House of Commons Library

UK oil and gas industry

Published Wednesday, April 18, 2018

This pack has been prepared ahead of the debate to be held in Westminster Hall on Thursday 19 April 2018 at 1.30pm on the UK oil and gas industry. The debate will be opened by Colin Clark MP.

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  • Oil and gas provided 72% of the UK’s total primary energy in 2016.[1]
  • In 2016 about 51% of oil was imported with the remainder from domestic production. [2]
  • Around 54% of natural gas was imported in 2016 with the remainder from UK gas production.[3]

State of the UK Offshore Oil and Gas Industry

  • The UK oil and gas industry (both onshore and offshore) employed 28,000 people directly and a further 140,000 in relevant supply chains in 2017. The majority of these roles are in the offshore industry. Overall, employment in the industry has fallen by 27% since 2013.[4]
  • In 2016/17, government revenues from oil and gas production were -£316 million. This was the lowest level since records began in 1968/69. (A negative revenue figure means that the cost of tax repayments for losses, particularly from decommissioning, exceeded any revenue raised from the profits of oil and gas producers.)[5]
  • The decline in drilling activity over the last decade, particularly exploration and appraisal (E&A), has been exacerbated by the downturn. 94 wells (71 development, 14 exploration and 9 appraisal) were drilled on the UKCS in 2017, the fewest since 1973.[6]
  • In 2016 there was £500 million of capital investment in new oil and gas projects in the UK Continental Shelf. In the first six months of 2017 there was £80 million of investment in new projects.[7]
  • The cost of decommissioning was £1.8 billion in 2017, 48% higher than in 2016. Decommissioning is forecast to cost £1.7 to £2 billion per year between 2017 and 2020.[8]

Further information is available from the Library briefing paper from March 2017 on UK offshore oil and gas industry.

State of the UK Onshore Oil and Gas Industry

  • The Conservative Government support hydraulic fracturing (fracking) to increase the production of onshore oil and gas in future. However, the industry is politically controversial, and Labour, the Liberal Democrats, Greens, and SNP do not support fracking.[9]
  • According to UK Onshore Oil and Gas (UKOOG), an industry trade body, there are 120 sites with 250 operating wells producing between 20,000 and 25,000 barrels of oil equivalent a day.[10] None of these are active fracking wells.
  • The sites are concentrated in counties towards the North of England and those South of London.[11]
  • UK Onshore Oil and Gas say that the industry contributed £38 million in tax and £150,000 in community benefits in 2016.[12]
  • Wales, Scotland and Northern Ireland have implemented various moratoriums on fracking. The Scottish ban is to face a legal challenge from developer INEOS, and the Welsh ban depends on incoming devolved powers under the Wales Act 2017 and does not apply to exploratory drilling.
  • There are a number of studies on the UK’s shale resource potential. For more information see this July 2013 Postbox on UK Shale Gas Potential. Drilling companies will have to undertake exploratory drilling to ascertain how much of the resource is economically recoverable.Further information is available from the Library briefing paper from April 2017 on Shale Gas and Fracking.
  •  

Projections for the future

The Oil and Gas Authority (OGA) believe the UK’s oil and gas production will re-enter decline following a slight recent upturn. This is shown in the graph below, reproduced from the OGA’s UK Oil and Gas Production and Expenditure report[13]. The report’s projections suggest the downturn will continue long term.

 

[1]     BEIS, Digest of UK Energy Statistics 2017, July 2017, Table 1.1

[2]     Ibid

[3]     Ibid

[4]     Oil and Gas UK, Economic report 2017, p15

[5]     HMRC, Oil and gas revenue statistics, Table 11.11

[6]     Oil and Gas UK, Business Outlook 2018 p 26

[7]     Oil and Gas UK, Economic report 2017, p44

[8]     Oil and Gas UK, Business Outlook 2018, p 7

[9]     Carbon Brief, Election 2017: What the manifestos say on energy and climate change, 16 May 2017

[10]    UKOOG, Onshore extraction – History (accessed 16 April 2018)

[11] Oil and Gas Authority, Onshore Oil and Gas Activity Interactive Map (accessed 11 April 2018)

[12]    UKOOG, Annual Report 2016

[13]    Oil and Gas Authority, Projections of UK Oil and Gas Production and Expenditure, March 2018

Commons Debate packs CDP-2018-0088

Authors: Nikki Sutherland; Suzanna Hinson; Chris Rhodes; Noel Dempsey; Alison Pratt

Topic: Oil, petrol and natural gas

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