Contribution Index

The UK Oil and Gas Industry's Contribution to the UK and its Economy UK Economic Benefits Oil & Gas GVA The value of UK indigenous crude oil and natural gas production was £23 billion or some 2.5% of Gross Value Added (GVA) of the total economy; net exports of crude oil and natural gas were worth £5.4 billion in 2002, the most recent year available. Investment and Gross Value Added (GVA) are compared for the production sector of the UK economy in Figure D. The oil and gas industry was the largest single industry investing in the industrial sector of the UK economy, only exceeded by the combined investment of the electricity, gas and water utilities. The industry creates more value for the UK economy than any other part of the industrial sector and demonstrates the highest level of productivity with a value added of over £700,000 per direct employee. Figure D: UK Oil & Gas Industry Investment & Gross Value Added Contribution to the Inland Revenue The UK economy has benefited from £195 billion (2003 prices) in North Sea taxes since the mid-1960s. Government tax revenues have been particularly strong in recent years and have averaged around £5 billion per year since 2000. This has been over a period when we have begun to see a decline in production and a relatively flat sterling oil price, despite the increase in the dollar crude price. North Sea taxes to the UK Treasury are estimated at £4.5 billion in 2003, as shown in Figure E. Figure E: UK North Sea Taxes (2003) Prices, 1991-2003 Investment The industry has invested some £211 billion (2003 prices) in exploration and development of the UK offshore sector since activity began in the mid-1960s. Over recent years the North Sea industry has represented some 17% of total UK industrial investment. In 2003 total industry expenditure (on exploration, development and operating costs) is expected to be some £8.6 billion, marginally below 2002 levels. Figure F: UK North Sea Expenditure (2003 prices), 1970 - 2003 Employment The UK is increasingly becoming a global centre of excellence for the oil and gas industry and this trend is reflected in the employment and skills base which is being sustained across the UK. In 2003 the industry provided employment for 260,000 people in the UK, of which 30,000 were directly employed by the operators and 155,000 as contractors to the industry or in the supply chain. An additional 75,000 induced jobs were sustained through the investment and wages from the industry. The oil and gas industry accounts for 4% of total employment in Scotland and has created a skilled and highly productive workforce centred on the North East of Scotland. However, employment from the oil and gas industry is spread across the UK as illustrated in Figure G. The largest concentrations of oil and gas related employment are in the North East of Scotland and the East Coast of England and the South-East of England. However, the importance of the oil and gas industry is not confined to these areas. Some 6,000 companies across the UK supply and service the oil and gas industry, bringing benefits to every community. Figure G: Employment Impact of the UKCS Oil & Gas Industry Continued investment in the UKCS will be required to maintain employment across the UK. Without investment in new developments and existing operations, employment will decline. To demonstrate the economic benefit, each £million invested in new developments or spent on operations delivers some 34 jobs.