The foundation of £35bn oil and gas supply chain

Business development manager Stephen Marcos Jones examines the ambitious supply chain mapping project for the industry

Chris Lomas Photography Stephen Marcos Jones
Stephen Marcos Jones

The oil and gas industry is vital to the UK. The offshore oil and gas industry generates almost £40bn for the UK economy each year and supports 450,000 British jobs in total.

In addition, oil and gas delivers around 70% of the UK’s total primary energy needs; indigenously produced oil and gas currently satisfies around 60% of that demand.

In light of these facts, in 2013 oil and gas was established as a key industrial sector within the Government’s overall Industrial Strategy – a key element of which has been the development of an ambitious sector-specific industrial strategy for oil and gas on the UK Continental Shelf (UKCS).

One year from launch and we have delivered one of its key outputs, and this project – authored by EY – confirms the UK upstream supply chain is a staggering £3

5bn industry.

The completion of this latest supply chain mapping project is a real milestone for the sector, resulting in what we believe is the most thorough piece of work ever undertaken to quantify the economic contribution of the oil and gas supply chain to the UK.

It outlines that while Aberdeen remains home to the majority of oil and gas services, it is not alone. Just over half of the companies featured in this project are based outside Scotland.

Specifically, the project shows that according to the number of companies surveyed, there are more people employed in the upstream supply chain in the North East, Yorkshire and the Humber than in the North West and London combined. 

As such, we believe that our industry should be properly celebrated and supported by the UK and Scottish Governments and local councils right across the UK.

This region undoubtedly has a proud history.

North East firms have been involved in much of the construction of the 6.5 million tonnes of concrete and steel structures installed in the North Sea up to 2013, with 290 operational platforms currently in place.

The reports produced as part of this project show that in the structure and topside design and fabrication sub-sector in the UK, which includes companies providing design and manufacture of platforms and subsea structures, turnover has more than doubled over the past five years and the number of employees has risen by over one thousand.

This project also outlines the significant opportunities and threats facing fabricators as part of the UK oilfield services industry.

In the fabrication sector, which we know is of particular relevance to the North East, we need to ensure continued and future growth of equipment manufacturing in the UK, companies need to be incentivised to maintain and invest in expanding production.

In addition, within the global supply chain there are many products and services available at a significantly lower cost.

While international competitors may take advantage of these lower costs, UK-based companies do however possess a recognisable quality brand which gives companies a clear differentiator when competing internationally.

At Oil & Gas UK, we are working with companies in the North East to strengthen and grow their businesses. Recently we published the UK offshore oil and gas fabricators directory, raising awareness of the capacity and capability of the sector in the North East, working alongside our counterparts in Norway to share best practice and ensure that contracts are secured in the North Sea for the UK’s supply chain companies.

Our hope is that this project – alongside Sir Ian Wood’s recent excellent recommendations for our industry – will provide a blueprint for growth and prosperity for companies in this region for decades to come.

Stephen Marcos Jones, business development director, Oil & Gas UK

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