Survey Paints Bleak Picture for North Sea Oil and Gas Industry

Two-thirds of North Sea oil and fuel business operators (67 p.c) have been compelled to cancel tasks due to the latest fall in oil worth, based on an business report revealed on Thursday.

The findings, from the twenty second Oil and Gas Survey carried out by Aberdeen & Grampian Chamber of Commerce in partnership with regulation agency Bond Dickinson, reveal that half of operators (precisely 50 p.c of respondents) have been compelled to cut back employees coaching for a similar cause.

[contextly_sidebar id=”Ww3wKqRPBqEUzsLkZntiJ1HH8nmbuPjX”]The fall in oil worth has been a contributing issue to a fall in confidence and exercise ranges within the sector. Contractors’ confidence within the UK Continental Shelf (UKCS) is at its lowest level because the survey started in 2004. Only 7 p.c of contractors are extra assured about their UKCS actions than they had been a 12 months in the past, in comparison with 76 p.c who’re much less assured.

The share of companies that report working at or above optimum ranges within the UKCS has additionally fallen to its lowest degree because the survey started in 2004. Just one in 5 contractors (21 p.c) is working at or above optimum ranges, down from 47 p.c within the earlier survey and simply over half (52 p.c) report working at or above optimum ranges in abroad markets, down from 72 p.c.

Exploration has been a giant casualty of the challenges dealing with the oil and fuel business, with 70 p.c of all companies concerned in exploration having seen the worth of it fall previously 12 months, and simply 8 p.c of them anticipating the worth of exploration to extend within the coming 12 months.

One respondent cautioned that though measures within the March 2015 Budget had been welcome, additional stimulus to exploration and funding is required: “Allowances on producing fields were welcome, but more was needed to increase exploration drilling, without which there will be no new projects and decommissioning will accelerate, thus removing infrastructure and opportunity for good.”

James Bream, analysis and coverage director at Aberdeen & Grampian Chamber of Commerce, mentioned: “Once once more we have now a set of outcomes that give us clear indicators that new alternatives exist and tells us that truly – opposite to what individuals say – we haven’t been right here earlier than.

“Confidence ranges are at an all-time low and we at the moment are experiencing our first ‘recession of confidence’, and it appears gloomy within the 12 months forward too. However, we have now seen optimistic tax modifications, the OGA staff is bedding in and within the Queen’s Speech the brand new UK Government has dedicated to legislating for the Infrastructure Bill.

“There is lots to build on and just perhaps it is possible that we are seeing the start of the next phase in our role at the frontier of the oil & gas sector. Can we grasp the opportunity to lead the way in decommissioning practices and become a new high efficiency basin as we mature faster than others? This is a mid-life crisis in the UKCS but as some people say life begins at 50.”

One space displaying will increase in exercise is decommissioning. Over 80 p.c of contractors concerned in decommissioning have seen will increase of their exercise within the final 12 months, and just one in 4 of those contractors (24 p.c) count on the worth of it to lower within the subsequent 12 months.

Bond Dickinson, which has been concerned in 25 p.c of all decommissioning tasks on the UKCS, says the survey findings affirm its expertise with purchasers.

Uisdean Vass, oil and fuel companion at Bond Dickinson, mentioned: “Decommissioning is the bittersweet optimistic within the survey. Academics have been predicting an imminent spike in decommissioning for years however that spike is now properly and actually upon us. Decommissioning just isn’t pushed by oil worth or demand and could possibly be essential in sustaining the worth of exercise within the North Sea – however the inevitable draw back is that it hastens the decline of offshore exploration and manufacturing.

“There are other opportunities for companies in the sector. It has never been more important for contractors to focus on technology improvements and internationalisation, and in world terms, there are new opportunities in unconventionals and in new jurisdictions such as Mexico, which has signed a memorandum of understanding on collaboration in the energy sector.”

Other key findings from the survey embody:

Tax and regulation inflicting points for contractors

Tax points had been cited by 81 p.c of contractors as a constraint on their exercise within the UKCS, an enormous improve from 28 p.c within the final survey. There had been additionally will increase within the variety of respondents reporting “complex regulations”, “cost of capital” and “access to capital” as constraints on their UKCS operations. Complex laws at the moment are an essential problem for 74 p.c of contractors, considerably up from between 20 and 40 p.c in earlier surveys.

Uisdean Vass continued: “The UK oil and gas sector is going through a regulatory and fiscal transition at blistering pace and with a new regulatory authority in the Oil and Gas Authority, companies in the sector are understandably increasingly concerned about how they will be affected.”

Investment intentions for workers coaching

Half of all companies (46 p.c) are sustaining ranges of expenditure on employees coaching over the following 12 months. However, extra contractors (28 p.c) predict to cut back spend on this space than improve it (23 p.c). The sample is even bleaker with operators, with a majority of them (60 p.c) anticipating a discount in expenditure on employees coaching within the subsequent 12 months.

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