This Key Note Market Report analyses the UK offshore oil and gas industry, which covers activities in the waters surrounding the UK, known as the UK Continental Shelf (UKCS). In 2005, total sales of oil, gas and related products amounted to £28.69bn, an increase of 22.8% on 2004. Government revenues and taxes attributable to UK oil and gas production reached an estimated £9.7bn in 2005/2006, up by 84.7% on the previous year.

Oil and gas production is falling. At 182.1 million tonnes of oil equivalent (mtoe), output in 2005 was 9.9% lower than 2004's output and 22.4% lower than it was in 2001. Oil and gas account for roughly equal shares of UKCS output.

41 years after the first recoverable reserves were discovered in the UKCS, the UK oil and gas industry is a mature one. While there are likely to be some short-term, small increases in output, as a few remaining large fields come on stream and the lives of older fields are extended, the long-term future will be one of decline, unless new major discoveries are made. The more recent discoveries have been smaller than earlier discoveries and they are also more difficult and expensive to bring into production. Some of the larger international oil and gas companies are selling their less attractive UKCS assets and switching their attention to other parts of the world, which give better returns on investment.

In the context of the recent government Energy Review, the UK offshore oil and gas industry has an important role to play in providing energy for the UK. Longer term, UK energy needs will have to be met by an increasing amount of oil and gas imports, much of which will come from countries where the culture and politics are very different from those in the UK.

Issues of particular concern to the UKCS oil and gas sector include recent rises in taxation (which could deter companies from investing in the industry) and decommissioning of redundant structures and pipelines (during the next 20 years, hundreds of structures and pipelines will have to be removed and disposed of in an environmentally acceptable manner).

The UK will be dependent on fossil fuels for decades to come, but carbon emissions are a serious disadvantage of this type of fuel. There is currently a major debate about whether or not to renew the UK's ageing nuclear power stations, all of which are due to be withdrawn from service in the 2020s. Nuclear power has the advantage of not producing carbon emissions, but the renewal of nuclear power plant would reduce the market for gas in gas-fuelled power plant.

The future of the UK oil and gas industry largely rests on international oil prices. Owing to the hostile environment in which oil and gas in the UK are recovered, the UK market is based on high prices. The current conflicts in the Middle East and unrest in other oil- and gas-producing countries raises the possibility that the UK could experience disrupted oil and gas supplies from these regions. Moreover, large emerging economies such as China and India will be major competitors for the world's energy resources. Any escalation of these factors could lead to renewed efforts to extract the maximum possible oil and gas from the UKCS, even at a very high cost. There has been a rise in the number of exploration licences taken out in the 2005 licensing round, an indication of sustained, but high risk (of not finding recoverable reserves), interest in the UK offshore oil and gas industry.

Executive Summary

1. Market Definition
* REPORT COVERAGE
* MARKET SECTORS
* Oil
* Natural Gas
* Natural-Gas Liquids
* MARKET TRENDS
* Oil
* Gas
* ECONOMIC TRENDS
* Population
* Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2001-2005
* Gross Domestic Product
* Table 2: UK Gross Domestic Product at Current and Annual Prices (£m), 2001-2005
* Inflation
* Table 3: UK Rate of Inflation (%), 2001-2005
* Unemployment
* Table 4: Actual Number of Unemployed Persons in the UK (million), 2001-2005
* Household Disposable Income
* Table 5: UK Household Disposable Income Per Capita (£), 2001-2005
* MARKET POSITION
* The UK
* Table 6: UK Production of Primary Fuels by Type of Fuel by Volume (million tonnes of oil equivalent), 2001-2005
* Table 7: UK Production of Primary Fuels by Type of Fuel by Volume (million tonnes of oil equivalent and %), 2001 and 2005
* Figure 1: UK Production of Primary Fuels by Type of Fuel by Volume (%), 2005
* Overseas
* Table 8: Consumption and Production of Oil in Selected Major Economies (million tonnes), 2005
* Table 9: Consumption and Production of Gas in Selected Major Economies (million tonnes of oil equivalent), 2005

2. Market Size
* THE TOTAL MARKET
* By Value
* Sales
* Table 10: The Total UK Market for Oil and Gas by Sector by Value (£m), 1996-2005
* Figure 2: The Total UK Market for Oil and Gas by Sector by Value (£m), 2001-2005
* Government Revenue from Taxes and Royalties
* Table 11: Taxes and Royalties Attributable to UK Oil and Gas Production by Value (£m), 1995/1996 to 2006/2007
* UK Production
* Table 12: UK Production of Petroleum and Natural Gas by Volume (million tonnes of oil equivalent), 2001-2005
* BY MARKET SECTOR
* Oil
* By Value
* Table 13: UK Sales of Oil by Value (£m and %), 2001-2005
* By Volume
* Table 14: UK Petroleum Oil Production by Volume (million tonnes of oil equivalent and %), 2001-2005
* Gas
* By Value
* Table 15: UK Sales of Natural Gas by Value (£m and %), 2001-2005
* By Volume
* Table 16: UK Production of Natural Gas by Volume (million tonnes of oil equivalent and %), 2001-2005
* OVERSEAS TRADE
* Exports
* Oil
* By Value
* Table 17: UK Exports of Crude Oil by Value (£m), 2003-2005
* By Volume
* Table 18: UK Exports of Primary Oils (million tonnes), 2001-2005
* By Country of Destination
* Table 19: UK Exports of Crude Oil by Country of Destination by Volume (000 tonnes), 2005
* Natural Gas
* By Value
* Table 20: UK Exports of Natural Gas by Value (£m), 2003-2005
* By Volume
* Table 21: UK Exports of Natural Gas by Volume (gigawatt hours), 2001-2005
* By Country of Destination
* Table 22: UK Exports of Natural Gas by Region of Destination by Volume (000 tonnes), 2005
* Imports
* Oil
* By Value
* Table 23: UK Imports of Crude Oil by Value (£m), 2003-2005
* By Volume
* Table 24: UK Imports of Primary Oils by Volume (000 tonnes), 2001-2005
* By Country of Origin
* Table 25: UK Imports of Crude Oil by Country of Origin by Volume (000 tonnes), 2005
* Natural Gas
* By Value
* Table 26: UK Imports of Natural Gas by Value (£m), 2003-2005
* By Volume
* Table 27: UK Imports of Natural Gas by Volume (gigawatt hours), 2001-2005
* By Country of Origin
* Table 28: UK Imports of Natural Gas by Region of Origin by Volume (000 tonnes), 2005

3. Industry Background
* RECENT HISTORY
* The Oil Fields
* Table 29: Crude Oil Production from Major Oil Fields (000 tonnes per annum), 1975-2000, 2001, 2003 and 2005
* The Gas Fields
* Table 30: Gross Production from Major Gas Fields (million cubic metres), Total to End of 2000, 2001, 2003 and 2005)
* NUMBER OF COMPANIES
* Table 31: Number of UK VAT-Based Enterprises Involved in the Extraction of Crude Petroleum and Natural Gas by Turnover Sizeband, 2005
* EMPLOYMENT
* Table 32: Number of VAT-Based Enterprises Involved in the Extraction of Crude Petroleum and Natural Gas by Employment Sizeband, 2005
* REGIONAL VARIATIONS IN THE MARKETPLACE
* DISTRIBUTION
* Table 33: Distillation Capacity of UK Refineries by Volume (million tonnes of oil equivalent per year), 2005
* HOW ROBUST IS THE MARKET?
* LEGISLATION
* Licensing Scheme
* Regulations
* KEY TRADE ASSOCIATIONS
* Association of British Offshore Industries
* British Marine Equipment Association
* Energy Institute
* Institute of Marine Engineering, Science and Technology
* International Maritime Contractors Association
* Society of Maritime Industries
* Subsea UK
* UK Offshore Operators Association
* UK Spill Association

4. Competitor Analysis
* THE MARKETPLACE
* Table 34: Selected UK Facility Operators and Oil Fields, 2006
* MARKET LEADERS
* BG Group PLC
* Company Structure
* Current and Future Developments
* Financial Results
* BP PLC
* Company Structure
* Current and Future Developments
* Financial Results
* Centrica PLC
* Company Structure
* Current and Future Developments
* Financial Results
* Chevron Corporation
* Company Structure
* Current and Future Developments
* Financial Results
* ConocoPhillips
* Company Structure
* Current and Future Developments
* Financial Results
* Royal Dutch Shell PLC
* Company Structure
* Current and Future Developments
* Financial Results
* Total SA
* Company Structure
* Current and Future Developments
* Financial Results
* OTHER COMPANIES
* Apache Corporation
* Canadian Natural Resources
* ExxonMobil
* Hess Corporation
* Interconnector (UK) Ltd
* Kerr-McGee
* Marathon Oil Corporation
* Perenco
* Talisman Energy Inc
* OUTSIDE SUPPLIERS

5. Strengths, Weaknesses, Opportunities and Threats
* STRENGTHS
* WEAKNESSES
* OPPORTUNITIES
* THREATS

6. Buying Behaviour
* ENERGY CONSUMPTION
* Energy Consumption of Primary Fuels
* Table 35: UK Inland Energy Consumption of Primary Fuel† by Type of Fuel by Volume (million tonnes of oil equivalent), 2001-2005
* Fuel Used in Electricity Generation
* Table 36: Fuel Mix Used in UK Electricity Generation by Type of Fuel by Volume (%), 2005
* Table 37: UK Electricity Generating Capacity by Type of Plant (megawatts), 2001-2005
* Energy Uses of Petroleum Products
* Table 38: Energy Uses of Petroleum Products (%), 2005
* NON-ENERGY USES OF PRIMARY FUELS
* Table 39: UK Inland Deliveries of Petroleum for Non-Energy Uses (000 tonnes), 2005
* GAS APPLICATIONS
* Table 40: Demand of Natural Gas by End Use (gigawatt hours), 2005
* MARKETING OF ENERGY

7. Current Issues
* FUTURE UK ENERGY CHALLENGE
* FUTURE OIL AND GAS SUPPLIES
* INCREASED TAX
* NUCLEAR POWER
* INCREASE IN LICENCES
* DECOMMISSIONING
* CARBON EMISSIONS
* CORPORATE ACTIVITY

8. The Global Market
* OVERVIEW
* OIL
* Reserves
* Table 41: World Proved Oil Reserves by Region (billion barrels, billion tonnes and %), 2005
* Production
* Table 42: World Oil Production by Region (million tonnes and %), 2005
* Consumption
* Table 43: Global Oil Consumption by Region (million tonnes and %), 2005
* NATURAL GAS
* Reserves
* Table 44: World Natural Gas Proved Reserves by Region (trillion cubic metres and %), 2005
* Production
* Table 45: World Natural Gas Production by Region (billion cubic metres and %), 2005
* Consumption
* Table 46: Global Gas Consumption by Region (billion cubic metres and %), 2005

9. Forecasts
* ECONOMIC FORECASTS
* Population
* Table 47: Forecast UK Resident Population by Sex (000), Mid-Years 2006-2010
* Gross Domestic Product
* Table 48: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2006-2010
* Inflation
* Table 49: Forecast UK Rate of Inflation (%), 2006-2010
* Unemployment
* Table 50: Forecast Actual Number of Unemployed Persons in the UK (million), 2006-2010
* UKCS Expenditure 2005 to 2010
* Table 51: UKCS Development Capital Projections (£bn), 2005-2010
* FORECASTS 2006 TO 2011
* Oil
* Table 52: UK Oil Production Projections (million tonnes), 2006-2011
* Table 53: Forecast UK Production of Oil by Volume (million tonnes of oil equivalent), 2006-2011
* Gas
* Table 54: UK Gas Production Projections (billion cubic metres), 2006-2011
* Table 55: Forecast UK Production of Natural Gas by Volume (million tonnes of oil equivalent), 2006-2011
* Future Reserves
* MARKET GROWTH
* Figure 3: Growth in UK Oil and Gas Production by Volume (million tonnes of oil equivalent), 2001-2011
* FUTURE TRENDS

10. Company Profiles
* BG Group PLC
* BP PLC
* Centrica Plc
* Chevron Ltd
* Conocophillips Ltd
* Royal Dutch Shell PLC
* Total E&P UK PLC

11. Consumer Confidence
* METHODOLOGY
* KEY FINDINGS THIS QUARTER
* THE WILLINGNESS TO BORROW
* Confidence Rebounds
* Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
* Fewer Adults Wish to Borrow
* Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), August 2005-2006
* SPENDING FROM SAVINGS
* Strong Recovery in Spending from Savings
* Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
* Savings Grow in Relative Importance
* Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), August 2005-2006

12. Further Sources

* Associations
* Government Publications
* Other Sources
* Bisnode Sources *
* Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
* Fewer Adults Wish to Borrow
* Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), August 2005-2006
* SPENDING FROM SAVINGS
* Strong Recovery in Spending from Savings
* Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), August 2005-2006
* Savings Grow in Relative Importance
* Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), August 2005-2006

12. Further Sources

* Associations
* Government Publications
* Other Sources
* Bisnode Sources