North Sea oil and gas companies gloomy about the future

The confidence of North Sea oil and gas contractors is at an all-time low, according to a new report released today.

According to the 23rd Oil and Gas Survey, four in five contractors (79 per cent) surveyed say they are less confident in their prospects than a year ago, compared to just 1 per cent that are more confident.

The surveyed, which is conducted by Aberdeen & Grampian Chamber of Commerce in partnership the Fraser of Allander Institute and sponsored by law firm Bond Dickinson, also reveal the lowest level of firms working at or above optimum levels in the UK Continental Shelf (“UKCS”) since the survey began in 2004. 

Just 16% of contractors report working at or above optimum levels, down from 21% in the previous survey.

And almost two thirds (64%) of firms have reduced their workforce in 2015 compared to just 14% who increased numbers.

In addition, 85% of respondents think the job losses will continue over the next year.

“The low confidence levels being reported come as no surprise and the outlook suggests there will be more pain ahead for the sector,” said Research and Policy Director at Aberdeen & Grampian Chamber of Commerce, James Bream.

“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 UKCS 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 Bond Dickinson, added: "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 per cent 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’.”

Jamie Hailstone is a freelance journalist and author, specializing in local government, transport and energy issues