Mineral extractionTOTAL UK EMPLOYMENT35,000 people are directly employed by the mineralextraction industry with a further 35,000 jobs supportedby it. 96 Over 88,000 jobs are supported by the oil refiningindustry. 97THE STATE OF THE SECTORMining and quarrying currently accounts for around 2.9 percent GVA (£39.6 billion in 2011). Cement, lime and petroleumaccounted for 0.45 per cent of total UK manufacturingin 2008. 98PROBLEMS FACING THE SECTORLike other industrial sectors, the recession of 2007-8 hada large negative impact on the minerals industry. Todaycommentators have started to describe “attrition in theextractive industries”. 99 The high costs of extraction havehad a negative effect on the industry at large, with asignificant drop in output and production. In petroleuma clear divergence has appeared with European andAsian operators struggling (2013 saw European refineryruns plummet to 25 year lows) while US refineries faredbetter. 100 In addition there are also concerns surroundingdepletion. While Q4 2013 saw a rise in European demandfor petroleum, this was the first time this had happenedsince Q4 2010. Productive capacity for both minerals andpetroleum has fallen dramatically over the last few years,seen clearly in Figure 16.The problems facing the industry can also be seen in thedeclining amount of minerals being sold by the UK as well.As Figure 17 shows, there has been a substantial drop in theamount that the UK sells.In 2013, UK production of crude oil fell by 9 per cent, inline with the long term trend and became a net importerof petroleum products for the first time since 1984 (whichitself was an aberration created by the Miners’ Strike) 101 asshown by Figure 18.In addition the UK’s petrochemical and petroleum industrieshave been seriously compromised by over-regulation. It hasbeen estimated that, as a result of UK, EU and internationalregulation, between 2015 and 2020 the cost of a barrelis going to increase by $2.5 per barrel of which only $1.3can be passed onto the consumer (assuming if EU basedpetroleum companies are going to remain competitivewith non-EU countries). According to UKPIA:The EU andEnergy Policy“It should be noted that cost items that are EU specificreduce the ability of EU refineries to compete with refineriesoutside the EU not subject to such stringent regulation”. 102THE IMPACT OF HIGH ENERGY BILLSThe mineral products industry comprises activities whichare energy intensive such as cement and lime manufactureand activities which are less energy intensive such as asphaltand aggregates production. This means that, while theindustry as a whole will not be severely damaged by the riseof energy costs, certain areas will suffer.High energy prices have had a significant impact onworldwide competitiveness. At the Wood Mackenzie ShortTerm Oil Markets Seminar held on 19 February 2014, itwas suggested that US Gulf Coast refiners were obtaininggross refining margins some $8/bbl higher than North WestEuropean refiners.It was also estimated that EU regulatory cost on UK refinerieswould be £5,205,280 (the UK regulatory cost by contrastwas £677,203). 103“High energy costs and a complex regulatoryclimate make the UK a less competitive place forthe minerals sector to do business. Despite effortsby the Government to streamline the planning andregulatory system, it remains cumbersome, timeconsuming and expensive.”96 According to BIS around 61,000 are employed in mining and quarrying.See also 97 UKPIA, Statistical Review 2013, found at 98 TUC and EIUG, Building our low-carbon industries, found at 99 C. Tighe, “Mining decline has brought coals to Newcastle”, Financial Times,found at 100 International Energy Agency, T. Bosoni, “International Refining Markets in2013 and Medium Term Outlook”, (Antwerp, Belgium 30-1 January 2014)101 UKPIA, The role and future of the UK’s Refining Sector in the Supply ofPetroleum products and its value to the UK economy, 10 May 2013, foundat 102, 103 IHS and Purvin & Gertz, The role and future of the UK refiningsector, p.16, 104 Written evidence on behalf of the CBI Minerals Group, found at 32- CBI Minerals Group 104
INDUSTRY CASE STUDY 3.1.4Figure 16: Output - Crude petroleum, coke and refined petroleum indexes (2010=100) 105Figure 17: Tonnes of minerals sold 2000-10 (2010=100) 106Figure 18: Petroleum products net trade (exports - imports)105 Note: data limited to 1997, found at ONS “Detailed Index of Production”, 106 MPA, “Market summary 1980-2010”, found at 33
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