UK inward investment report 07/08 - energy

Earning revenues of £90 billion in 2007, the UK energy sector is a worldwide hub for technology development and application.

The UK’s North Sea oil and gas reserves were expected to run out in 1990.

They didn’t. Now, some 40 years after the first production came ashore, latest projections call for at least another 30 years of life in what has proved to be one of the world’s most enduring oil and gas provinces.

But none of this just happened of its own volition. It was the result of applying decades of world-class R&D to existing wells and developing new technology to discover reservoirs that had been previously overlooked. Just as important, all this took place against the background of stable and pragmatic regulatory and fiscal regimes. The prolongation of North Sea production has also relied on a can-do project management culture funded, in large part, by one of the world’s most vibrant financial and trading centres – the City of London.

Doubling demand

Today, with world demand for energy set to double by 2030, the unique strengths of the UK energy industry are still evident – and relevant not just to oil and gas but to every part of the sector. This includes clean coal combustion and carbon capture and storage; biofuels; renewables such as photovoltaics; fuel cell technology; supercritical boilers for major power generators; integrated gasification combined cycles; nuclear decommissioning and waste management.

And when it comes to technologies that rely on marine experience such as offshore windfarms and tidepower facilities, the skills that built and operated the North Sea oil and gas platforms provide valuable crossover resources.

In October 2007 Clipper Windpower of California selected Blyth, Northumberland for development work on a 7.5 megawatt offshore wind turbine (the largest of its kind in the world). It will be deployed initially with the Crown Estate in “Project Britannia”. The announcement followed two years of negotiation between the company, Regional Development Agency One NorthEast and UK Trade & Investment. “Clipper Windpower’s decision to develop a new generation of offshore wind turbines in the North-East is further evidence that the UK is fast becoming a magnet for renewable energy investment,” Business and Enterprise Secretary John Hutton said at the time, noting that a recent report from Ernst & Young showed that the UK had become the world’s second-most attractive site for renewable investment.

At the same time, the UK’s expertise in oil and gas exploration and production, and midstream operations remains vital as well. According to the International Energy Agency, these fuels will continue to dominate global energy supply at least until 2030. In the decades ahead, UK expertise will be instrumental in bringing these hydrocarbons to the surface in energy hotspots such as India, China, Kazakhstan, Russia, the Americas, the Middle East, Africa and offshore in places such as the Barents Sea.

UK Energy Excellence

As the world faces a growing global demand for energy and there is a greater competition for energy resources worldwide, the work that is carried out within the UK Energy Excellence strategy, launched in December 2007, will be vital.

Positioning the UK as a worldwide hub for energy technology development and application, and offering the UK’s energy sector the loudest possible voice on the world stage are key priorities of the strategy.

A range of technologies

Whatever the fuel source, all energy projects have one thing in common.

They are becoming increasingly complex. In many cases, this complexity entails a combination of technologies applied in locations that are harsh, remote and – more often than not – environmentally sensitive.

Broad UK energy expertise and experience across the entire range of projects, combined with an internationally recognised skills base, have led ten of the world’s prime contractor companies – including Amec, Foster Wheeler and KBR – to maintain signifi cant operations in the UK. Together, they employ over 40,000 people working on projects in the UK and internationally. More widely, the UK energy sector’s workforce numbers 600,000 staff.

Total sector revenues in 2007 were £90 billion, of which the export value was £19.4 billion in 2007.

One typical project, due for completion at the end of 2010, is the overhaul of the Arnot coal-fired power station in South Africa. Now approaching the end of its nominal life, Arnot is benefiting from major retrofit of boilers and steam turbines by Rugby-based Alstom.

In another significant development, this time at home, Mitsubishi Power Systems Europe (MPSE) has opened a European headquarters office in London. This facility will drive forward its business in both conventional and renewable power generation in Europe, North Africa and the Gulf. Also of note is the leading involvement of a number of international companies in the new Energy Technology Institute established at Loughborough University.

In the oil and gas sector UK Trade & Investment has established strong links with major Latin American companies such as Petrobras, Pemex and Petrovesa. More recently, UK Trade & Investment started work with Shell on an initiative to help improve contacts with national oil companies, with particular focus in the Middle East.

A world-class investment environment

Having established a world-class energy industry, the UK Government is determined to perpetuate the nation’s prominence in this field. New legislation is backing that commitment. The Planning Bill, for instance, has paved the way for an Infrastructure Planning Commission due to be operational by the end of 2009. By centralising the planning process for power facilities of more than 50 megawatts, this Commission should fast-track development consents for major projects.

The UK’s Climate Change Bill is the first of its kind to enshrine carbon reduction targets in law.

This will stimulate the development of investment in low carbon technologies, including energy efficiency, renewables, and waste management.

The complementary Energy Bill not only focuses on the further potential of nuclear, but further develops existing support mechanisms such as the Renewable Obligations Certificates.

Collectively, these new laws will help reduce carbon emissions, broaden the UK’s overall energy mix and help promote security of supply. They will also ensure that the UK remains a place that encourages – and rewards – innovation and investment in energy in all its forms.