Outlook for the UKCS in 2007

Capital Expenditure

Within the main categories of the industry’s expenditure, the greatest increase occurred in capital investment which rose to £5.6 billion. This spending on field developments, including associated drilling, was 25% (£1 billion) more than in 2005. The fact that there was no substancial increase to delivery plans over this period demonstrates the effects of cost inflation which was approaching 20%.

Figure 31: UKCS Capital Expenditure Forecast 2003-08

While the forecast reduction in 2007 may signal a return to more sustainable rates of investment after the recent rapid rises, this is the first time since 2003 that a planned reduction in capital investment has been forecast for the year immediately following a survey. Although investment from 2007 onwards is still higher than was forecast a year ago, this could be a significant sign that higher costs and taxes are adversely affecting the ability of the UKCS to retain its international competitiveness and continue to attract investment funds.