Oil platform

© Alex Brown

This section summarises all activities associated with oil and gas extraction, transport and storage in the seas around the UK, together with gas storage and storage of carbon dioxide (CO₂) captured from industrial activities.

Oil and gas remain the UK’s principal sources of fuel and power, meeting more than 75% of demand in 2008. One billion barrels of oil equivalent were extracted from the UKCS in 2008, comprising: 72 million tonnes of oil and natural gas liquids and 68 billion cubic metres of gas. Total UK oil and gas production peaked in 1999 and has been declining since due to decreasing reserves (Figure 5.3). Domestic resources satisfied about two-thirds of UK primary energy demand in 2008 (94% of oil demand and 74% of gas demand) and are projected to satisfy about half of the UK’s oil and gas demand in 2020.

The domestic oil and gas extraction industry accounted for £37 billion GVA in 2008 and is one of the largest contributors to GDP. The value of oil and gas is driven by the sale price of oil and gas and the level of production. For example, price per barrel of oil is strongly influenced by volatile energy markets owing to a complicated range of supply and demand factors.

Figure 5.3 Actual and projected UK oil and gas production and demand (as at February 2009).

The recovery of remaining oil and gas reserves will require additional investment, both in money and expertise. The distribution of resources is fairly well understood although exploration activities continue in all areas with suitable geology. Around 500 individual structures (including production platforms and tie backs) will be decommissioned over the next three decades.

In 2008, the upstream oil and gas industry invested £4.8 billion in developments, £1.4 billion in exploration and appraisal, and spent £6.8 billion on operations. The extraction of oil and gas is supported by highly specialised ‘supply chain’ activities and also supports a large downstream manufacturing sector (oil refining: net trade surplus £1 billion; petrochemicals: turnover £50 billion; trade surplus £5 billion), although these use a mix of UK and imported production. In 2008 there were 107 oil platforms, 181 gas platforms, 14 000 km of pipelines, plus 9 crude oil refineries and 3 specialist onshore refineries.

Additional socio-economic benefits from the oil and gas sector include employment, taxes paid to HM Treasury, export business and energy security. The majority of oil and gas fields on the UKCS are located in the North Sea (Regions 1 and 2) and as a consequence Scotland is the largest region of related employment in the UK. The extraction industry employs 34 000 people; 230 000 in supply chain companies and 214 000 in secondary petrochemical industries.

There are a number of environmental issues associated with oil and gas extraction, the most notable being the risk of oil spills, noise from exploration and production, historical oil-based cuttings piles, and inputs of production chemicals. Oil discharges in produced water have fallen and most oil spills are of less than 1 tonne. Impacts from pipeline installation on habitats are spatially minor with short-term noise and disturbance impacts. The extraction, processing and burning of oil and gas to provide energy is very energy intensive and produces high levels of associated CO₂ emissions causing concern over climate change (see Chapter 6).

As a result of increasing dependence on imported fuels the UK will have a growing need for gas storage. The use of geological structures in the sub-sea marine environment for the storage of gas is therefore receiving increasing focus. Structures can include depleted oil and gas fields or artificially created salt caverns and they have been used to store natural gas in Europe and the UK for over 30 years, although there is only one offshore gas storage facility currently in operation in the UK: the Rough 47/8 Alpha facility.

As an indicator of economic potential, the Department for Trade and Industry – now the Department of Energy and Climate Change – estimated in 2007 that £10 billion of investment in new gas storage and import facilities was in place or planned over the next few years. Use of existing storage features and infrastructure is likely to have negligible environmental impacts although the release of hypersaline water in the production of salt caverns may have some localised effects.

There have also been proposals to store CO₂ released from power generation and industrial processes, a process known as Carbon Capture and Storage (CCS). CO₂ can be stored in depleted hydrocarbon fields or aquifers. Given that CCS is a fledgling industry, there is considerable uncertainty surrounding future rates of development, specific location of developments, investment, cost-efficiency of construction, financial incentives and total economic contribution of the industry.