Oil and Gas Survey Reveals Infrastructure and Equipment Gap

The fifth Aberdeen and Grampian Chamber oil and gas survey produced with Deloitte reveals that specialist equipment and infrastructure such as drilling rig and survey ships are at a premium and in short supply. Findings also indicate that planned activity by contractors is stronger in international markets than in the UK Continental Shelf (UKCS).

"The potential equipment flight that may result due to capital expenditure necessary to increase UKCS capacity must be seriously considered," warns Geoff Runcie, chamber chief executive. "Oil producers and contractors, employing over 200,000 in the UK and international oil sector expressed unease about resourcing their businesses with the right equipment, infrastructure and people. This disquiet is compounded by the fiscal instability created by the UK Government's decision to increase supplementary North Sea oil charge from 10% to 20%. Concerns about the additional tax burden are much more evident in this survey.

"We must establish what incentives and other measures are required to sustain UKCS capacity."

Conducted by the Fraser of Allander Institute, the survey also shows that business confidence continues to rise but less so than in previous surveys. The majority of producers reported increased UKCS-based exploration, development and appraisal activity through the period (December 2005 March 2006) and these rising trends are set to continue over the next 12 months.

Rising trends in employment were reported with 43% of producers expecting to increase total employment. All respondents have increased contract staff in the period and the use of temporary as well as contract staff has increased particularly among the contractors.

Both producers and contractors also reported rising trends in overseas-based work and this is expected to strengthen further over the next year.

Commenting on the survey, Graeme Sheils, oil and gas partner at Deloitte says: "A critical industry concern highlighted in the report is the skills shortage to meet the demand of almost half the survey base expecting to increase employment. However, of particular note is the trend to recruit contracted staff and we question whether this is the new norm.

"As this survey was being conducted many large oil and gas companies and industry bodies were launching initiatives to attract fresh talent into the sector. The average age of the sector's workforce continues to rise and the industry must appeal to the next generation of employees. The expansion in non-permanent posts may not be sending out the right signals.

"On the positive side, the sector has resourced up to meet increased levels of activity which does demonstrate the attractiveness, flexibility and value of the UKCS skillsbase."

The percentage of contractors working at or above optimum levels eased slightly from over 90% to just under 70% with regards to overseas activity and from over 80% to 70% in relation to UKCS activity.

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