Contribution to the UK Economy

Balance of Trade

Oil and gas production, even in its current mature state, continues to have a large, positive effect on the UK’s balance of trade. In 2006, the balance in all goods and services was in deficit by £54 billion. If all indigenously produced oil and gas had been imported, the balance of trade would have suffered by a further £30 billion, resulting in a total deficit of £84 billion.

The net balance of trade in oil and gas (including crude, oil products and natural gas) has been in decline since 2001 and became negative to the tune of £400 million in 2005. This deficit widened in 2006 to £3.9 billion, accounted for by oil more than gas. However, increasing oil production, as is expected in 2007 and 2008, should improve matters in the short term, although declining gas production will work against this. Oil, though, remains the more valuable of the two commodities.

Figure 7: UK Balance of Trade: Crude Oil, Oil Products and Natural Gas 1995-2006

In addition to production, the UK’s balance of trade benefits from the export of goods and services to other oil and gas regions around the world. Operators overseas are increasingly recognising the expertise which the supply chain in Britain possesses, after some forty years of development and operation of domestic production. They are seeking to use this technology and know-how, especially subsea expertise.

Since 1999, exports from oil and gas supply chain companies based in Scotland alone have increased by 10% per annum, whereas overall exports of manufactured goods have fallen by 5% per annum. On average, 27% of the oil and gas supply chain’s sales in 2005 were to overseas markets, amounting to £4 billion worth of activity; particular sub-sectors like subsea export as much as 50% of their products and services and have experienced exports’ growth of 20% per annum in recent years. Expenditure in the global oil and gas supply chain is expected to increase by 60% from £450 billion in 2001-05 to £700 billion in 2006-10, so there are major opportunities for further growth of export sales by supply and service companies.