Survey: Confidence among North Sea Oil, Gas Contractors at All-Time Low

Confidence among North Sea oil and gas contractors is at an all-time low, according to a new industry survey released Thursday.
 
Findings from the 23rd Oil and Gas Survey, compiled by Aberdeen & Grampian Chamber of Commerce (AGCC), revealed that four out of five contractors (79 percent) surveyed said they are less confident about their prospects than a year ago.

The AGCC estimates that there has been a 5.2 percent reduction in contractors' employment over the last 12 months, with 62 percent of those surveyed revealing that they had reduced their employment in 2015. By contrast, the survey also found that just 15 percent of contractors had increased employment over this period, compared to 54 percent a year ago.

Britain's oil and gas sector has lost more than 5,000 jobs since late 2014, according to Reuters, primarily due to the effects of a lower oil price environment. Oil & Gas UK's annual economic report, released in September this year, painted a bleaker picture, stating that employment supported by the sector in the UK had contracted by 15 percent to 375,000 jobs, from an estimated 440,000 jobs, since the start of 2014.

With regards to future employment in the sector, AGCC's report revealed that 85 percent of respondents think redundancies will continue over the next year. Four out of five firms said they are seeing an abnormal increase in the number of projects being cancelled and 76 percent stated that there has been an unusual increase in the time taken to make procurement decisions, with 45 percent reporting a spike in late payments.

Almost half the respondents (47 percent) don't believe the role of the Oil & Gas Authority has been explained well enough to them and 22 percent of firms are not confident that the OGA has the powers it requires to protect the future of the UK Continental Shelf. The Oil & Gas Authority was not immediately available to provide a comment in response to these claims.

In the face of the challenging economic environment, North Sea businesses are giving serious consideration to alternative revenue streams, according to the AGCC survey. Seventy-eight percent of all firms questioned expect to be more involved in decommissioning work during the next three-to-five years, 67 percent of firms expect greater involvement in unconventional oil and gas activities and 46 percent expect greater involvement in renewables work.

James Bream, the AGCC's research and policy director, commented in a statement:

"The low confidence levels being reported come as no surprise and the outlook suggests there will be more pain ahead for the sector. However, if we are not complacent, a long-term future still exists for the sector and players such as the Oil & Gas Authority will have a major role alongside the industry itself. The fact is that the [UK Continental Shelf] is a frontier basin and always has been. This provides a unique set of opportunities which can continue to allow our supply chain to be active around the globe, but this success is not guaranteed."

Uisdean Vass, oil and gas partner at law firm Bond Dickinson, which sponsored the survey, said: 

"This is probably the most negative survey we have ever had and while there is little to be positive about in the short term, there are some glimmers of hope. Over the next three years, 28 percent of contractors expect their numbers of core staff to increase. Neither contractors nor operators see the North Sea disappearing.

"They believe the industry can survive at $50 a barrel and that there will be a price upswing over the next three years with more room for oil company profitability because of enhanced efficiency. Contractors will also benefit from enhanced efficiency. As the old saying goes, 'what doesn't kill you makes you stronger'."

 

A graduate in journalism from Cardiff University, Andreas has eight years of experience as a business journalist. Email Andreas at andreas.exarheas@rigzone.com

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