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Report points to progress

North Sea oil and gas sector ‘on the mend’

Brent oil fieldCautious optimism has returned to the North Sea oil and gas industry, as it weathers the storm of the past three years.

The latest economic report from Oil and Gas UK shows investment rising on the back of lower costs following measures introduced by operators to improve efficiency.

The number of job losses in the sector was worse than expected with 60,000 direct and indirect jobs lost across the industry in 2016, more than the 40,000 the organisation had predicted. A further13,000 could be lost this year.

However, the report says “the largest reductions may now be behind us”.  It adds: “There are tentative signs that investor confidence is starting to return to the sector.:

Almost £6 bilion was invested in UK continental shelf assets and acquisitions in the first half of 2017.

Oil & Gas UK chief executive Deirdre Michie said: “There are still serious issues facing our industry which has suffered heavy job losses since the oil price slump. But we are hopeful that the tide is turning and expect employment levels to stabilise if activity picks up.”

She added: “Despite our difficulties, we’ve got more reasons to be positive and some great stories to tell that demonstrate the real progress that we are now making.”

Graham Hollis, senior partner for Deloitte in Aberdeen, said the report “demonstrates just how much progress the UKCS has made on reducing operational costs, and the encouraging level to which confidence is returning to the basin.”

He said this most shown notably through a significant uptick in M&A activity across the sector.

“Assets are finding their way into the right hands and a new cohort of private equity-backed businesses is breathing new life into the basin.”

He warned that challenges remain and the recovery “needs to be carefully fostered.”

The report shows there are a potential £40 billion worth of developments in companies’ business plans.

Mr Hollis said it was for those involved in the industry to help these come to fruition and that this will require a collaborative approach involving government, the business community, the supply chain, and wider stakeholders. 

“The UKCS is vitally important to our economy and still supports more than 300,000 jobs,” said Mr Hollis.

“To ensure its future, we need to set about anchoring that talent pool in Aberdeen and the surrounding areas. While it will mean keeping the skills we already have, it will also mean ensuring we continue to attract a new generation of talent, which can carve out a new path for the industry in the years ahead.”

> Deloitte will support the Fraser of Allander Institute’s quarterly Economic Commentary report, providing additional analysis and helping to communicate its findings to Scottish companies.

 

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