Rolls-Royce adapts its established aero gas turbines and systems skills to the power generation and oil and gas sectors.

These markets are expected to continue to expand as a result of privatisation, deregulation and the trend towards higher oil and gas prices, which encourage exploration. The potential markets are forecast to be worth $165 billion over the next ten years. About three quarters of this lies in power generation with the remainder in the oil and gas sectors. The company expects to secure a growing share of this business over the next five years.

Our gas turbine and diesel systems are ideally suited to the generation of electrical power. The company has over 100 million hours of operating experience in the energy market with its industrial gas turbines. The industrial RB211, delivering around 30MW of output, and the industrial Trent in the 50MW range, meet a substantial market opportunity.

The industrial Trent has been developed on a transatlantic basis with around 50 per cent of its components sourced in North America. It is designed to meet the most stringent international emission requirements. The development of environmental combustion systems for the industrial Trent led the company to create a provision of £120 million to meet the expected additional costs. We are confident that our emission control system, which we believe is a world leader, is able to deliver its design specification within this provision. The potential market for the industrial Trent is very significant and we believe the engine will establish itself as one of the most powerful and efficient aero-derived generating sets in the world. Demand for the product is strong with sales expected to reach 30 engines annually within five years.

Rolls-Royce products for the oil and gas market include gas turbines, diesel engines and compressors for oil and gas pumping, compression duties and pipeline applications. Orders in the first quarter of 2001 picked up following the sustained high oil price in 2000 and the resulting increase in exploration. A sustained recovery in oil prices will benefit our sales in 2001 and beyond.