Scottish oil and gas industry sales hit record high

Strong industry demand due to the high oil price meant that total sales by the sector rose an impressive 10.6 per cent to £12.9 billion, more than twice the value of the entire Scottish tourism industry.  Domestic sales grew by 2.9 per cent to £8.1 billion and international revenues increased by an incredible 26.9 per cent to £4.76 billion, due to a huge jump in sales from overseas subsidiaries.

As a result international sales now represent a 36.8 per cent share of total revenue, the highest ever proportion accounted for by overseas sales.

SCDI welcomed the results, and in particular the trend towards continued international diversification which SCDI views as critical to the long term future of the industry.

SCDI's Survey of International Activity in the Oil and Gas Sector 2006/2007 shows:

• Scottish based service/supply companies generated a record £12.9 billion in domestic and international sales, compared to £11.7 billion in 2005.
• Total sales have increased by 177 per cent since the first survey in 1997.
• International sales increased by 26.9 per cent to £4.8 billion. This was driven by a 59 per cent rise in sales derived from overseas owned subsidiaries.
• International sales of services have seen a continued strong growth, with an increase of 30.4 per cent reported. These sales account for £3.5 billion of the export total.
• The United States was again the top international market, with a substantial 33.6 per cent rise and sales topping £1 billion for the first time; sales to the USA are estimated at £1.22 billion. 90 per cent of sales in the USA are derived via subsidiary companies, mainly based in Houston, rather than direct exports.
• Continued growth in trade with Eastern European markets is noted and Russia consolidates its position as Scotland's third most important market with exports increasing by 74 per cent in 2006 to stand at £269 million. Azerbaijan is the fifth top destination for sales which are now valued at £175 million.

Commenting on the results, SCDI North East Manager Ian Armstrong said:

"These latest figures show the strength of Scotland's oil and gas supply chain, as the sector continues to grow its international business significantly. The results show that Scottish firms can take on the world, and that Scotland is an important international player in the energy industry, with more than £1 billion of sales generated in the American market alone.

"Ten years ago people were talking about an aspiration to develop a much greater global dimension to the Scottish supply chain. It is now clear that the industry is not just truly international in nature, but also has great potential to grow and develop further.

"However, the modest increase in domestic sales and the slight decline in direct exports are worrying.  The industry is extremely stretched in terms of manpower, equipment and resources in handling this volume of business, and it may well be that the capability to deliver domestic projects has reached a limit.

"Skills shortages remain a significant constraint and it is vital that the oil and gas sector redoubles its efforts to attract more young people into its fold. In this regard the recent launch of OPITO's Oil & Gas Skills Academy, and the support from the oil and gas sector for this initiative is to be welcomed.

"The UK Government must ensure that its tax policies encourage investment in a mature oil and gas basin. The current Treasury review into the North Sea Fiscal Regime must be fair, open minded and for once take a long term view of the sector and what tax policies are needed to sustain its future as long as possible."

Brian Nixon, Director of Energy at Scottish Enterprise said: "Scotland's oil and gas industry is an amazing success story for our economy and is well on track to maintain its world-leading position for years to come. Scottish Enterprise has been playing its part by working alongside many companies in the sector to help them break into new markets, develop innovative products and grow their businesses. We have also been working alongside industry on projects to attract new blood into the sector so it has the skilled workforce it needs for further growth.''

Ian Armstrong added:

"SCDI is pleased to acknowledge the support of the Scottish Enterprise Energy Team in enabling this research to be undertaken. We are also grateful to the companies that responded to the survey. Without the excellent support we have received from them, it would not have been possible to carry out this survey."