UK's offshore supply chain is $58-bn industry, report says


UK's offshore supply chain is $58-bn industry, report says

LONDON -- As a result of a project to map the UK oil and gas supply chain, Oil & Gas UK has released two reports. The first report -- UK upstream oil and gas supply chain - Economic contribution -- shows that the UK supply chain is a $58.7 bn (£35 bn) industry.

The second report -- UK upstream oil and gas supply chain - Market intelligence -- provides additional information on the size and composition of three selected sub-sectors: engineering, operations, maintenance and decommissioning contractors (EOMD); drilling and well equipment design and manufacture (DWEDM); and marine and subsea contractors and equipment (MSCE).

Oil & Gas UK -- with the support of the UK's Department for Business Innovation and Skills, the Department for Energy and Climate Change and the Scottish Government -- last year commissioned professional services firm EY to undertake this project.

EY examined over 3,000 companies actively involved in the supply chain, with over half (1,585) of those companies identified as UK registered, with at least 50% of turnover generated in the oil and gas sector and with 2012 accounts filed with Companies House.

The economic contribution report also reveals a strong export market, with a rise in the export activity of UK businesses. In 2012, exports made up 42% of the $58.7 bn turnover for the upstream supply chain, a percentage which has remained fairly constant over the last five years.

Stephen Marcos Jones, business development director at Oil & Gas UK, said: “Both the Scottish and UK governments recognise that to stay as a global leader, we need to continue to work together to promote our advantage in the oil and gas sector and increase exports, helping to create jobs and growth.

"Just over half of the companies featured in this project are based outside Scotland and we are seeing very strong regional centres, in particular in the East of England, the North East and London, which act as hubs for fabrication, servicing the southern North Sea and commerce respectively.”

Additionally, the reports outline that the number of people directly employed by the supply chain increased by over 21,000 between 2008 and 2012, with the supply chain sector now employing some 200,000 people in total.

The statement coincides with the one year anniversary of the UK government’s Industrial Strategy for the oil and gas sector. The strategy is the collective responsibility of Government and Industry Council.

Business and Energy Minister Michael Fallon said: “The UK’s oil and gas industry is a UK success story -- contributing £35 bn to the economy and directly employing over 200,000 skilled jobs. We now have a very clear snapshot of the breadth and depth of the upstream supply chain.

“It’s encouraging to see that over 40% of those companies surveyed are exporting their expertise abroad, and this is set to grow. Together through the UK's Industrial Strategy, government and industry are creating the conditions to ensure that businesses are best placed to take advantage of emerging opportunities and compete successfully on the international stage.”

In addition to demonstrating that the UK upstream supply chain generated more than $58 bn of turnover in 2012, data also shows that turnover increased by $19.1 bn (£11.4 bn) between 2008 and 2012, with an increase of 290 companies in that same period.

This growth had been driven by the rise in capital investment on the UK Continental Shelf (UKCS), which stood at $19.1 bn (£11.4 bn) in 2012, in real terms, the highest for three decades. This pattern may be set to continue as 2013 saw record investment of $24.2 bn (£14.4 bn) and Oil & Gas UK’s 2014 Activity Survey forecasts around a further $21.8 bn (£13 bn) of capital investment in 2014.

Alex Milward, Oil & Gas Advisory Partner at EY, commented: “The reports outline the significant opportunities facing the UK oilfield services industry, but identify certain barriers that must be overcome if growth is to be sustained in the sector. Crucially, the attractiveness of the UK as a place to do business must be maximised. Steps must also be taken to realise domestic and international demand for oilfield services and to promote the industry to new talent.”

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