond

Operations Director

Oil & Gas UK

The Future of the Oil and GasSector in the North Sea

North Sea Stakeholder ConferenceWorking together to manage the marine resource of the North Sea Region18th March 2010

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Who we are…

• The leading representative body for the UK offshore oil and gas industry• Working to promote and strengthen the long-term health of the Industry• We represent operators, non-operators, contractors and suppliers & speak for the whole sector

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• Providing secure energy supplies:

Produced > 900 million barrels oil and gas equivalent in 2009 Supplying 2/3rd UK’s primary energy needs Meeting 97% UK oil demand and 73% UK gas demand

• A major investor in the UK economy

£ 1.0 billion invested in exploration in 2009 £ 4.7 billion invested in new developments in 2009 £ 6.6 billion spent on production operations in 2009

• A major employer: 450,000 jobs supported across the UK

• Benefiting UK balance of payments:

£ 30 billion better off in 2009 from the UKCS

• Major Source of Tax Revenue:

Direct North Sea taxes £12.9 billion in fiscal year 2008/9 Paid 28% of total UK Corporation Tax, CT Oil field tax rates between 50 & 75% Supply chain provides further £5 - 6 billion in payroll / CT

• Global hub exporting oilfield goods and services:

£6 billion per annum export business – world leader in high-tech engineering and offshore energy services e.g. sub-sea systems

Economic Importance of the UK Oil and Gas Industry - today

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Contribution of indigenous European production to security of energy supply

• Overall the EEA is the 4th largest oil and gas producer in the world

– ahead of e.g. Iran, Algeria and Canada;

• Indigenous EEA/EU production is an important contributor to EU security of energy

supply;

• Approx. 90 % of EU reserves are located offshore.

Source: BP Statistical Review, 2008 + Dutch MEA

0 1 2 3

RO

DK

IT

UK

N

Million barrels per day

Consumption

Production

0 20 40 60 80 100

PLDKROIT

DENLUKN

Billion cubic metres

Consumption

Production

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Remaining UKCS reserves:

• Produced 39 billion boe of oil and gas to-date

• Up to 25 billion boe still to be recovered

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UKCS Investment Outlook

£ b

illio

n

0

1

2

3

4

5

6

7

8

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

60-69%

70-79%

80-89%

90-99%

100%

60

70

80

90

100%

70

80

90

100%

Capital Investment Forecast

50-59%

< 50%

Sector Estimated Value Added

(€ million)

Oil and Gas 41,822

Shipping 5, 498

Offshore Wind

70

Fishing 511

Source: Policy Research CorporationDraft report, 2010

UK Investment comparison to 2020:Offshore wind aspiration: ca £100bnOil & Gas plans: £60bn

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Future world demand for energy – continuing importance of oil and gas

• Global demand for energy is increasing steadily;

• Wind, solar and bio-fuels expanding rapidly: but from a very small initial base;

• Oil and gas will remain the primary energy source for many years to come;

• In the UK, even as we head towards a low carbon economy, oil and gas will account for 70 % of our primary energy needs in 2020.

Source: ExxonMobil 2008

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EU demand outlook - reference scenario

• Oil and gas will remain the primary energy source for many years to come;

• Oil remains the key feedstock for the materials needed in modern life

– “its not just about energy”

• Oil demand expected to remain around 13mbd, slightly falling to around 10mbd towards 2030;

• Gas demand expected to rise by about 17.5% from 2007 and 2030.

Source: DG TREN, IEA World Energy Outlook 2008, OGP

MBDOE

0

10

20

30

40

1990 1995 2000 2007 2020 2030

Other

Coal

Gas

Oil

Source: DG TREN, IEA World Energy Outlook 2008, OGP

MBDOE

0

10

20

30

40

1990 1995 2000 2007 2020 2030

Other

Coal

Gas

Oil

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The future of the UKCS – a tale of two possible futures…

The challenge is to keep the UKCS competitive to secure investment funding in a global market place

£10bn ongoing investment

Requires further £50bn investment

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Health & Safety in UK Offshore Oil and Gas

Hydrocarbon Releases (1997-2009)

Incident: Piper Alpha

Outcome: Lord Cullen Enquiry: 106 recommendations made

Incident: April 1st Super Puma crash

Outcome: Setup of the Helicopter Task Group to drive the helicopter safety agenda

Incident: Sumburgh Chinook Crash

Outcome: Chinooks withdrawn from offshore use

0

50

100

150

200

250

300

350

400

Major injuries

Over-3-day injuries

Key Events

Injury Trend (1995-2009)

0

20

40

60

80

100

120

140

160

Significant

Major

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

New Offshore Safety Regulations

Step Change in Safety Initiative

HSE’s KP3 Programme

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Example of changes in operational procedures that have produced environmental benefitsMarine Oil discharges

0

1000

2000

3000

4000

5000

6000

7000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Oil & Gas UK / EEMS

ton

nes

0

5

10

15

20

25

mg

/L

Total Oil Discharged w ith PW Oil spills Average oil in w ater w ith IR method Average oil in w ater w ith GC-FID method

As a result, a measurable improvement in the quality of the marine environment.

• OSPAR Decisions and Recommendations & EU Directives incorporated into UK legislation• Company’s Environmental Management Systems

Safeguards focus on minimising risk to the environment

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SFFSFF NFFONFFOOil & Gas UKOil & Gas UK

FLTC ServicesFLTC Services

FLTCFLTC

Un-attributable Un-attributable Compensation Compensation

FundFund

KIS-UKCSKIS-UKCS FishSAFEFishSAFE WebsitesWebsites

FLTC established to manage interactions between two industries and endowment fund

Funding to redress Skippers for loss or damage to fishing gear caused by oil-related debris

Subsidiary FLTC Services Limited to supply information and devices that enhance safety

The sharing of common waters between two The sharing of common waters between two industries requires good working relationships and industries requires good working relationships and attention to potential interactions, especially with attention to potential interactions, especially with

respect to safetyrespect to safety

The UK oil and gas industry, through Oil & Gas UK, The UK oil and gas industry, through Oil & Gas UK, has taken positive steps to develop methods and has taken positive steps to develop methods and systems that allow both industries to work safely systems that allow both industries to work safely

and efficiently together and to promote harmonious and efficiently together and to promote harmonious working relations working relations 

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Southern North Sea

Petroleum Production Licences

Overlap with Round 3 windfarm lease zones

A case for spacial planning, good working relationships and meaningful consultation.

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EU Marine Spatial Planning – The Oil & Gas Industry’s View

1. Must continue to allow access for E&P activities and promote recovery of new hydrocarbon resources;

2. Should recognise the oil and gas industry's economic and social contribution;

3. Must fit with other EU energy policy goals (i.e. oil and gas industry's contribution to secure energy supplies);

4. ONLY required where conflicts arise - oil and gas industry actively maintains good relationships with other sea users;

5. Should be the responsibility of Member States;

6. Must take account of possible future technology developments and any proposals must be subject to a thorough stakeholder consultation process.