Oil & Gas Survey Reveals UK is Top for R&D
The UK is the preferred location for R&D reveals the eighth Aberdeen and Grampian Chamber of Commerce oil and gas survey sponsored by Deloitte. Almost two thirds of contractors surveyed (57%) revealed that their R&D activity takes place in the UKCS. The US takes second place with 35% of contractors.
The survey, which is carried out for the Chamber by the Fraser of Allander Institute, identifies trends in confidence, activity, employment and investment focused on research and development in this period (Dec 06 - April 07).
Derek Henderson, partner in charge of Deloitte's Aberdeen office commented, "The development of the next wave of new technologies is critical to the long-term future of this industry. Recovering the remaining reserves around the world in more complex fields with greater challenges is requiring new approaches in terms of technology, equipment and skills."
Among operators, R&D activity centered around developing new processes, improving extraction and developing related software. A third of contractors reported that the main focus of their R&D activity was in the development of new equipment and processes, 32% in developing new services and 18% in developing new software. 26% of contractors reported undertaking no R&D activity.
"What is encouraging is that 25% of smaller firms, employing less than 100 people, and 36% of firms with more than 100 employees are reporting an increase in R&D. It is however of concern that over a quarter of the contractors surveyed said they did not undertake any R&D."
Almost half of the contractors (48%) reported a rising trend in spend in R&D in the UK over the last two years, with 43% seeing an increase in R&D spend in other locations.
Other key findings are :
- Rising trend in investment by operators and contractors
- Concern over rising costs with more pressure felt in the UKCS
- Rising trends in both UKCS and overseas workload
- International skills shortages leading to increased investment in training and development
Chamber chief executive, Geoff Runcie said: "In summary, there is greater consolidation of previous investment coupled with continued, but slower, rates of growth expected over the next year. Operators and contractors are reporting increasing UKCS and overseas work and this is expected to continue in 2008.
"Contractors continue to work at or above optimum levels and there is an encouraging increase in investment in R&D, equipment and new development activity and production. People development is high on the agenda, with increased investment in staff training, reflecting continuing staff shortages."
"The recent increased levels of operating and capital expenditure by oil companies in the UKCS has resulted in allaying contractors' fears about activity levels.
"Capital costs and access to funding have so far not impacted on confidence and activity, however there are signs of increased concerns relating to taxation levels. Oil and gas companies will not share the reduction in underlying Corporation Tax set out for other large businesses in the latest UK Budget. This again sets them out of step and does not recognize the plummeting gas prices in particular and the increasing technical and rising cost challenges of the UKCS. The Chancellor has again taken the upside of oil prices but failed to recognize and respond on the way down for gas prices. This does not recognize the volatility of energy prices nor does it reflect the reality of the way these vital commodities find their way to our shores"
More details on the findings:
In the period January – May 2005, the survey found that the main areas of increased investment were in new markets, cost reduction and staff development. This survey shows that the key areas of investment are now in developing new markets and staff and replacing equipment. In 2005, 70% of respondents were investing in the replacement of equipment, this has risen to almost 85%.
Rising employment trends continued amongst operators with the majority anticipating increasing employment over the next 12 months. Overall, 57% (63% in the previous survey) of operators reported an increase in employment from December 2006 to April 2007 and 71% (62% in the previous survey) expect to increase employment over the next year.
Increased employment was reported by 86% of firms with less than 100 employees and 60% of firms employing more than 100. The trend towards temporary and contract staff continues to decrease.
The factors most likely to limit activity for operators in the next twelve months were skills shortages, contractors' capacity, commodity prices, taxation issues, capital allowances and rising costs.