SUBMISSION FROM OIL AND GAS UK

1. Thank your for inviting Oil & Gas to submit written evidence to the inquiry into international trade in Scotland entitled “An inquiry into the public sector’s support for exporters, international trade and the attraction of inward investment”.

2. Although Oil & Gas UK is unable to respond to all of the Committee’s specific questions, we nevertheless felt it was important to respond with our key points and observations.

3. Oil & Gas UK is the representative organisation in the for the offshore oil and gas exploration and production (E&P) industry. It has more than 100 members from the integrated majors, BP, Chevron, ConocoPhillips, ExxonMobil, Shell and Total, through large, international E&P and utility companies (e.g. BG Group, , E.On Ruhrgas, GdFSuez, Marathon, Petro-Canada and Tullow) to smaller exploration only businesses and the supply chain, including Amec, Aramark, , , and . More information is available on our web-site at www.oilandgasuk.co.uk

4. Maximising the recovery of hydrocarbons and underpinning the security of energy supplies for the next 25 to 30 years require both investment and the means to deliver it. The continued growth of a strong and sustainable UK based supply chain is vital to achieving that objective. The UK, and specifically Scotland, is now a global hub for the provision of oilfield goods and services, offshore technology and operational expertise, and is an undisputed world leader in subsea engineering.

5. Oil & Gas UK’s 2009 Economic Report estimated that in 2007 the value of exports from Scotland’s chain amounted to £2.3 billion. We anticipate a 10% growth in exports year on year to be achievable. We estimate that approximately 190,000 people are employed in Scotland in support of the UKCS upstream oil and gas industry, many of which will also support the exports of the related products and services. It is important that the supply chain remains anchored in the UK, not just to support our own production but also to provide the platform for further export growth.

6. As production from the UKCS oil and gas industry goes into decline, and as we experience a downturn in activity such as brought on by the current global financial crisis, exports are of particular importance to our UK supply chain. Increasing exports during these downturns allow manufacturers to maintain production levels which are essential to remaining competitive at home and abroad. The export markets also provide an opportunity to utilise personnel and resources internationally, maintaining the levels of employment and retaining their valuable skills within our industry.

7. In the last 12 months our members are reporting that they are unable to secure finance to support ongoing and new R&D and technology development. This has a direct effect on their ability to compete both technically and commercially in the export markets. A result of this lack of investment, coupled with external competitive pressures, is to drive manufacturers and service organisations to reconsider their global manufacturing strategy. A reduction in manufacturing capacity will affect both our ability to maintain and grow our exports as well as negatively impact our need for a sustainable supply chain to harvest our UKCS oil and gas reserves.

8. Many of our members who manufacture and provide services in Scotland for ultimate export, have other facilities and draw on resources from across the UK. One concern is the fragmented nature of assistance and expertise from the public and private sectors in support of trade promotion and inward investment. Our members would be more effectively served through a single organisation that addresses both UK and regional needs. Currently, some organisations have multiple locations for manufacturing and servicing across the UK. They seek support for export assistance or inward investment through a variety of organisations such as SDI, UKT&I, Scottish Enterprise, Highlands and Islands Enterprise and regional and local Chambers of Commerce across the UK.

9. Oil & Gas UK appreciate that funds and assistance originate from differing sources and with differing target results in mind. However, we believe that with stronger co-ordination across these multiple sources, a greater degree of success will be achieved for both exporting organisations as well as businesses seeking to invest in the UK.

Brian Kinkead Oil and Gas UK March 2010