1. Oil & Gas Sector in Scotland
David Rennie
Oil & Gas, Thermal Generation & CCS Director
25 September 2012
2. Scottish Enterprise
• Scotland‟s main economic
development agency
• Work with Scotland‟s key
industries
• Work in partnership with industry,
further education, local authorities
and public sector bodies
• Investing around £300 million in
economic development
3. UKCS History
• Gas production started SNS in
late 1960s – 50 metres
• Oil production started NNS in
mid-1970s – 200 metres
• West of Shetland started late
1990s – approx 500 metres
• Atlantic margin – between1500 –
5000 metres
4. Economic Contribution
Supports up to 440,000 Oil and Gas provides 75% of
UK jobs – (c. 45% in the UK’s primary energy
Scotland)
The largest single
industry ~ £ 6 billion UK balance of
“value adding” trade contribution in 2011
contributor to the UK
economy
Currently providing 68% ~ £ 11.2 billion in direct
of the UK’s oil and taxation
58% of its gas needs
5. UKCS Production
UKCS Oil & Gas Production
• UK is 19th largest oil and gas
producer
• Produced 1.8 million boe per
day in 2011
• Decline in production offset
by growth in oil price
Source: DECC
6. UKCS Reserves
UKCS Reserves and Resources
• Up to 24 billion boe still
to be recovered
• Technology and
investment key to
unlocking potential
7. UKCS Expenditure
UKCS Overall Expenditure (2012-16)
• Total UKCS expenditure
increased from £12.4 billion
in 2007 to £17 billion in 2011
• £90.5 billion total forecast
expenditure over five years
2012-16
• Annual average expenditure
£18 billion
8. Current challenges
Some challenges of a mature UK oil and gas industry
• Control CAPEX and OPEX - massive increase in costs
• Ageing assets - maintain integrity of infrastructure -
high cost of Operation and Maintenance
• Sustain production levels – technology
• Create indigenous decommissioning supply chain capability
– uncertainty of timing
9.
10. Strategy Themes
• Focus on maximising recovery through:
– Strengthening our supply chain expertise;
– Applying Innovation;
– Utilising our skills;
– And increasing internationalisation.
• Industry led – through Industry Leadership Group
11. Opportunity driven
• Around £90bn of investment in the North Sea in the next 5 years
• About 40% resources by volume still to extract – more in value terms (up
to £1.5 trillion)
• Current recovery levels average 40% - for each percentage point rise in
recovery:
£89bn in economic value
£22bn in taxation
• Oil and Gas will still meet 70% of UK primary energy needs by 2020 –
even if renewable targets are met
• Industry supports about 200,000 jobs in Scotland – but needs 10,000
new people over the next 5 years
12.
13. Supply Chain - Domestic
What is planned?
• Additional account management resource - primarily in Aberdeen
• Engage with additional 100 companies over next 3 years – SE
currently work with around 175 O&G companies in Aberdeen (230 in
Scotland)
• Working with trade associations on how to make that happen –
identify the best companies
• Increase levels of „prospecting‟ within SE
• More market research
– spends and trends
– opportunities in shale gas
• Increase engagement with larger companies
14. Supply Chain - International
What is planned?
• Focus on priority markets (two thirds of current sales)
• Increased SDI resource – increase international activity and exports
• Plans for Brazil, Norway and West Africa
• Building on Calgary and Middle East
• All these will have oil and gas focus
• Increased SDI resource based in Scotland
• Market Intelligence e.g. a guide on “How to do Business in Brazil”
• Market research into Middle East Gas opportunities for Scottish firms
• Building on existing SDI activity – learning missions and exhibitions
• Work with larger companies re inward investment opportunities
16. Innovation
What is planned?
• Focus on technologies to enhance recovery
• £10m over 3 years - series of innovation calls around
– Enhanced Oil Recovery (EOR)
– Subsea
– Asset integrity
• Working with the Industry Technology Facilitator (ITF) to deliver
• Significant interest from Industry in this proposal - we can leverage more
including field trials and technical support
17. Scotland a major region for
centres of excellence
• Shell E&P – Centre of Upstream Technology Excellence & Diving Excellence
• Total E&P – Centre of Excellence in Geoscience
• Expro – Centre of Excellence in Design Engineering
• ChevTex – Subsea Engineering R&D function
• FMC Technologies – Technology Development Centre
• Aker Solutions – manufacturing facility for intelligent control systems and valves
• AMEC Energy Service – drive their global energy activities from Aberdeen
• Technip – drive European and N African subsea engineering business
• Health & Safety training - worldwide reputation, North Sea is international benchmark
• First class hyperbaric centre
18. New Opportunities
What is planned?
• Increase supply chain knowledge of new opportunities e.g.
• Oil & Gas Decommissioning
• Carbon Capture & Storage
• Nuclear Decommissioning & New Build outwith Scotland
• Offshore Renewables
• Workshops and events working with trade bodies
• Promote oil and gas capability to these new sectors
• Encourage cross learning – e.g. “A Guide to Offshore Wind and
Oil & Gas Capability
19. Decommissioning
Forecast Decommissioning
• Total £3.7 billion forecast
Expenditure
expenditure to 2016
• Rising from £490 million in
2012 to £1,050 million in
2016
• Brent field (Shell) will
account for majority of
UKCS expenditure over next
few years
20. Skills
What is planned?
• Skills issues responsibility driven by others – SDS, OPITO and Trade
Bodies
• But ILG has a role to play
– Facilitating discussions
– Sharing data and evidence
– Using account management system to feed back issues and
shortages
• Probably the number one issue right now
• Long-term need to increase the size of the talent pool
• Messaging to schools and universities about the long-term nature of the
industry
21. Promotion and Place
What is planned?
• Work with others who have the main responsibilities here
• ASCEF
• Local Authorities
• Scottish Govt
• Ensure that views regarding local infrastructure are fed via the ILG into
the above bodies
• Ensure that local and national policy makers are aware of the issues
which impact upon the sector
• Consider possible sources of investment for infrastructure with a focus on
business space and transport
28. Examples of future technology
requirements
Exploration & production tools of the future:
• Improved reservoir imaging – always!
• Cost-effective drilling
• e-field real-time operations management
• Tail-end production and field rejuvenation
• Handling problematic reservoir fluids/heavy oil
• Subsea processing and transport
