MINISTERIAL FOREWORD

BY HELEN LIDDELL, MINISTER FOR ENERGY AND COMPETITIVENESS IN EUROPE

Welcome to the latest edition of the DTI’s annual report on the development of the UK’s oil and gas resources. Since becoming Minister for Energy and Competitiveness in Europe last year, I have had many meetings with Government and industry representatives from around the world. It is clear from these contacts, and the questions that I am asked, that developments in the UK energy sector are watched with close interest. I hope that this will continue to be the case.

This report has been published annually since 1973. Throughout this time, the UK’s oil and gas resources have played a crucial part in providing our energy needs. Last year, either through direct use or as a source of energy to produce electricity, oil and gas accounted for over 70% of total UK energy consumption, with UK production supplying 99% of gas consumed. 1999 saw record production levels of 137 million tonnes of oil, and 105 billion cubic metres of gas, increases of approximately 3.5% and 10% respectively on 1998.

We must realise the full potential of UK oil and gas resources. It is essential to our economy and to achieving secure, diverse and sustainable supplies of energy at competitive prices.

This report is a long-standing and regular publication, but the industry it covers is subject to constant change. Change in the technology of exploration and production; in ever more competitive domestic and global markets; in the growing importance of electronic commerce and the Internet; in attitudes towards environmental issues; and in the nature of the relationship between industry and Government.

Oil and Gas Industry Task Force

This last change has in particular been evident over the last year. In his foreword to last year’s report, my predecessor, John Battle, recognised that companies were having to develop strategies for reducing the cost base of their UK operations and improve their competitiveness. We all knew that maintaining new exploration and appraisal activity on the UK Continental Shelf (UKCS) was not going to be easy. Indeed 1999 proved a difficult year for many companies operating in the UK oil and gas sector, with disappointing levels of exploration and appraisal drilling and fewer new field developments receiving approval.

Government and industry already had a response. At the end of 1998, we set up the Oil and Gas Industry Task Force to plan a way forward for the industry to maintain and improve its competitiveness.

The Task Force’s membership included operators, the supply chain, trade unions, and Government Departments. Seven Workgroups were established to progress work in the key areas identified by the industry: Vision, Competitiveness, Fiscal, Regulation & Licensing, Skills & Training, Innovation & Technology, and Sustainable Development.

An ambitious yet achievable vision for the UKCS in 2010 was identified:

	To sustain investment in UKCS activity at Ł3 billion per year;
	To increase the UK share of the world supplies market by at least 50%, an increase of Ł2 billion, over the next 5 years;
	To secure Ł1 billion additional value from new businesses;
	To find ways of supporting up to 100,000 jobs more than there would otherwise have been;
	To maintain production at 3 million barrels of oil equivalent per day; and
	To prolong self sufficiency in oil and gas.

PILOT

The job of turning the vision into reality now rests in the hands of PILOT. Its remit is to drive forward the practical application of Task Force initiatives to meet the desired targets. Some initiatives already established by the Task Force include:

	LOGIC (Leading Oil & Gas Industry Competitiveness), a central resource developing and disseminating supply chain methodologies;
	An Industry Technology Facilitator to improve the flow of new technology to the market;
	LIFT (Licence Information for Trading), a website to promote licence trading; linked to DEAL (Digital Energy Atlas & Library), an on-line interactive database of UKCS information;
	A National Training Organisation Group, promoting a pan-industry approach to training, bringing together all the oil and gas training organisations;
	an NGO (Non-Government Organisations)/industry/ Government forum to debate and make recommendations on offshore environmental issues.

In addition to PILOT, DTI also last year set up an Oil and Gas Fabrication Support Group. Comprising over 40 representatives of fabrication yard managements, the trade unions and public sector bodies, the Group is exploring the many issues and challenges currently facing the UK’s offshore fabrication yards.

The Way Ahead

I have already chaired two PILOT meetings and look forward to being involved in further meetings during 2000. The Task Force work has allowed for a healthy dialogue between Government, industry, and non-Governmental bodies. I believe it can make the difference and ensure continued activity on the UKCS, particularly now that the recovery in prices has produced a more profitable base for investment.

However, this can only be done through consolidated efforts between Government and industry. I am confident that the oil and gas industry, which is renowned for its technical innovation and forward-thinking, will meet the challenges ahead and seize the opportunities which the UKCS continues to offer. I hope that this publication helps reinforce the importance of this sector, and provides useful data for companies operating, or looking to operate, on the UKCS.

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