ECONOMIC DEVELOPMENT BENEFITS
OF THE OIL AND GAS INDUSTRY
IN NEWFOUNDLAND AND LABRADOR
CONFERENCE
ST JOHN’S
NEWFOUNDLAND
16 MAY 2007
LOCAL ECONOMIC BENEFITS
OF THE OFFSHORE
OIL AND GAS INDUSTRY
IN SCOTLAND AND NORWAY
by
TONY MACKAY
ANNUAL OIL PRODUCTION
(million tonnes)
180
140
120
100
80
60
40
20
UK
Norway
Newfoundland
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
0
1995
million tonnes
160
ANNUAL GAS PRODUCTION
(billion cubic metres)
100
90
80
70
60
50
40
UK
Norway
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
30
20
1995
billion cubic metres
120
110
OFFSHORE EXPENDITURE IN 2005
(C$ million)
• Newfoundland
30000
1,345
• Norway
• UK
24,600
20,785
C$ million
25000
20000
15000
10000
5000
0
INDUSTRY COMPARISONS
• Norwegian oil and gas production 15 x Newfoundland
•
•
•
•
•
•
UK oil and gas production 12 x Newfoundland
300 producing fields offshore UK
54 producing fields offshore Norway
3 producing fields offshore Newfoundland
Norwegian offshore expenditure 18 x Newfoundland
UK offshore expenditure 15 x Newfoundland
UKCS EXPENDITURE SURVEY
30000
20000
Decommissioning
Operating Expenditure
15000
Capital Expenditure
10000
Exploration
5000
2011
2010
2009
2008
2007
2006
2005
2004
2003
0
2002
$ million
25000
NORWAY EXPENDITURE SURVEY
24000
Decommissioning
16000
Operational Expenditure
12000
Capital Expenditure
8000
Exploration Expenditure
4000
2010
2009
2008
2007
2006
2005
2004
2003
2002
0
2001
$ million
20000
MAP OF SCOTLAND
KEY FEATURES IN SCOTLAND
• 35 years of activity, with fluctuations
• 1100+ companies involved as main
activity, plus many otheres
• Currently 75,000 oil and gas jobs in
Scotland, including 30,000 offshore
• Gas industry becoming more important
• Tax revenues go to UK rather than
Scotland
GEOGRAPHICAL DISTRIBUTION
OF BENEFITS IN SCOTLAND
• Most activity and employment concentrated in the
Aberdeen area
• Increasing concentration in Aberdeen following closure
of platform fabrication yards
• Increasing concentration following oil price collapse in
1990s….economies of scale and proximity
• Other significant areas include
–
–
–
–
Shetland … Sullom Voe oil terminal and Lerwick supply base
Orkney … Flotta oil terminal
Cromarty Firth … Rig IRM base and Nigg oil terminal
Fife … Mossmorran NGL plant
COPING WITH DECLINE
• Diversification into other offshore markets, eg
– Norway
– West Africa
- Gulf of Mexico
- Caspian Sea
• Diversification into other energy markets, eg
– wind farms, onshore and offshore
– marine/wave/tidal energy
• Supply of labour to other offshore markets
• Offshore decommissioning market
• Average company turnover now 68% UK and
32% international, with latter increasing
THE SHETLAND EXAMPLE
• Close-knit community, comparable with Newfoundland and Labrador
• Very active local authority .. Shetland Islands Council
• Support from Shetland Enterprise, part of the Highlands and Islands
Enterprise network
• Oil revenues/taxes from throughput at Sullom Voe terminal
• Re-investment in other local industries
– salmon farming
- information technology
– fish processing
- tourism
• Investment in infrastructure
– airports
- ferry terminals
– higher education facilities
MAP OF NORWAY
KEY FEATURES IN NORWAY
• History and scale similar with UK/Scotland
but more stable and with smaller
fluctuations because of gov policies
• More protectionist policies than in UK
have increased national and local benefits
• State companies Statoil and Norsk Hydro
dominate production and expenditure
• Benefits spread more widely because of
country’s geography
GEOGRAPHICAL DISTRIBUTION
OF BENEFITS IN NORWAY
• Three distinct areas
- North Sea in the south
- Norwegian Sea in the middle
- Barents Sea in far north
• North Sea
- Stavanger main oil centre in country
- Karsto, Mongstad, Kollnes terminals
- Various fabrication yards in region
NORWAY BENEFITS (2)
• Norwegian Sea
- Kristiansund main base
- Nyhamna and Tjeldbergodden terminals
- Best examples for Newfoundland
• Barents Sea
- Hammerfest main base
- Snohvit LNG development
- Best examples for Labrador, partic gas