The Bank of Scotland’s fourth annual oil and gas report has revealed that the UK’s oil and gas sector is resilient and has plans for future investment and growth, despite the challenges of significantly lower commodity prices and rising production costs. It has been reported that 92% of companies surveyed for the report are planning to grow over the next two years and 101 companies questioned, 73 expect headcount to increase with only nine expecting reduction.
39% acknowledged that the drop in oil prices had delayed planned investment in growth but when the estimates of net gains and losses for jobs are summed, a total of just under 8000 roles are expected to be created over the next two years. This compares to approximately 10 000 jobs having been created by the same firms over the past two years.
The big issues
When asked to identify the biggest issue in the oil and gas sector, responders pointed out commodity prices as the main concern. However, it was only identified as such by under 20%. Executives were also asked for their three biggest challenges. Commodity prices came fifth at 28%, some way behind the overall top challenge of increased cost of production, which was listed by 35% of participants.
The number of companies expressing a strong interest in diversifying into onshore shale production rose by 27% from 2014, whilst interest in renewable energy sources rocketed with a 35% increase in firms expressing a strong interest. Seeking more flexible oil production and reducing exposure to price uncertainties are the main reasons for this spike in interest.
- Industry expectations for the price of Brent this time next year averaged at US$55/bbl.
- Although tax was named by only 2% of firms as being the single biggest industry concern, it was among the biggest three challenges for 21% of the survey. When asked about what actions would stimulate North Sea activity, 36% opted for technology adoption, 33% for investment in skills.
- Among the opportunities arising is the increased possibility of mergers and acquisitions. 24% of firms surveyed hope to merge or acquire compared to only 9% with such intentions in last year’s survey.
- The proportion considering international expansion has increased from 64% in the 2014 survey to over 91% this year.
- The last 12 months have caused acceleration in field decommissioning plans, with a strong 38% increase in firms expressing an interest in diversifying into decommissioning related work.
Stuart White, Area Director of Commercial Banking, Bank of Scotland said, “while it is obvious the North Sea is facing some serious challenges, this research paints a clear picture of a global industry, which having dealt with similar commodity price challenges in the past, is determined to come through fitter and stronger. Firms continue to be concerned by an ageing workforce and a lack of skills, which explains why the industry is determined to get through the current storm without major workforce reductions. North Sea firms are seen as world leading so it is therefore not surprising they are looking at international expansion opportunities where they can enjoy continued growth backed by the strong expertise they have developed here in the UK.
“Our client base mirrors these trends and we have seen a significant increase in our support to the industry in recent years to facilitate international expansion and this is something we expect to continue. Bank of Scotland will continue to work closely with the industry as it seeks to overcome the current challenges and ensure that this key UK industry continues to make its mark both at home and on the global stage.”
Edited from press release by Claira Lloyd