41 years after the first recoverable reserves were discovered in the UKCS, the UK oil and gas industry is a mature one. While there are likely to be some short-term, small increases in output, as a few remaining large fields come on stream and the lives of older fields are extended, the long-term future will be one of decline, unless new major discoveries are made. The more recent discoveries have been smaller than earlier discoveries and they are also more difficult and expensive to bring into production. Some of the larger international oil and gas companies are selling their less attractive UKCS assets and switching their attention to other parts of the world, which give better returns on investment.
In the context of the recent government Energy Review, the UK offshore oil and gas industry has an important role to play in providing energy for the UK. Longer term, UK energy needs will have to be met by an increasing amount of oil and gas imports, much of which will come from countries where the culture and politics are very different from those in the UK.
Issues of particular concern to the UKCS oil and gas sector include recent rises in taxation (which could deter companies from investing in the industry) and decommissioning of redundant structures and pipelines (during the next 20 years, hundreds of structures and pipelines will have to be removed and disposed of in an environmentally acceptable manner).
The UK will be dependent on fossil fuels for decades to come, but carbon emissions are a serious disadvantage of this type of fuel. There is currently a major debate about whether or not to renew the UK's ageing nuclear power stations, all of which are due to be withdrawn from service in the 2020s. Nuclear power has the advantage of not producing carbon emissions, but the renewal of nuclear power plant would reduce the market for gas in gas-fuelled power plant.
The future of the UK oil and gas industry largely rests on international oil prices. Owing to the hostile environment in which oil and gas in the UK are recovered, the UK market is based on high prices. The current conflicts in the Middle East and unrest in other oil- and gas-producing countries raises the possibility that the UK could experience disrupted oil and gas supplies from these regions. Moreover, large emerging economies such as China and India will be major competitors for the world's energy resources. Any escalation of these factors could lead to renewed efforts to extract the maximum possible oil and gas from the UKCS, even at a very high cost. There has been a rise in the number of exploration licences taken out in the 2005 licensing round, an indication of sustained, but high risk (of not finding recoverable reserves), interest in the UK offshore oil and gas industry.
