The Future of the Oil and Gas Sector in the North Sea

1. North Sea Stakeholder ConferenceWorking together to manage the marine resource of the North Sea Region 18th March 2010 The Future of the Oil and GasSector in the North Sea Paul Dymond Operations Director Oil & Gas UK

2. Who we are… • The leading representative body for the UK offshore oil and gas industry • Working to promote and strengthen the long-term health of the Industry • We represent operators, non-operators, contractors and suppliers & speak for the whole sector

3. Economic Importance of the UK Oil and Gas Industry - today

4. N N UK UK NL DE IT IT RO DK Consumption Consumption DK Production RO Production PL 0 1 2 3 0 20 40 60 80 100 Million barrels per day Billion cubic metres Source: BP Statistical Review, 2008 + Dutch MEA Contribution of indigenous European production to security of energy supply • Overall the EEA is the 4th largest oil and gas producer in the world – ahead of e.g. Iran, Algeria and Canada; • Indigenous EEA/EU production is an important contributor to EU security of energy supply; • Approx. 90 % of EU reserves are located offshore.

5. Remaining UKCS reserves: • Produced 39 billion boeof oil and gas to-date • Up to 25 billion boestill to be recovered

6. UKCS Investment Outlook 8 Capital Investment Forecast < 50% 7 50 - 59% 60 60 - 69% 6 70 70 70 - 79% 80 80 80 - 89% 5 90 90 90 - 99% £ billion 100% 100% 100% 4 3 2 Source: Policy Research Corporation Draft report, 2010 1 UK Investment comparison to 2020: Offshore wind aspiration: ca £100bn Oil & Gas plans: £60bn 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

7. Future world demand for energy – continuing importance of oil and gas • Global demand for energy is increasing steadily; • Wind, solar and bio-fuels expanding rapidly: but from a very small initial base; • Oil and gas will remain the primary energy source for many years to come; • In the UK, even as we head towards a low carbon economy, oil and gas will account for 70 % of our primary energy needs in 2020. Source: ExxonMobil 2008

8. EU demand outlook - reference scenario • Oil and gas will remain the primary energy source for many years to come; • Oil remains the key feedstock for the materials needed in modern life – “its not just about energy” • Oil demand expected to remain around 13mbd, slightly falling to around 10mbd towards 2030; • Gas demand expected to rise by about 17.5% from 2007 and 2030.

9. The future of the UKCS – a tale of two possible futures… The challenge is to keep the UKCS competitive to secure investment funding in a global market place Requires further £50bn investment £10bn ongoing investment

10. Hydrocarbon Releases (1997-2009) Injury Trend (1995-2009) Health & Safety in UK Offshore Oil and Gas 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Key Events Incident: Sumburgh Chinook Crash Outcome: Chinooks withdrawn from offshore use Incident: Piper Alpha Outcome: Lord Cullen Enquiry: 106 recommendations made Incident: April 1st Super Puma crash Outcome: Setup of the Helicopter Task Group to drive the helicopter safety agenda New Offshore Safety Regulations Step Change in Safety Initiative HSE’s KP3 Programme

11. Safeguards focus on minimising risk to the environment Example of changes in operational procedures that have produced environmental benefits • OSPAR Decisions and Recommendations & EU Directives incorporated into UK legislation • Company’s Environmental Management Systems As a result, a measurable improvement in the quality of the marine environment.

12. Un-attributable Compensation Fund SFF NFFO Oil & Gas UK FLTC FLTC Services KIS-UKCS FishSAFE Websites Funding to redress Skippers for loss or damage to fishing gear caused by oil-related debris • The sharing of common waters between two industries requires good working relationships and attention to potential interactions, especially with respect to safety • The UK oil and gas industry, through Oil & Gas UK, has taken positive steps to develop methods and systems that allow both industries to work safely and efficiently together and to promote harmonious working relations  FLTC established to manage interactions between two industries and endowment fund Subsidiary FLTC Services Limited to supply information and devices that enhance safety

13. Southern North Sea Petroleum Production Licences Overlap with Round 3 windfarm lease zones A case for spacial planning, good working relationships and meaningful consultation.

14. EU Marine Spatial Planning – The Oil & Gas Industry’s View • Must continue to allow access for E&P activities and promote recovery of new hydrocarbon resources; • Should recognise the oil and gas industry's economic and social contribution; • Must fit with other EU energy policy goals (i.e. oil and gas industry's contribution to secure energy supplies); • ONLY required where conflicts arise - oil and gas industry actively maintains good relationships with other sea users; • Should be the responsibility of Member States; • Must take account of possible future technology developments and any proposals must be subject to a thorough stakeholder consultation process.