Pick up in confidence
North east firms detect signs of recovery
Oil and gas businesses are seeing signs of recovery and are more confident about prospects, according to an industry report released today.
The 26th Oil and Gas survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute, reveals that 38% of contractors are more confident about business on the UKCS compared to just 10% who are less confident.
This is a notable rise from historic lows six months ago when only 12% of contractors were more confident and 47% were less confident.
However, 52% report no change in their outlook, indicating that significant challenges still remain in the marketplace.
The report says it is too early to say a recovery is being universally felt.
More than half (52%) of contractors and operators / licensees believe that the sector has already reached the bottom of the current cycle and 26% consider it will do within the next year.
When asked what position businesses expect to be in by January 1, 2018, 42% expect their business to be growing, up from 16% who expected to be growing by January 1, 2017, while only 2% anticipate further decline.
Contractors’ investment spend is moving in a positive direction with more contractors anticipating to increase investment over the next two years (26%) rather than reduce (19%). However, increases are limited to certain areas and again cannot be seen consistently across all parts of the industry.
James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce, said: “We’re seeing some signs of recovery for the industry and the global outlook is certainly more positive than it was six months ago but it is clear that most companies are still suffering.
“We are hopefully stepping into a more prosperous period in due course but that is not upon us for now. It seems clear that many believe that we won’t return to previous levels of activity and that perhaps we shouldn’t call this a downturn. This isn’t a ‘new norm’, it is just normal.”
The survey found that excess capacity remains with 24% percent of contractors reporting working at, or above, optimum levels in the UKCS and 43% are working at or above their optimum levels overseas, up from record lows of 12% and 24% respectively six months ago.
While more contractors have reported working at or above optimum levels, there are still signs of more labour market challenges with operators and licensees reporting a 2.5% decline in their FTE workforce, and a 6% decline for contractors, in the 12 months to March 2017.
Although operators and licensees continue to anticipate a decline over the next 12 months at a rate of 2%, contractors expect to increase their workforce by 0.8%.
With regards to sector-specific activity, the majority (81%) of contractors expect to be involved in decommissioning in the next three to five years; with just over half of respondents (54%) reporting similar interests in renewables.
Sixty-nine percent expect to be involved in unconventional oil and gas activity in the UK in the medium term, with 65% expecting to be involved outside the UK.