https://cpes.org.uk/om/files/original/fa0261e59aedb65950fb7bd45886215e.pdf 191efbde9c94235c580a7e85fb96b85a Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Economic Policy Review Volume 1 Description An account of the resource February 1975 No 1 Text A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text. Text Any textual data included in the document CHAPTER4 AN ECONOMIC ASSESSMENT OF THE NORTH SEA by Francis Cripps and Roger Tarling The extraction of oil and gas from the UK sector of the North Sea is a major factor in the long-tenn prospects for the UK economy. Its significance has been much increased by the rise in world oil prices. This chapter presents estimates of the probable value of North Sea operations to the UK in the next few years. The first stage in this assessment is the preparation of a set of accounts for the North Sea economy itself. These accounts provide the material for estimates of the contribution of North Sea operations to the UK national income and balance of payments. It will be shown that by 1978 the gain to national income is likely to reach £2 billion at 1974 values, or 2~%. Accounts for the North Sea Appendix 4.1 gives a full set of accounts for the North Sea at current and constant prices, estimated for each of the years 1964 to 1978. These accounts, modelled on conventionai national income and balance of payments tables, regard the North Sea as an 'economy' with no residents, whose domestic product consists entirely of property income payable abroad in the fonn of taxes or profits due to oil companies. Exports from the North Sea consist ofdeliveries ofoil and gas, while imports comprise all capital and current inputs of goods and services, whether for exploration, development or production. The North Sea accounts are based on an analysis of operations, field by field, taking account of Government tax proposals so far announced and of the distribution of investments between UK and foreign companies. The technical details and sources of infonnation are described in Appendix 4.2. Expenditure on each field consists, in the early years, of investment in exploration and development financed by long-tenn capital put up by companies investing in the field. This capital has to provide for trade credit in the fonn of advance and progress payments to contractors. Once oil or gas starts to come on stream, the field yields gross trading profits equal to the value of deliveries less operating costs. These gross profits then divide into tax revenue payable to the Government and profits net of tax payable to the companies which have invested in the field Tax revenue will be collected in three fonns: (a) royalties at 12~% of the value of deliveries, (b) Petroleum Revenue Tax (PRT) charged on profits net of royalties and capital allowances (up to 150% of exploration and developmentcosts), and (c) Corporation Tax charged on profits net of royalties, PRT and the nonnal 100% capital allowances. The estimates in the Appendix are based, arbitrarily, on a 65% rate for PRT and assume that the world oil price remains at its 1974 level in real tenns (after adjustment for world inflation). It is also assumed that the UK share of finance for North Sea investment remains at about 35%, and the foreign share at 65%. Estimates of the possible effects of 51% participation by the UK Government will be given below, but they are extremely uncertain as no detailed proposals have yet been announced. On all the above assumptions, a typical oil field will, in the first year or two of production, pay little tax other than royalties as capital allowances are used up and the _initial investment is amortized by accruals of profit to the companies which have financed exploration and development. Thereafter, profits net of tax will fall off and the tax yield will rise to absorb most of the gross profits. Averaged over the whole life of a field, and assuming a 10% real return on investment, the rough breakdown of proceeds per barrel of oil would be as follows: Sale value $12.50 Operating costs $ 1.00 Gross profit $11.50 Capital costs Royalties and taxes $ 2.00 $ 8.50 Net profit $ 1.00 This would be an average breakdown. The figures for individual fields may vary considerably depending on costs of extraction and the life of the field. For the UK sector of the North Sea as a whole, the year-by-year pattern of deliveries, profits and Government revenue is estimated as follows: (£million, 1974 values) 1974 1975 1976 1977 1978 Deliveries 161 301 823 1893 2766 Operating costs 50 59 92 163 224 Gross profit 111 242 731 1730 2542 Government revenue 20 38 112 493 1216 Capital costs and net profit 91 204 619 1237 1326. The value of deliveries is expected to rise rapidly in 1976-78, enabling the UK to reduce its net imports of oil from other sources. By 1978 the Government would start to receive a substantial share of the revenue because of the exhaustion of capital allowances on some of the larger fields. Effects on UK national income and balance of payments As a net oil importer, the UK would at present secure an immediate gain from any reduction in world oil prices. By the 1980's, as a net exporter of oil, the U.K.'s interest will lie in a high world price for oil, while at the cross-over point in 1980-81 the world price of oil will temporarily be of little consequence for the UK. But an 29 Economic Policy Review assessment of the effects of North Sea operations alone will always show a larger benefit from a higher oil price. It is important to remember that until the UK becomes a net exporter of oil, any North Sea gains from a high oil price will be more than offset by the cost to the UK of imports from other sources. It is convenient to consider the possible effects of North Sea operations on the UK economy in three parts: (a) the effects of UK jurisdiction, i.e. those effects which would not arise if the North Sea operations were outside UK national boundaries and were under the jurisdiction of a foreign tax authority. (b) the effects of UK commercial involvement, i.e. the value of sales of goods and services from the UK to the North Sea, and the flows of capital and profit associated with UK investment. (c) the possible effects of 51% UK Government participation in capital invested in the North Sea. UK jurisdiction means, principally, that tax revenue from the North Sea is payable to the UK Government. ( 1) This represents a straightforward gain to the national income and the balance of payments. The balance of trade on goods and services benefits by the amount of gross profits less North Sea imports of investment goods and services; the current account benefits by the amount of tax revenue less North Sea imports of investment goods and services; and the balance on long-term capital and trade credit benefits by the amount of finance for North Sea imports of investment goods and services. Table 4.1 shows estimates of these effects for 1974-78 in column (1 ). UK commercial involvement increases the gain to national income by the amount of profits (net of tax) due to UK companies; it increases the gain to the balance of trade on goods and services by the UK share of North Sea purchases of imports; and it reduces the gain to the balance on long-term capital by the UK share of finance for North Sea investment. These effects are shown in column (2) of the table. The possible effects of 51% UK Government participation shown in column (4) are estimated on the assumption that payments of compensation for prior investment are spread out over the three years 1975-77, that from 1975 onwards the UK Government provides 51% of the finance for new investment, and that the respective financial involvement of UK and foreign companies is reduced pro rata. There would then be a further gain to national income and the balance of payments current account equal to the UK Government's share of profits net of tax (assumed to build up in line with the UK Govern- ment's stake in operations). But the UK surplus on long-term capital would be reduced by the amount of payments of compensation and of Government subscriptions of new capital in lieu of foreign sources of finance. The maximum estimate of the gain to national income in 1978 (shown in column (5) of the table) is about £2.2 billion (at 1974 values). This is composed of £1.2 billion Government revenue in the form of royalties and tax receipts, £0.4 billion profits due to UK companies (before allowing for any state participation) and £0.5 billion profits due to the UK Government (on a 51% state share) which would otherwise have accrued to foreign companies. Prior to 1976 the estimated effects on the balance of payments current account are negative because imports to the North Sea from non-UK sources of supply exceed the value of oil and gas deliveries. But from 1976 on there is an increasing net gain to the current account as profits and tax revenue due to the UK build up rapidly. The maximum estimate of the gain to the current account in 1978 comprises: (£billion, 1974 values) Royalties and tax revenue 1.2 less North Sea investment -0.8 plus Value of UK supplies to North Sea 0.5 plus Profits due to UK companies (before state participation) 0.4 plus Saving on profits due abroad (as a result of 51% participation) 0.5 Total gain to current account 1.9 The gains on the basic balance of payments (current account plus long-term capital flows) exceed gains on current account by the amount of the inflow of foreign capital (net of any compensation payments). The maximum estimate for 1978 is about £2.1 billion at 1974 values. The provisional conclusion is that the North Sea will contribute about 0.5% per year to the average growth of real national income between 1974 and 1978, and that by 1978 it should provide a net gain of about £2 billion (at 1974 values) to the balance of payments. Although these estimates would be altered by any future changes in the world oil price (adjusted for inflation), additional gains or losses in the North Sea would by 1978 be largely offset by losses or gains to the rest of the economy arising from the change in the cost of oil. - (1) The other consequences are all accounting adjustments, due solely to the implied location of national boundaries. 30 An Economic Assessment of the North Sea Table 4.1 Estimated effects of the North Sea on the U.K. national income and balance of payments, 1974-78 (£million, 1974 values) Effects of UK jurisdiction (1) Effects of UK commercial involvement (2) Total effects under present arrangements (3)=(1 )+(2) Possible effects of 51% UK Government participation (4) Total effects with 51% Govern- ment participation (5)=(3)+(4) National Income 1974 1975 1976 1977 1978 20 38 112 493 1215 28 48 75 113 278 390 569 1062 425 1640 48 23 136 138 528 378 1440 517 2157 Balance of payments current account 1974 -325 1975 -612 1976 -720 1977 -279 1978 459 156 366 745 1044 925 -169 -246 25 765 1384 -169 23 -223 138 163 378 1143 517 1901 Balance of payments on current account, long-term capital and trade credit 1974 20 -59 -39 -39 1975 38 78 116 -432 -316 1976 112 480 592 -302 290 1977 493 786 1279 -61 1218 1978 1215 660 1875 234 2109 See text for assumptions. Figures are based on Tables 4Al.1 and 4Al.2. - 31 Economic Policy Review APPENDIX 4.1 THE ACCOUNTS OF THE NORTH SEA ECONOMY 1964 TO 1978 Table 4A1.1 National Accounts of the North Sea Economy 1964 1965 Gross National Product: Expenditure at current prices 1. Gross ftxed capital formation 1 2. Exports of goods and services 3. Imports of goods and services 3a. from U.K. 0 3b. from ROW 1 4. G.D.P. at factor cost 5. Net property income paid abwad 6. Gross National Product 7 7 2 5 1966 20 20 6 14 1967 64 4 64 19 45 3 3 1968 69 14 71 22 49 12 12 1969 85 25 89 28 62 21 21 Gross National Product: Expenditure at 1970 prices: 1. Gross ftxed capital formation 1 8 23 74 77 92 2. Exports of goods and services 2 9 22 3. Imports of goods and services 1 8 23 74 79 96 3a. from U.K. 02 7 22 24 30 3b. from ROW 1 6 16 52 55 66 4. G.D.P. at factor cost 2 7 17 (1) These forecasts are based on assumptions underlying the variant 'Import restriction; low inflation; see Statistical Appendix, table F. Table 4A1.2: Balance of Payments Accounts of the North Sea Economy 1964 1. Exports of goods and services 2. Imports of goods and services 2a. from U.K. 2b. from ROW 1 0 1 3. Balance of goods and services -1 4. U.K. taxes 5. IDPto U.K. 6. IDPto ROW 7. Current balance -1 8. Long-term capital from U.K. 9. from ROW 10. Net increase in trade credit 0 1 0 11. Total investment and capital flows 1 12. Currency flows (1) See note to table 4Al.l 1965 7 2 5 -7 -7 2 4 0 7 1966 20 6 14 -20 -20 14 26 20 20 1967 4 64 19 45 -60 1 3 -64 30 55 21 64 1968 14 71 22 49 -57 2 8 3 -69 25 46 1 69 1969 25 89 28 62 -64 3 8 9 -85 30 56 2 85 32 - An Economic Assessment of the North Sea - 1970 1971 1972 1973 1974 67 81 128 155 345 47 80 117 133 161 77 98 154 189 395 25 33 52 64 128 52 65 102 125 266 38 62 91 98 111 38 62 91 98 111 67 73 105 95 142 47 79 115 125 147 77 89 128 121 172 25 30 43 41 58 52 59 85 80 114 38 63 92 100 117 Forecast (1) 1975 1976 1977 1978 757 1110 1133 1162 351 1098 2779 4253 825 1233 1374 1507 339 622 697 769 486 610 676 738 282 976 2539 3908 282 976 2539 3908 268 340 309 295 179 301 546 743 303 394 404 422 125 197 202 211 178 197 202 211 144 247 451 616 1970 1971 1972 1973 1974 47 80 117 133 161 77 98 154 189 395 25 33 52 64 128 52 65 102 125 266 -30 -18 -37 -56 -234 6 10 15 17 10 16 24 26 22 36 52 56 20 28 63 -67 -81 -128 -155 -345 25 39 46 72 3 31 47 91 215 88 169 399 8 105 269 67 81 128 155 345 Forecast (l) 1975 1976 351 1098 825 1233 339 622 486 610 -475 . -135 44 149 88 372 150 455 -757 -1110 336 353 623 656 202 -101 757 1110 1977 2779 1374 697 676 +1405 724 835 980 -1133 379 704 -51 1133 1978 4253 1507 769 738 +2746 1869 653 1387 -1162 408 757 3 1162 33 Economic Policy Review The activities of exploration, development and production of resources in the North Sea are assumed to take place in a separate economy. This economy is assumed to have no residents so that the entire gross domestic product is paid as property income as UK taxes and profits to UK and foreign companies. The estimates make no allowance for the effects of a possible government participation by, for instance, an acquisition of 51% of the equity (see page 30 for some discussion of this point). The accounts for this economy are presented in two tables, one for the expenditure on the gross national product and the other giving the balance of payments accounts. The estimates for the future are based on assumptions underlying the variant projection 'Import restriction, low inflation'; for a description, see table F in the Statistical Appendix. A description of the definition and coverage of each series shown in the accounts for the North Sea is given below, together with the relevant identities; all series are for activities in oil and gas fields combined. Table 4Al.l Gross National Product I. Gross domestic fixed capital formation: all exploration and development expenditures and investment in productive capacity. 2. Exports of goods and services: all gas and oil extracted and piped or brought in by tanker, valued c.i.f. 3. Imports of goods and services: all investment (as in item 1) plus operating inputs including offshore services, disaggregated by origin, (a) from UK and (b) from the rest of the world (ROW). Investment and operating inputs are allocated separately. 4. Gross domestic product: this item (= 1 + 2 - 3) is the value added in the North Sea. By identity, it equals exports of goods and services less operating inputs. 5. Net property income paid abroad: taxes and royalties paid to the UK government and all (post-tax) profits of UK and foreign companies. Because the North Sea has no residents, this item is identically equal to the gross domestic product. 6. Gross National Product: by identity, equal to zero. Table 4Al.2 Balance of Payments 1. } as in items 2, 3 of table 4Al.l 2. 3. Balance on goods and services: this item is the value of production less gross investment expenditures and operating costs. 4. UK taxes: revenue from the PRT, Corporation Tax and royalties paid to the UK government. 5. IPD to UK: post-tax profits of UK companies. 6. IPD to ROW: post-tax profits of foreign companies. Note: the sum of items 4, 5 and 6 is identically equal to item 5 in table 4Al.l. 7. Current balance: this item (= 3 - 4 - 5 - 6) is identically equal to gross investment expenditures treated as an import. 8. Long-term capital flow from the UK: UK financed share of payments for investment goods; differs from UK share of investment by amount of capital raised abroad. 9. Long-term capital flow from ROW: Foreign financed share of payments for investment goods. 10. Net increase in trade credit: the difference between the advance and progress payments made for investment goods (item 8 plus 9) and the deliveries of investment goods (item 1 in table 4Al.l ). 11. Total investment and capital flows: this item (= 8 + 9 - 10) is equal to gross fixed capital formation, by treating the deliveries as additions to assets. It is an exact offset to the current balance. 12. Currency flow: this item (= 7 + 11) is identically zero. Appendix 4.2 Background of assumptions underlying the North Sea Accounts (1) Exploration for oil and gas in the North Sea began late in 1964 and gas was found in the West Sole field in 1965. But it was not until 1970 that BP made the first oil discovery on their Forties field. Nearly all of the gas fields (five of which are in commercial production) are in the Southern basin whereas all of the oil discoveries have been made in the Middle or Northern sectors (north of the 56th parallel). The northerly location of the oil fields has led to complicated technological problems since the finds have been in much deeper waters than the gas fields and these problems, together with more violent and variable weather conditions, have led to considerable slippage in the original development schedules for many fields. The forecasts for oil and gas offtake included in the accounts represent a summary of the position as it now appears; the estimates are more pessimistic than those made by the Department of Energy last May. There are now about 16 proven finds which can support commercial production of oil which should come on stream by 1979, and about ten of these fields should have attained peak rates of production by (1) The estimates made in this appendix are based on informa- tion drawn mainly from 1. "Production and reserves of oil and gas in the United Kingdom", Department of Energy, May 1974. 2. "Study of potential benefits to British industry from offshore oil and gas developments", a study for the Department of Trade and Industry by International Management and Engineering Group of Britain Limited 1972. , 3. "How much capital for North Sea oil?", Tony Parker, The Banker, October, 1974. 4. Five articles by Adrian Hamilton, appearing in the Financial Times on Dec. 11, Dec. 13, Dec. 19, Dec. 27 and Jan 6 (1974/5). Reference was also made to numerous other press articles and journals of the petroleum industry. 34 --- An Economic Assessment of the North Sea Table 4A2.1 North Sea oil and gas productiop. {in million tons of petroleum or equivalent) Gas Oil Total North Sea supply Expected Pessimistic 1967 1968 1969 1970 1971 1972 1973 1974 0.4 1.6 3.9 8.6 14.3 20.8 22.5 26.5 0.1 0.2 0.3 0.3 0.4 1.6 3.9 8.6 14.4 21.0 22.8 26.8 1975 1976 1977 1978 27.5 30.3 34.5 37.7 3.6 17.2 45.2 68.0 31.1 47.5 79.7 105.7 30.0 43.0 70.9 89.9 1980/81. There are 4 additional fields which are still being delineated and evaluated. The expected rates of development of the fields and extraction of oil and gas are shown in Table 4A2.1 for the period to 1978. Estimates incorporating a more pessimistic view about the development of the oil fields are shown in the final column. In 1978 a very high proportion of oil production will come from three fields, Forties, Piper and Brent, providing in total about 800,000 - 850,000 barrels per day (about 40 million tons of petroleum per annum). sites made available may be insufficient to meet the build-up of orders, particularly with the currently rather long production periods. During recent public discussions about the likely future oil offtake pattern, the oil companies have suggested that they may slow down, or even halt, development schedules on some of the fields due to come on stream in the next five years. This is the result of rapidly rising capital costs and the uncertainties about tax arrangements for North Sea operations. The value of production from the North Sea has Table 4A2.2 Capital costs per daily barrel capacity for 15 fields Cost range (£103 p.d.b.c.) Number Latitude No. of fields Total Reserves (m. barrels) Capital costs (£103 p.d.b.c.) weighted by reserves 1.00-1.50 1.50-2.00 2.00-2.50 2.50-3.00 3.00+ 1 5 6 0 3 56-57° 57-58° 58-59° 59-60° 60-61° 61-62° 2 2 3 1 2 5 175 2060 1400 550 2250 3150 1.45 1.66 2.27 2.18 2.65 2.18 All of this production and nearly all the remainder estimated for 1978 is to be produced using production platforms which are already constructed and installed (Forties) or under construction. Most uncertainties which remain relate to the difficulties involved in the installation of platforms or variations in weather conditions, such as have caused significant delays recently. A view about production starts in other fields is however subject to uncertainties about production schedules for additional platforms. Possibly the most important problem is the availability of sites for the fabrication yards; three new sites for yards have just been agreed but there is some public discussion about the planning procedure and new been estimated by assuming that the price of North Sea oil is pegged to the world price (including a quality premium) and maintains its 1974 value in real terms; the price of gas from the North Sea (at about 1.2p per therm in 1974) is assumed to rise with domestic inflation. Assuming that the government pays this price for Nol:th Sea production, and assuming operating costs (1 J in 1974 values of 43p per barrel for oil and 0.39p per therm for gas, the revenues accruing to the UK government and the oil companies can be obtained on assumptions about taxation and capital expenditure (1) A 50% share of which comes from the UK. 35 - Economic Policy Review schedules. Capital expenditures are obtained from estimates by Parker and Hamilton (Financial Times-Dec. 27); th.e timing of these expenditures for each field were estimated by reference to Hamilton and the IMEG report in 1972. Current estimates of capital costs average about £2000 per daily barrel of capacity in 1974 prices but there is some variation (see table 4A2.2 above). Yearby-year totals are given in Appendix 4.1. It is assum~d that 40% of the investment is by UK compames (roughly equivalent to the UK share of field ownership) with 5% of this being financed by capital raised abroad, giving a total of 65% financed from abroad (l ). If Petroleum Revenue Tax is levied on the basis of announced Government proposals, and taking an arbitrary assumption of 65% for the rate ofPRT, the average rate of tax (PRT and Corporation Tax) on trading profits {net of royalties) is estimated to be as follows: (2) 1975 1976 1977 1978 0 0.014 0.172 0.396 Because of the generous initial capital allowances, the tax receipts from individual fields will only rise after production equivalent tp 1-2 years at the peak rate. Over the lifetime of fields, with the price of oil and capital costs fixed in real terms at their 1974 levels, the internal real rates of return (gross of depreciation) should be about: cost offield (£p.d.b.c.) 1000 2000 3000 Internal real rate of return (%) 29 18 13 These returns should be quite competitive with alternative offshore projects. The one factor which could severely reduce these returns is a fast rate of inflation of capital costs relative to the price of oil. If capital costs rose at a rate 20% per annum faster than the price of oil, a three year delay (approximately equal to the lag of the development of the Brent field behind the Forties field) could reduce the internal real rate of return from 23% to about 15% for an average field. This analysis suggests that it should be possible for the UK government and the oil companies to come to an agreement on the tax proposals and that they should not hinder the expected rate of development and the likely pattern of offtake. {1) In the Balance of Payments accounts the IPD flows are allocated in the same proportions as the finance {65% to abroad). {2) These estimates are built up .from a .field-bf-field analysis of the timing of trading profits agatnst which capital allowances can be offset. Appendix 4.3 The energy balance for U.K. to 1978 An analysis of the energy balance for the U.K. is conducted in two parts. Firstly, inland energy consumption, shown in table 4A3.1, is given in terms of primary fuel input. For the future, supplies of coal, nuclear and hydro electricity, and natural gas are predicted and it is assumed that these alternative fuels are consumed up to supply. A forecast of total inland energy consumption (dependent on output) is made and the requirements for petroleum are derived as a residual. The second part is an analysis of petroleum use and requirements. Together with the energy requirements of petroleum for inland energy consumption (the residual from table 4A3.1), the industrial uses, stockbuilding, bunkers and refinery fuel losses make up the total requirements. The domestic supplies to meet these requirements are small quantities from inland production and products marketed by the petroleum in4ustry and the growing quantities to be extracted from the North Sea; the residual requirement is the net import requirement from the rest of the world. Individual primary fuel supply forecasts are: i) coal: it is assumed that coal supply is maintained by the NCB undertaking the restructuring of existing faces and opening of new faces necessary to offset the loss in supply as existing faces run out. Net imports are assumed to be zero and stocks are expected to be held at around 6 million tons (consistent with a lower level of undistributed stocks). The situation is remarkably similar to the mid-1950's and the forecasts rely heavily on analyses by Laurie Handy of the DAE both for the mid SO's and the current position. ii) electricity: increases in primary electricity generation are the result of the increased capacity of nuclear plant coming into commission in the next few years. iii) Natural gas: the forecasts assume a steady output of gas from existing fields in the Southern Basin of the North Sea for 1975-78. Increased production comes partly from new fields coming into production (Rough and Frigg (UK)), from gas extracted as a joint product from the oilfields, and from imports from the Norwegian sector (in particular, Frigg (Norway)). The forecast of total inland energy consumption is obtained by a r~gression equation for the period since 1960. There is an apparent break in the time trend sometime in the mid-1960's and the forecasts are based on an equation derived from data for the period since the mid 1960's 0): 1n (IEC)= 5.3124 + 0.007 y- Yt + 0.0217 t Yt where Y = compromise index of GDP (1970= 100) and Yt = a fitted logarithmic trend, and t = time trend = 1 in 1952. An alternative forecast for total energy consumption is shown which assumes that there is some energy saving in each year to 1978: 1975, 4%; 1976, 5%; 1977, 672.%; 1978,8%. In the main (1) The growth of GDP assumed in these forecasts is 0.5% 1974/5, 3.0% 1975/6-1977/8. See footnote 1, p.37 36 - An Economic Assessment of the North Sea Table 4A3.1: Coal Inland energy consumption of primary fuels (million tons of coal or coal equivalent) Electricity Natural PetroleumC2) Total (3) Nuclear Hydro gas (1) (a) (b) (a) (b) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 196.7 191.8 191.2 194.0 187.2 184.6 174.7 163.8 164.5 161.1 154.4 138.7 120.9 131.3 115.0 0.9 1.1 1.5 2.5 3.2 6.0 7.8 8.9 10.1 10.5 9.4 9.7 10.5 9.9 12.0 1.7 0.1 2.1 0.1 2.1 0.1 1.8 0.2 1.9 0.3 2.3 1.2 2.4 1.1 2.7 1.9 2.2 4.3 2.0 8.4 2.6 16.0 1.9 25.8 2.0 36.7 2.0 39.7 2.0 46.2 65.5 71.0 78.6 85.3 93.3 102.8 111.7 119.3 125.9 135.7 145.6 147.3 157.6 159.4 149.8 264.9 266.1 273.5 283.8 285.9 296.9 297.7 296.6 307.0 317.7 328.0 323.3 327.7 342.3 325.0 1975 1976 1977 1978 129.0 130.5 132.0 134.0 13.0 14.5 15.5 17.0 2.0 47.9 2.0 54.7 2.0 65.9 2.0 74.3 154.7 153.2 147.9 144.6 140.8 135.5 124.3 114.8 346.6 354.9 363.3 371.9 332.7 337.2 339.7 342.1 Notes: a) predicted by equation for log (inland energy consumption) b) with energy saving, 4%1975,5%1976, 6Yz% 1977,8%1978. (1) including colliery methane, excluding natural gas liquids (condensate) (2) including natural gas liquids (3) 1960-74, temperature unadjusted: projections 1975-78 on an adjusted basis. analysis, it has been assumed that energy saving grows from 3% in 1975 to 5% in 1978. Some savings will come from speed limits and industrial heating restrictions already introduced, and quite considerable savings might be expected if restrictions on petrol consumption are introduced; inland energy consumption seems to be running 3-4% below expected levels at the present time. The forecasts of petroleum requirements for inland energy consumption obtained from Table 4A3.1 are only a part of the total requirement of petroleum. A breakdown of the requirements and supply of petroleum is given in table 4A3.2; the units in this table are million tons of petroleum (the conversion factor is 1 ton of petroleum = 1.7 tons of coal equivalent). The major part of inland deliveries is for energy consumption and this item corresponds to the figure in table 4A3 .1; other uses, being industrial uses and process oils, are assumed to depend only on GDP0X2) and to be unaffected by energy saving policies. Stockbuilding is obtained as a residual item for the past. For the future, it is assumed that the UK will maintain stocks equal to the EEC requirement of 90 days supply. Requirements of petroleum for bunkers are assumed to remain constant and refinery losses (defined as refinery throughput - refinery fuel - refinery output) are are assumed to be about 1% of total requirements. The supply of oil is the sum of North Sea production (including natural gas liquids (condensate), which have been landed since 1970), inland production, products marketed by the petroleum industry and net imports from abroad. The projected offtake is discussed in appendix 4.2. These estimates imply an appreciable substitution of other primary fuels (particularly natural gas) for petroleum. However, the actual configuration of use and supply may well be different since it will be quite possible for the UK to enter into trade in primary fuels, say natural gas for oil. The results of the analyses are that the UK should become self-sufficient in energy requirement by 1979 or 1980 and can then become a net exporter of primary fuels. The non-energy uses of petroleum, for industrial uses, bunkers and refineries, are a significant requirement and mean that the UK will probably not become selfsufficient in petroleum until about a year later. If significant energy savings are not achieved on petroleum use or it proves impossible to achieve much substitution of gas for oil, self-sufficiency in petroleum may lag further behind self-sufficiency in energy. (1) ln (other uses) =0.9349 + 0.02y5- Y--t + 0.06144t Yt (2) See also footnote 1 on previous page. 37 - Economic Policy Review Table 4A3.2 Petroleum requirements and supply Requirements : (a) 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 91.0 1976 90.1 1977 87.0 1978 85.1 Inland deliveries Energy (1) (b) 38.6 41.7 46.2 50.2 54.9 60.5 65.7 70.2 74.0 79.8 85.7 86.7 92.7 93.8 88.1 82.8 79.7 73.1 67.5 Other (2) uses 4.2 4.3 4.7 5.5 6.3 6.4 6.8 7.9 8.8 9.5 9.7 9.5 9.8 11.0 11.1 11.4 12.2 13.0 13.9 Stock (3) building Bunkers Refmery losses (4) 1.0 5.4 1.4 5.1 1.4 4.7 -0.3 4.8 1.3 4.9 0.8 5.2 1.4 4.9 0.2 5.0 1.3 5.3 2.0 5.5 0.5 5.4 4.3 5.6 -1.1 5.1 0.7 5.4 8.0 5.5 -1.6 5.5 0.5 5.5 -1.0 5.5 0 5.5 0.9 0.7 0.6 0.7 0.8 1.0 0.8 0.8 0.9 1.0 1.2 0.9 1.2 1.3 1.2 1.3 1.3 1.2 1.2 Notes: (1) (2) (3) (a) and (b); see table 4A3.1 =column 'Petroleum,' table 4A3.1, 71.7 (1 ton petroleum= 1.7 tons coal equivalent). for equation, see text Obtained as a residual; for projection, see text - 38 An Economic Assessment of the North Sea Table 4A3.2 continued (a) 107.6 109.6 105.7 105.7 Total Requirement 50.1 53.2 57.6 60.9 68.2 73.9 79.6 84.1 90.3 97.8 102.5 107.0 107.7 112.2 113.9 (b) 99.4 99.2 91.8 88.1 (million tons of petroleum) Supply: North Other Sea indigenous Production (5) supply(6) (a) 0.5 0.5 0.4 0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.3 0.1 0.3 0.2 0.3 0.3 0.3 0.3 0.3 3.6 0.3 103.7 17.2 0.3 92.1 45.2 0.3 60.2 68.0 0.3 37.4 =(4) refmery (throughput-fuel-output). (5) including natural gas liquids. (6) inland production and products marketed by the industry. Net imports 49.5 52.7 57.1 60.5 67.6 73.4 79.2 83.7 89.8 97.5 102.1 106.6 107.1 111.6 113.3 (b) 95.5 81.7 46.3 19.8 39  Dublin Core The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/. Title A name given to the resource Chapter 4 An Economic Assessment of the North Sea Creator An entity primarily responsible for making the resource Francis Cripps Roger Tarling Source A related resource from which the described resource is derived Economic Policy Review, Volume 1, pages 29-39 Date A point or period of time associated with an event in the lifecycle of the resource February 1975