Oil & Gas UK Education Information Leaflets Fact Sheet 3 - North Sea Oil and the UK Economy Background During the 1950s and 1960s, demand for energy in the UK was increasing. We were using more electrical appliances, travelling more, installing central heating and so on. About half of this energy was supplied by coal but a high proportion of it came from oil imported from the Middle East. In 1956 and 1967 war in the Middle East created disruption to supplies and in 1973, war again created huge uncertainty. This led to sharp rises in oil prices to six times the level in the 1960s. Conservation measures were quickly put in place, but the most important factor in protecting our economy was the development of our own oil and gas fields. Oil was first discovered in UK waters in 1969, and is now being produced from almost 100 fields to the north and east of Great Britain as shown on the map. During 1998 the oil price fell to $9/barrel. Contributing factors were over supply, and the financial crisis in Asia which reduced demand for oil from the region. As a consequence, in 1999, North Sea exploration was at its lowest for the past two decades. To increase the demand for oil, world supply was cut. This, plus the stabilisation of the Asian economy, helped raise the oil price to the mid $20's/barrel early in 2000. The Direct Effect on the Economy The first full year of production from a UK oil field was 1976. By 1980 the UK was self sufficient in oil and we now export crude oil to a value of £3 billion a year. This has enormously improved our balance of payments (the difference between imports and exports) and therefore our wealth as a nation. There are over thirty companies involved in exploring for and producing oil that comes from UK oil fields, and each of them pays tax to the Government on the revenue it earns. Since 1970, £160 billion has flowed into the Inland Revenue in this way, contributing to healthcare, education and all the other services funded by the Government. Investment Conditions in the North Sea are very harsh, and the oil fields are small compared to those in other parts of the world resulting in oil production that is relatively expensive. UK oil companies therefore, need to be inventive and have to invest heavily in safe and efficient techniques to remain competitive in the world market. Currently a fifth of all industrial investment in the UK, £4 billion per annum, comes from the oil and gas industry. As a result of this investment, we have moved in one generation, from reliance on other countries for much of our specialist knowledge, to being globally acknowledged experts, particularly in areas such as deep water technology. We have been very successful in developing techniques for extracting a higher proportion of oil from each field than was possible before. Expertise of this kind means that UK specialists are in high demand all over the world, and their own contribution to the economy is enormous. Jobs It is estimated that approximately 300,000 people in the UK are employed directly and indirectly in over 6,000 companies by the oil industry. About 30,000 of these are employed by oil companies in offshore jobs. Despite some of the most challenging conditions in the world, the UK oil industry works hard to maintain a good safety record and continues to invest heavily in improvements in safety and environmental management and technology. Just a few examples of employment generated by the oil industry Exploration and production: Divers Drillers Engineers Geologists Geophysicists Analysts and planners Welders Safety officers Transporting oil and support services: Construction workers Crews for standby vessels and other marine support Helicopter crews Lorry drivers Tanker crews Oil companies' offices: Accountants and administrative support IT and communications specialists Lawyers Printers, publishers and stationery suppliers Telephone operators and receptionists Planners and project managers Back-up staff on offshore platforms: Administrators and managers Catering and cleaning staff Computer specialists Nurses and paramedics Environmental specialists The Future Twenty years ago, it was confidently predicted that North Sea oil would run out by the year 2000, but UK oil production continues to increase. In fact, UK reserves of oil currently stand at around two billion tonnes - as much as has been produced in the last 25 years. Some oil fields, in particular those to the west of the Shetland Islands, have been discovered relatively recently and are at an early stage of their productive life. Long term investment in new technology remains a priority, both to increase productivity and to find new sources of oil. Recent and future fields are expected to remain productive at least until 2020. Many of the world's unexplored oil fields lie under very deep water. UK expertise in extracting oil from deep water wells is therefore likely to grow in importance and make British technology an increasingly valuable export. Leaflets Index Next Section

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