Outlook for the UKCS in 2007

UKCS Expenditure

Total UKCS expenditure rose by £2 billion to over £11.5 billion in 2006, 10% higher than forecast only a year ago. This total comprised about £600 million on exploring for and appraising new discoveries, £5.6 billion of capital investment to develop new fields and £5.5 billion to operate and new existing production.

Figure 30: UKCS Expenditure Forecast 2003-2010

Given that resources were already well stretched in 2005, the largest cause of increased spending in 2006 was cost inflation, not greater activity. The sustained high oil price has increased demand for resources globally, resulting in rising costs which put particular pressure on the economics of a mature province such as the UKCS.