UK Continental Shelf (UKCS) Oil and Gas Production and the UK Economy. Mike Earp

UK Continental Shelf (UKCS) Oil and Gas Production and the UK Economy Mike Earp 15 June 215

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

Major Oil and Gas Producing Countries 214 US Russian Federation Saudi Arabia Canada China Iran Qatar United Arab Emirates Mexico Norway Kuwait Venezuela Iraq Nigeria Algeria Brazil Indonesia Kazakhstan Malaysia Angola Egypt Turkmenistan United Kingdom Oman Oil Gas The UK was ranked 23rd overall, 24th in oil and 21st in gas 1 2 3 4 5 6 7 8 9 1 11 12 Production in million tonnes (of oil equivalent)

million barrels of oil equivalent/day UK Oil and Net Gas Production 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. 22 218 216 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 1978 1976 1974 1972 197 Oil & NGLs Natural Gas Total Hydrocarbon Production

billion boe UK Continental Shelf Oil and Gas Reserves and Production 55 55 5 5 45 45 4 4 35 35 3 3 25 25 2 2 15 1 5 Cumulative production to end of year Possible Reserves at end of year Remaining Proven plus Probable Reserves at end of year Production in year 15 1 5 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213

New Offshore Field Approvals by year 25 2 15 1 5 214 213 212 211 21 29 28 27 26 25 24 23 22 21 2 1999 1998 1997 1996 1995 1994 1993 1992 1991 199 1989 1988 1987 1986 1985 1984 1983 1982 1981 198 1979 1978 1977 1976

New Offshore Field Approvals by year 25 2 Gas Fields Condensate Fields Oil Fields 15 1 5 214 213 212 211 21 29 28 27 26 25 24 23 22 21 2 1999 1998 1997 1996 1995 1994 1993 1992 1991 199 1989 1988 1987 1986 1985 1984 1983 1982 1981 198 1979 1978 1977 1976

Number of Offshore UK Oil & Gas Field Start-Ups by Year 1975 214 2 15 1 5 75 76 77 78 79 8 81 82 83 84 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 3 4 2 4 2 1 4 2 5 3 8 8 3 9 12 1 2 14 23 12 16 22 2 17 17 1 16 16 17 1 14 9 21 17 9 8 5 9 13 3

Thousand tonnes 13, UK Crude Oil Production by start-up year of field 12, 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 1977 1976 1975 1984 1983 1982 1981 198 1979 1978 1991 199 1989 1988 1987 1986 1985 1997 1996 1995 1994 1993 1992 24 23 22 21 2 1999 1998 211 21 29 28 27 26 25 214 213 212

22 21 2 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1-1 -2 1975 1976 1977 1978 Number of UK Onshore and Offshore Oil Fields in Production 1979 198 1981 1982 Ceased Production Start-ups Number of fields in production 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 22 21 2 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1-1 -2

million tonnes UK Continental Shelf Oil Reserves and Production 4,5 4,25 4, 3,75 3,5 3,25 3, 2,75 2,5 2,25 2, 1,75 1,5 4,5 4,25 4, 3,75 3,5 3,25 3, 2,75 2,5 2,25 2, 1,75 1,5 1,25 1, 75 5 25 Cumulative production to end of year Possible Reserves at end of year Remaining Proven plus Probable Reserves at end of year Production in year 1,25 1, 75 5 25 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213

million tonnes 55 Evolution of Estimated Ultimately Recoverable UK Oil Reserves 5 45 4 35 3 25 2 15 1 5 22 23 24 25 26 27 28 29 21 211 212 213 Proven Reserves Probable Reserves Central estimate of Potential Additional Resources Central estimate of Undiscovered Resources Cumulative Production Production

million tonnes 55 UK Oil Resources and Production 5 45 4 35 3 25 2 15 1 5 224 222 22 218 216 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 Cumulative Production Dummy Estimate of ultimately recoverable resources Actual/Projected Production

bcm UK Continental Shelf Gas Reserves and Production 3,25 3,25 3, 3, 2,75 2,75 2,5 2,5 2,25 2,25 2, 2, 1,75 1,75 1,5 1,5 1,25 1,25 1, 1, 75 5 25 Cumulative production to end of year Possible Reserves at end of year Remaining Proven plus Probable Reserves at end of year Net Production in year 75 5 25 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213

bcm Evolution of Estimated Ultimately Recoverable UK Gas Reserves 35 3 25 2 15 1 5 22 23 24 25 26 27 28 29 21 211 212 213 Proven Reserves Probable Reserves Central estimate of Potential Additional Resources Central estimate of Undiscovered Resources Cumulative Production Production

bcm UK Gas Resources and Production 35 3 25 2 15 1 5 224 222 22 218 216 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 Cumulative Production Dummy Estimate of ultimately recoverable resources Actual/Projected Production

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

billion (213 prices) UKCS Income and Expenditure 197 213 55 5 45 4 Exploration & Appraisal Expenditure Development Capital Expenditure Operating Costs Decommissioning Costs Government Take on top of Post-Tax Income Post-Tax Income 55 5 45 4 35 35 3 3 25 25 2 2 15 15 1 1 5 5 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 1978 1976 1974 1972 197

3 29 28 27 26 25 24 23 22 21 2 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1-1 Government revenues from UK oil and gas production ( billion, 213/14 prices) Licence Fees Royalty Supplementary Charge Ring Fence Corporation Tax Supplementary Petroleum Duty Petroleum Revenue Tax 213/14 212/13 211/12 21/11 29/1 28/9 27/8 26/7 25/6 24/5 23/4 22/3 21/2 2/1 1999/ 1998/99 1997/98 1996/97 1995/96 1994/95 1993/94 1992/93 1991/92 199/91 1989/9 1988/89 1987/88 1986/87 1985/86 1984/85 1983/84 1982/83 1981/82 198/81 1979/8 1978/79 1977/78 1976/77

UKCS Offshore Drilling Activity 1964 214: number of wells started each year including geological sidetracks 4 38 36 34 32 3 28 26 24 22 2 18 16 14 12 1 8 6 4 2 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 1978 1976 1974 1972 197 1968 1966 1964 Development (cumulative total: 6784; total all wells: 1178) Appraisal (cumulative total: 1835; total E&A: 4294) Exploration (cumulative total: 2459) Real Sterling oil price ( /bbl, 215 prices)

/bbl IHS CERA UCCI and UOCI vs Brent Oil Price (all nominal) 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5 2 Q1 2 Q3 21 Q1 21 Q3 22 Q1 22 Q3 23 Q1 23 Q3 24 Q1 24 Q3 25 Q1 25 Q3 26 Q1 26 Q3 27 Q1 27 Q3 28 Q1 28 Q3 29 Q1 29 Q3 21 Q1 21 Q3 211 Q1 211 Q3 212 Q1 212 Q3 213 Q1 213 Q3 214 Q1 214 Q3 32 3 28 26 24 22 2 18 16 14 12 1 8 6 4 2 Index Oil Price (Brent) Upstream Capital Cost Index ( ) Upstream Operating Cost Index ( )

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

GVA ( million) 3, Upstream Oil and Gas Gross Value Added (GVA) 3.% 25, 2.5% 2, 2.% 15, 1.5% % of total GDP 1, 1.% 5,.5% 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213.%

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

billion (213 prices) 1 8 6 4 2-2 -4-6 -8-1 -12-14 -16-18 -2-22 Value (Cost) of UK Oil & Gas Exports (Imports) 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Oil Natural Gas Oil & Gas

mtoe 7 6 5 4 3 2 1-1 -2-3 -4-5 -6-7 Net UK Exports (Imports) of Oil & Gas 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Oil Natural Gas Oil & Gas

million tonnes 55 Destination of UK crude oil production and sources of UK supply, 213 5 45 Imports from other countries (26%) 4 35 3 25 2 Exports to other countries (21.8%) Exports to France (9.3%) Exports to South Korea (11.5%) Exports to Germany (17.5%) Imports from Algeria (6.9%) Imports from Nigeria (1.7%) Imports from Russia (11.6%) 15 1 5 Exports to The Netherlands (32.5%) Imports from Norway (39.2%) Domestic Use (7.5%) UKCS Production UKCS (5.6%) UK Refinery Crude Supply

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

January 1998 May 1998 September 1998 January 1999 May 1999 September 1999 January 2 May 2 September 2 January 21 May 21 September 21 January 22 May 22 September 22 January 23 May 23 September 23 January 24 May 24 September 24 January 25 May 25 September 25 January 26 May 26 September 26 January 27 May 27 September 27 January 28 May 28 September 28 January 29 May 29 September 29 January 21 May 21 September 21 January 211 May 211 September 211 January 212 May 212 September 212 January 213 May 213 September 213 January 214 May 214 September 214 January 215 million tonnes p.a. 15 14 13 12 11 1 9 8 7 6 5 4 3 2 1 UK Oil (including NGL) Production

January 1998 May 1998 September 1998 January 1999 May 1999 September 1999 January 2 May 2 September 2 January 21 May 21 September 21 January 22 May 22 September 22 January 23 May 23 September 23 January 24 May 24 September 24 January 25 May 25 September 25 January 26 May 26 September 26 January 27 May 27 September 27 January 28 May 28 September 28 January 29 May 29 September 29 January 21 May 21 September 21 January 211 May 211 September 211 January 212 May 212 September 212 January 213 May 213 September 213 January 214 May 214 September 214 January 215 million tonnes pa UKCS Oil Production 15 145 14 135 13 125 12 115 11 15 1 95 9 85 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5 Current month (annual equivalent) 12 months to date % change (12 months to date vs previous year) 34% 32% 3% 28% 26% 24% 22% 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% -1% -12% -14% -16% -18% -2% -22% -24% -26%

January 1998 May 1998 September 1998 January 1999 May 1999 September 1999 January 2 May 2 September 2 January 21 May 21 September 21 January 22 May 22 September 22 January 23 May 23 September 23 January 24 May 24 September 24 January 25 May 25 September 25 January 26 May 26 September 26 January 27 May 27 September 27 January 28 May 28 September 28 January 29 May 29 September 29 January 21 May 21 September 21 January 211 May 211 September 211 January 212 May 212 September 212 January 213 May 213 September 213 January 214 May 214 September 214 January 215 bcm pa UKCS Net Gas Production 15 145 14 135 13 125 12 115 11 15 1 95 9 85 8 75 7 65 6 55 5 45 4 35 3 25 2 15 1 5 Current month (annual equivalent) 12 months to date % change (12 months to date vs previous year) 34% 32% 3% 28% 26% 24% 22% 2% 18% 16% 14% 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% -1% -12% -14% -16% -18% -2% -22% -24% -26%

January 1996 July 1996 January 1997 July 1997 January 1998 July 1998 January 1999 July 1999 January 2 July 2 January 21 July 21 January 22 July 22 January 23 July 23 January 24 July 24 January 25 July 25 January 26 July 26 January 27 July 27 January 28 July 28 January 29 July 29 January 21 July 21 January 211 July 211 January 212 July 212 January 213 July 213 January 214 July 214 January 215 mcm/day 4 UK Monthly Gas Demand 35 3 25 2 15 1 Net storage injections Net monthly exports via IUK 5 Exports to the Republic of Ireland (and Isle of Man) Implied UK consumption including downstream operators' own use and metering differences

December 1996 June 1997 December 1997 June 1998 December 1998 June 1999 December 1999 June 2 December 2 June 21 December 21 June 22 December 22 June 23 December 23 June 24 December 24 June 25 December 25 June 26 December 26 June 27 December 27 June 28 December 28 June 29 December 29 June 21 December 21 June 211 December 211 June 212 December 212 June 213 December 213 June 214 December 214 bcm 12 UK Gas Demand over previous 12 months 11 1 9 8 7 6 5 4 3 Net storage injections Net monthly exports via IUK 2 Exports to the Republic of Ireland (and Isle of Man) 1 Implied UK consumption including downstream operators' own use and metering differences

December 1996 June 1997 December 1997 June 1998 December 1998 June 1999 December 1999 June 2 December 2 June 21 December 21 June 22 December 22 June 23 December 23 June 24 December 24 June 25 December 25 June 26 December 26 June 27 December 27 June 28 December 28 June 29 December 29 June 21 December 21 June 211 December 211 June 212 December 212 June 213 December 213 June 214 December 214 bcm 12 UK Gas Demand and Supply over previous 12 months 11 1 9 8 7 6 5 4 3 2 1 Net storage injections Net monthly exports via IUK Exports to the Republic of Ireland (and Isle of Man) Implied UK consumption including downstream operators' own use and metering differences Net UK production excluding direct exports

January 1996 July 1996 January 1997 July 1997 January 1998 July 1998 January 1999 July 1999 January 2 July 2 January 21 July 21 January 22 July 22 January 23 July 23 January 24 July 24 January 25 July 25 January 26 July 26 January 27 July 27 January 28 July 28 January 29 July 29 January 21 July 21 January 211 July 211 January 212 July 212 January 213 July 213 January 214 July 214 January 215 mcm/day 4 UK Monthly Gas Supply 35 3 25 2 15 1 5 Net storage withdrawals Total Imports Net UK production excluding direct exports

January 1996 July 1996 January 1997 July 1997 January 1998 July 1998 January 1999 July 1999 January 2 July 2 January 21 July 21 January 22 July 22 January 23 July 23 January 24 July 24 January 25 July 25 January 26 July 26 January 27 July 27 January 28 July 28 January 29 July 29 January 21 July 21 January 211 July 211 January 212 July 212 January 213 July 213 January 214 July 214 January 215 mcm/day 4 UK Monthly Gas Supply 35 3 25 2 15 Net storage withdrawals Imports of LNG 1 Imports via BBL Net monthly imports via IUK 5 Direct imports by pipeline from Norway Net UK production excluding direct exports

December 1996 June 1997 December 1997 June 1998 December 1998 June 1999 December 1999 June 2 December 2 June 21 December 21 June 22 December 22 June 23 December 23 June 24 December 24 June 25 December 25 June 26 December 26 June 27 December 27 June 28 December 28 June 29 December 29 June 21 December 21 June 211 December 211 June 212 December 212 June 213 December 213 June 214 December 214 bcm 12 UK Gas Supply over previous 12 months 11 1 9 8 7 6 5 4 3 2 1 Net storage withdrawals Imports of LNG Imports via BBL Net monthly imports via IUK Direct imports by pipeline from Norway Net UK production excluding direct exports

December 1996 June 1997 December 1997 June 1998 December 1998 June 1999 December 1999 June 2 December 2 June 21 December 21 June 22 December 22 June 23 December 23 June 24 December 24 June 25 December 25 June 26 December 26 June 27 December 27 June 28 December 28 June 29 December 29 June 21 December 21 June 211 December 211 June 212 December 212 June 213 December 213 June 214 December 214 bcm 11 1 9 8 7 UK Gas Demand and Supply over the previous 12 months 11 1 9 8 7 6 6 5 4 3 2 1 Net Exports to the Continent via Bacton Zeebrugge Interconnector Exports to the Republic of Ireland and the Isle of Man UK Consumption Net UK production excluding direct exports Direct exports of UK production to The Netherlands and Norway (as negative) Producers' own use (as negative) 5 4 3 2 1-1 -1

Jan 1996 Jul 1996 Jan 1997 Jul 1997 Jan 1998 Jul 1998 Jan 1999 Jul 1999 Jan 2 Jul 2 Jan 21 Jul 21 Jan 22 Jul 22 Jan 23 Jul 23 Jan 24 Jul 24 Jan 25 Jul 25 Jan 26 Jul 26 Jan 27 Jul 27 Jan 28 Jul 28 Jan 29 Jul 29 Jan 21 Jul 21 Jan 211 Jul 211 Jan 212 Jul 212 Jan 213 Jul 213 Jan 214 Jul 214 Jan 215 mcm/day UK Monthly Gas Supply and Demand 4 375 35 325 3 275 25 225 2 175 15 125 1 75 5 25 Storage Injections Net Exports except to Ireland and direct to The Netherlands & Norway Storage Withdrawals Net Imports Indigenous Net Gas Supply UK & net Irish Demand 4 375 35 325 3 275 25 225 2 175 15 125 1 75 5 25

Outline Production and Reserves Expenditure, Income and Taxation Gross Value Added Trade Recent Production History Production (and Demand) Projections

Oil (million tonnes) Actual/Projected UKCS Oil and Gas Production 14 13 12 11 1 9 6 55 5 45 4 8 7 6 5 4 3 2 1 35 3 25 2 15 1 5 Gas (billion therms) 22 219 218 217 216 215 214 213 212 211 21 29 28 27 26 25 24 23 22 21 2 1999 1998 Actual Oil March 211 Oil Mar 214 Oil Mar 215 Oil Actual Gas March 211 Gas Mar 214 Gas Mar 215 Gas

Actual/Projected UK Oil and Gas Production and Demand (million tonnes of oil equivalent) 14 14 12 12 1 1 8 8 6 6 4 4 2 2-2 225 224 223 222 221 22 219 218 217 216 215 214 213 212 211 21 29 28 27 26 25 24 23 22 21 2 1999 1998-2 -4-6 -8-1 Oil Production Oil Demand Gas Production Gas Demand Net Oil and Gas Exports/(Imports) -4-6 -8-1

billion barrels (resources) UK Oil Resources and Production 4 4. 35 3.5 3 25 2 15 1 3. 2.5 2. 1.5 1. million barrels/day (production) 5.5. 25 248 246 244 242 24 238 236 234 232 23 228 226 224 222 22 218 216 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 Cumulative Production Lower estimate of ultimately recoverable resources Upper estimate of ultimately recoverable resources Actual/Projected Production (5% pa decline 22 )

billion barrels of oil equivalent (resources) 65 UK Oil and Gas Resources and Production 6.5 6 55 5 45 4 35 3 25 2 15 1 5 6. 5.5 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5 million barrels/day of oil equivalent (production). 25 248 246 244 242 24 238 236 234 232 23 228 226 224 222 22 218 216 214 212 21 28 26 24 22 2 1998 1996 1994 1992 199 1988 1986 1984 1982 198 Cumulative Production Lower estimate of ultimately recoverable resources Upper estimate of ultimately recoverable resources Actual/Projected Production (5% pa decline 22 )

Thank you for your attention Mike Earp Senior Economist, UK Upstream Oil and Gas Authority Kings Buildings, 16 Smith Square, London SW1P 3HQ +44 ()3 685784 mike.earp@oga.gsi.gov.uk Further information is available from: https://www.gov.uk/oil-and-gas https://www.gov.uk/government/collections/oil-statistics https://www.gov.uk/government/collections/gas-statistics http://www.oilandgasuk.co.uk/